In a March 13, 2018 article in JAMA (2018;319(10):1024-1039), Papanicolas, Woskie, and Jha (PWJ) provide an in-depth description of “Health Care Spending in the United States and Other High-Income Countries.” Through detailed comparisons of demographics, insurance system characteristics, workforce composition, service and pharmaceutical use, and specific indicators of access and health outcomes, the authors conclude that “Prices of labor and goods, including pharmaceuticals, and administrative costs appeared to be the major drivers of the difference in overall cost between the United States and other high-income countries.” They dismiss differences in workforce composition and related compensation differences as significant contributors to differences in health care spending per capita.
This commentary takes issue with two particular claims related to the inferences drawn by PWJ.
Claim 1: “The US did not differ substantially from the other countries in physician workforce (2.6 physicians per 1000, 43% primary care physicians.)” Based on Area Resource File data, the 43% calculation cited exceeds the effective number by 30 percent; so, it is not unreasonable to argue that the US workforce composition is more specialty oriented than those of other high income countries.
PWJ’s eTable 10 cites the Kaiser Family Foundation (KFF) as the source. The related KFF webpage identifies 456,389 primary care physicians (PCPs) and 951,227 total active licensed physicians. The authors subtract out (appropriately) OB-Gyn physicians to leave 405,288 PCPs or 43% of the total. The KFF site lists Redi-Data, Inc as the October 2017 source, but the information from this site is proprietary, so not readily available.
The most commonly used source in the United States regarding the US healthcare workforce is the Area Resource File published by the U.S. Department of Health and Human Services, Health Resources and Human Services Division. From its dashboard for 2015, the total number of active primary care physicians serving patients in the US was 245,983, and the total number of physicians (medical doctors plus osteopathic doctors) equaled 871,155. Based on these numbers, PCPs make up 28% of physicians. Using more detailed counts from the same source and summing the number of doctors who are in family medicine, general practice, general internal medicine, and general pediatrics yields 288,689 or 33% of all physicians. In either case, the result is much smaller than that cited by the PWJ. The primary difference appears to arise from the inclusion of internal medicine subspecialties (such as Endocrinology, Hematology/Oncology, Nephrology, and Interventional Cardiology) in the PWJ description. Physicians in these subspecialties should not be counted as primary care physicians since they typically are not seen without a referral from a primary care physician. There may be similar breakdowns of internal medicine in other countries, but the authors do not inform us how these calculations were determined.
Claim 2: “Salaries of physicians and nurses were higher in the US; for example, generalist physicians salaries were $218,173 in the US compared to a range of $86,607 (in Sweden) to $154,126 (in Germany).” The authors use of purchasing power parity (PPP) exchange rates (computed by the OECD) rather than market exchange rates distorts the comparisons. When market exchange rates are used, some deviations are widened; while others are narrowed. No matter which rates are used, given the relative role of specialists in the US as emphasized above, their compensation and the high use of intensive services they provide are a central cause of higher US spending.
The values cited for Sweden and Germany use purchasing power parity exchange rates. If market exchange rates for 2016 were used (from the same OECD source) , the average Swedish primary care physician salary in dollars would rise to $91,642, and average German PCP’s salary would fall to $133, 576. For specialists, the PWJ study lists the US average salary at $316,000 which outpaces a range of $98,452 for Sweden at the low end and $202,291 for Australia at the high end. When put in market exchange rate terms, Swedish specialist salaries would rise to $104,176 and Australian specialist salaries would also rise to $223,269. In contrast with Emanuel (JAMA, 2018;319(10):983-985), who argues that “paradoxically this does not substantially contribute to the high cost of US health care…,” the intensive use of services he cites such as imaging, hip and knee replacement, and coronary artery bypass graft surgery would not be possible without a sizeable number of specialists performing these operations. Furthermore, as argued by Laugesen and Glied, “…higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main drivers of higher US spending…” Additionally, the reported compensation does not reflect the returns such specialists might receive from any ownership share of the facilities they might own.
In a posting in Vox , Harvard professor Jeffrey Frankel argued that one needs to be very careful in using PPP exchange rates. Purchasing power parity rates are appropriate when comparing per capita standards of living since such rates remove differences in prices across countries in order to yield differences in what a country’s income enables its residents to purchase. These rates are particularly relevant when comparing traded goods. With the exception of pharmaceuticals, for which there exist many barriers to trade, medical care is consumed domestically; thus, removing price differences makes little sense, especially if one seeks to understand what drives spending differences. For example, residents of the United States typically do not visit a Swedish cardiologist to manage their high blood pressure or congestive heart failure.
PWJ provide a very useful description of why US residents pay so much more for medical services than do people of other high income countries. Higher prices clearly do matter, but so does the composition of a more specialty oriented medical care work force and the resultant higher compensation paid to specialists and intensity of services rendered by these specialists.
No Con Economics 