Greg Mankiw writes:
For obvious reasons, I have been thinking a lot about healthcare
recently. One important question is, why does the United States spend
so much more on healthcare than other nations do?
recently. One important question is, why does the United States spend
so much more on healthcare than other nations do?
There are surely myriad reasons for the international differences, but part of the answer can be gleaned from this passage by Uwe Reinhardt, Gerard Anderson, and Peter Hussey (via an old post of Ezra Klein)
He then quotes a passage about how much doctors are paid in the United States relative to the rest of the world. They're paid a lot more.
But doctors' incomes are not a cause of higher spending. Doctors incomes being high are a result of the same underlying forces that cause higher total spending in the United States relative to the rest of the world—an increase in the demand for medicine driven by third party payments–governmental and private (with the latter tax-subsidized by government).
Doctors pay in the US is also affected by supply limitations imposed by licensing and medical school accreditation. This keeps prices from equalizing internationally as there are barriers to foreign doctors practicing here.
