Econ 101 says that deregulation reduces costs, yup. But ChristianKl said more specifically that deregulation “has the chance to lower costs a lot” (emphasis mine), and it’s not so obvious that realistic deregulation is likely to make a big difference to costs.
For instance, ChristianKl says MRIs are an order of magnitude more expensive in the US than in Japan. Is it really credible that 90% of the cost of an MRI in the US comes from regulatory inefficiencies that are absent in Japan? I don’t think so; I bet that cost difference comes from other sources, and if e.g. much of it goes to health insurers’ profits then it’s even possible that more regulation could reduce prices, if it restricts what insurers can charge.
Given the vastly higher costs in the US and the mediocre outcomes, it seems there is a lot of scope to reduce costs. I am not aware of any detailed quantification of this.
Maybe such a thing exists but all the material I can find seems to be motivated. E.g. the Obama material talks a lot about market failure but seems innocent of the idea that government regulation could be part of the problem.
I’m sure there’s scope to reduce costs (though e.g. if part of the problem is that Japanese medical professionals are paid much less than American ones, reducing those costs a lot would be really difficult). What I’m questioning is the assumption that what needs doing to get the costs down is to cut regulation. It might be—some regulation is very harmful—but the comparison with Japan points, if anything, exactly the other way. And I am as wary of the assumption that the solution to “X is really expensive” is “deregulate X” as I am of the opposite assumption that the solution is “put regulation in place demanding that X be cheap”.
Salaries are higher in the US, especially for highly skilled medical practitioners. Any sort of medical investigation or treatment is going to cost more in the US than in Japan.
Many costs are explicitly regulated down in Japan. Amusingly, this specifically includes ChristianKl’s example of MRIs: they are not allowed to cost more than a certain (rather low) amount.
Of course this may increase costs elsewhere; or it may, by lowering medical salaries or something, drive medical personnel out of Japan to places where they can earn more or have more comfortable working conditions. But such actual evidence as I’ve seen suggests that, Econ 101 notwithstanding, Japanese healthcare is way cheaper than American overall and of comparable quality.
Most healthcare in the US is paid for via for-profit insurance companies. Most healthcare in Japan is paid for via government-run insurance that is not required to be profitable. That removes one layer of extra profit-taking.
There may be differences in, say, administrative structure that greatly affect the amount of overhead cost; these might be there just for path-dependent historical reasons, or because of different levels of lawsuit-fear, or because of different government regulations, or for many other reasons.
I am not going to make any confident claims about what the actual sources of the difference are; I don’t have enough information to know. But nothing I’ve seen makes it at all plausible that Japanese healthcare is cheaper than American because there’s more regulation in the US and less in Japan.
Econ 101 says that deregulation reduces costs, yup. But ChristianKl said more specifically that deregulation “has the chance to lower costs a lot” (emphasis mine), and it’s not so obvious that realistic deregulation is likely to make a big difference to costs.
For instance, ChristianKl says MRIs are an order of magnitude more expensive in the US than in Japan. Is it really credible that 90% of the cost of an MRI in the US comes from regulatory inefficiencies that are absent in Japan? I don’t think so; I bet that cost difference comes from other sources, and if e.g. much of it goes to health insurers’ profits then it’s even possible that more regulation could reduce prices, if it restricts what insurers can charge.
Given the vastly higher costs in the US and the mediocre outcomes, it seems there is a lot of scope to reduce costs. I am not aware of any detailed quantification of this.
Maybe such a thing exists but all the material I can find seems to be motivated. E.g. the Obama material talks a lot about market failure but seems innocent of the idea that government regulation could be part of the problem.
I’m sure there’s scope to reduce costs (though e.g. if part of the problem is that Japanese medical professionals are paid much less than American ones, reducing those costs a lot would be really difficult). What I’m questioning is the assumption that what needs doing to get the costs down is to cut regulation. It might be—some regulation is very harmful—but the comparison with Japan points, if anything, exactly the other way. And I am as wary of the assumption that the solution to “X is really expensive” is “deregulate X” as I am of the opposite assumption that the solution is “put regulation in place demanding that X be cheap”.
“Lower costs a lot” is an unfalsifiable statement—you need to nail it down before discussing whether it’s likely to be true.
Would you like to suggest what these other sources are?
Possible other sources include:
Salaries are higher in the US, especially for highly skilled medical practitioners. Any sort of medical investigation or treatment is going to cost more in the US than in Japan.
Many costs are explicitly regulated down in Japan. Amusingly, this specifically includes ChristianKl’s example of MRIs: they are not allowed to cost more than a certain (rather low) amount.
Of course this may increase costs elsewhere; or it may, by lowering medical salaries or something, drive medical personnel out of Japan to places where they can earn more or have more comfortable working conditions. But such actual evidence as I’ve seen suggests that, Econ 101 notwithstanding, Japanese healthcare is way cheaper than American overall and of comparable quality.
Most healthcare in the US is paid for via for-profit insurance companies. Most healthcare in Japan is paid for via government-run insurance that is not required to be profitable. That removes one layer of extra profit-taking.
There may be differences in, say, administrative structure that greatly affect the amount of overhead cost; these might be there just for path-dependent historical reasons, or because of different levels of lawsuit-fear, or because of different government regulations, or for many other reasons.
I am not going to make any confident claims about what the actual sources of the difference are; I don’t have enough information to know. But nothing I’ve seen makes it at all plausible that Japanese healthcare is cheaper than American because there’s more regulation in the US and less in Japan.