The Meds In Spain Vary Mainly By The Plain

In June I proposed to municipalize medicine:

Consider letting government take full control of the industry, but at a municipal level. …  Some municipalities will find ways to cut overuse, and others will fail, but failures can then emulate successes. …

We could require municipalities to give universal coverage, and require national standards so businesses could avoid dealing with differing local regulations.  But we should otherwise give municipalities wide discretion on cost control measures. They could receive federal funds, but depending only on demographics, and usable for other purposes; the key is for local folks to pay for local practice variation.  Municipalities should be empowered to charge new residents higher prices, just as insurance companies now charge for pre-existing conditions.  (Perhaps the districts folks leave should pay districts they go to.) … My libertarian friends prefer this proposal to the [US] status quo.

It turns out that Spain does this, at least at the region level:

Spain’s national health care system operates on a highly decentralized basis, giving primary responsibility to the country’s 17 regions.  The Spanish Constitution guarantees all citizens the “right” to health care, … but responsibility for implementing the country’s universal system is being devolved to regional governments. The degree and speed of devolution is uneven, however, with some regions only recently achieving maximum autonomy. …

The federal government provides each region with a block grant. The money is not earmarked: the region decides how to use it.  The block grant itself is based primarily on a region’s population with some consideration given to other factors such as the population’s demographics. Regions may use their own funds to supplement federal monies. Not surprisingly, health care spending varies widely from region to region. The differences in expenditures, as well as in spending priorities, lead to considerable variance in the availability of health resources. …

Spanish patients cannot choose their physicians, either primary care or specialists…. Waiting lists vary from region to region … On average, Spaniards wait 65 days to see a specialist. … About 12 percent of the population currently has private health insurance.

Spain does pretty well with this system:

Total health spending accounted for 8.5% of GDP in Spain in 2007, below the average of 8.9% in OECD countries [and 16% in the US]. … Despite the relatively low level of health expenditure in Spain, there are more physicians per capita than in most other OECD countries.  In 2007, Spain had 3.7 practising physicians per 1,000 population.  [The US had 2.4] … In 2006, life expectancy at birth in Spain stood at 81.1 years, more than two years higher than the OECD average [ and 78.1 in the US] … The infant mortality rate in Spain … stood at 3.8 deaths per 1,000 live births in 2006, lower than the OECD average.

The same approach might well work at a smaller scale.  Many have expressed concern that regions would try to discourage sick folks from moving into their area, but I don’t think this is a problem in Spain.   Also, consider education, which is often managed and funded at a local level.  Even though citizens with kids impose much higher costs, I know of no localities that actively discourage folks with kids from moving in.  Citizens also vary greatly in how much use they make of local parks, but what localities try to discourage new park-using residents?

Added:  Paavo tells us that Finland med is even more decentralized:

The responsibility for organizing health care in Finland lies with the approximately 440 municipalities across the country. These can either provide health care services independently or join with neighbouring municipalities in joint municipal boards which maintain a joint health centre. A municipality can also buy in health care services from other municipalities, non-governmental organizations or the private sector. …

Hospital districts formed by municipalities are responsible for arranging specialized medical care. There are 21 hospital districts including Åland, and each municipality must belong to one of these. Health services are mainly funded by municipalities from tax revenue.  43 per cent of health care is funded from local tax revenue, 17 per cent from central government grants financed by national taxes and 16 per cent from health insurance revenue. The proportion of service users is 20 per cent. The central government contribution to municipal social welfare and health care expenditure is determined by the population, age structure and morbidity in the municipality plus a number of other computational factors.

The law lays down the basic nature and operating framework for the health care services, but does not concern itself with detailed questions of the scope, content or organization of services.

Fins spend 8.2% of GDP on medicine, have 3.0 docs per 1000, and expect to live 79.5 years.

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  • Doug S.

    Even though citizens with kids impose much higher costs, I know of no localities that actively discourage folks with kids from moving in.

    Towns often discourage “new development” that is likely to bring in such families…

    • http://hanson.gmu.edu Robin Hanson

      Why is new development much more likely to have kids than old?

      • Doug S.

        It isn’t, but towns can control new development more easily than they can control old development. It’s a lot easier to prevent someone from building housing that’s attractive to families with children than it is to do something about development that’s already there.

        Building new housing is often a net money loser for towns, or so I’ve heard. Taxes on commercial properties tend to end up subsidizing services to residents; shopping malls pay a lot in taxes and don’t take up classroom seats.

  • Jess Riedel

    Even though citizens with kids impose much higher costs, I know of no localities that actively discourage folks with kids from moving in.

    Well, my googling returns that K-12 education is about 4.5% of GDP in the US, compared to the 16% you quote for health care. Additionally, citizens with children (typically middle-age) tend to be higher earners than those without (typically young, old, or troubled), so their higher taxes partially offset their costs. This suggests that citizens with children have a much smaller fiscal impact than the sick citizens, so localities may be much more concerned about their immigration.

    Citizens also vary greatly in how much use they make of local parks, but what localities try to discourage new park-using residents?

    The costs of parks don’t scale with the number of citizens who use them. Also, park-using citizen are much harder to identify than the sick.

    • Jess Riedel

      The second to last paragraph should be a blockquote. Sorry.

    • http://www.jackchristopher.com Jack Christopher

      More people using parks means more people to maintain them.

  • http://pojatitkee.blogspot.com Paavo Ojala

    Finland has municipal healthcare.

    • http://hanson.gmu.edu Robin Hanson

      Thanks for the tip! I just added to the post on it.

  • Gary

    It’s interesting that you mention education and federal guidelines. Here in Michigan, schools are funded on a per-student basis by the state (instead of being funded locally), so I can’t speak to your point about discouraging people to move to a municipality based on the cost of students because it’s encouraged under this arrangement. However, the extra 7% of federal funds directed at our schools for NCLB compliance create little incentive to retain students who are liabilities. Special needs students and those with behavior issues are liabilities to schools trying to meet annual yearly progress and are often shuffled around as a result (particularly behavior cases).

    I wonder if this aspect of public education has any bearing on municipal healthcare, especially since the only way federal municipal health care guidelines could be enforced would be through congressional purse strings.

  • stephen

    I am trying to find fault with this idea but the more I try the more I like it.I am attracted the idea of my vote having some actual signifigance on this issue. I like the idea of voting with my feet. I prefer state and local politicians deciding what to do with my taxes, this is the reason I live in Texas and not California.

    I don’t see exclusion being an issue. Certainly the flight of high earners from some regions will occur, but in my book this a feature. It will force bad policy reform. It seems the ideal place for this kind of system is the US for that very reason. Props for the good idea, Robin.

  • Mike

    One danger is if municipalities are too small. This is the case with public schools, where there is enormous variation in quality depending on municipality. Perhaps the economists here could put this in more precise terms, but what seems to me to happen is people who value education tend to collect and create high quality schools, whereas those who don’t, don’t. The correlation between valuing education and making lots of money exaggerates the effect, because level of funding affects school performance. And in the end you get two undesirable phenomena. First is, only relatively wealthy people have access to quality public education, because demand is high to live in the corresponding municipalities and they are the only ones who can afford it. Second is, there is a sort of injustice in which the opportunities a person faces depend largely on where his/her parents live.

    I would guess these would not be issues if, however, health care were managed state by state.

    One thing that would worry me, though, would be inefficiency, due to the 50x redundancy. One would hope, with so many different nations already running public health care programs, there would be little need to try to emulate a market in this way, since we can simply study those nations, try to figure out what would work best here, and proceed trial and error from there.

    • HH

      “Perhaps the economists here could put this in more precise terms, but what seems to me to happen is people who value education tend to collect and create high quality schools, whereas those who don’t, don’t.”

      Well…yeah. Isn’t that a feature? If you value education, you go where people pay for education and pay for it [usually in property taxes.] Why would that not also be true of health care? People who care about fancy health care would go to such places and pay for it. Others who are more willing to settle for bare-bones care go to low-cost/low-service locations.

      I think the concern is that “willingness to pay” is obviously constrained by “ability to pay,” and most people still exempt health care [and to an extent education] from this basic rule. Willingness to pay for fancy cars is similarly constrained by ability to pay, but most people don’t consider that a right or something they’d want everyone to have. Another indicator that most people think of health care as “different” somehow.

  • Phil Goetz

    This may be a good idea, but I feel that it’s part of a dominant pattern we have, at least in the US, of looking at healthcare in the wrong way. We keep trying to find ways of changing how the money flows, and who pays for it, instead of asking why healthcare is so expensive in the US.

    There are two basic reasons I know of why healthcare is so expensive in the US:

    1. Doctors charge way too much money. The average surgeon makes over $400,000/yr in the US. Sure, they work hard for their money – or so we’re told, though I notice they usually work 6 hours a day, 4 days a week – but so does President Obama, and he makes less than they do.

    Doctors make way too much money because the American Medical Association works very hard to ensure that we keep paying more and more money to fewer and fewer doctors. They lobby for legislation requiring the involvement of doctors in anything medical; they lobby to make it hard for doctors from other countries to practice in America; they haze interns to a degree that would be illegal in any other profession. Yet instead of being seen as a shameless self-interested trade union, they are considered respectable, authoritative, and benevolent. We have stricter laws against practicing medicine without a license than for any other profession, except lawyers, who are also experts at lobbying to protect their own incomes. If you say you are an engineer, and you build a bridge, and it falls down and a hundred people die, you won’t go to jail for engineering without a license.

    Doctors also make way too much money because medical colleges charge a lot of money. I don’t know which way causality runs here, but I know that anybody interested in reforming health care cost should look into how to make medical college less expensive. Other countries somehow manage to educate doctors for a tiny fraction of the price. Training to be a doctor does not have especially high costs. Training people to be biotechnology lab technicians is probably much more expensive: Students require experience on a large number of outrageously-expensive machines, costing up to $100,000 each and needing to be replaced every 5 to 10 years; and every day they go through large amounts of expensive, disposable glassware, gloves, and media. Yet it costs about $4000/yr to study to be a lab technician at my local community college, which has excellent facilities. Graduates typically earn about $30,000/yr.

    Medical lawsuits are another factor. This one’s a no-brainer. Punitive damages should be capped, period. There is no benefit to society from having unlimited punitive damages, and it would be an enormous and direct cost savings to cap them. The only people who benefit from not having a cap are lawyers.

    2. Getting drugs approved is too expensive. Getting a drug past the FDA costs, on average, over a billion dollars in the US. The pharms then need to make that money back before the patents expire.

    Everybody worries about drugs that will kill them because they weren’t tested enough. Few people worry about all the people who die because they can’t afford the drugs that will save them; or because the drugs that would have saved them, haven’t been approved. Once I had a serious knee problem that kept me in a wheelchair for over a year, and a doctor told me, in effect, that he would have several effective options for treating me if I were a horse, but as I was human I was only allowed access to second-rate medical and pharmaceutical technology.

    • Douglas Knight

      I think you’re missing the forest for the trees.

      Doctors and drugs are pretty cheap, and thus irrelevant to the dramatic differences between, say, the US and France. The US system is so messed up that any detail causes outrage and most people get stuck on the first detail they look at, usually an easy one to find, like doctors or drugs. Thus it is unlikely that a single line-item is the problem and we should look for more abstract causes.

      France spends about the same percentage of its health-care budget on doctors as the US. Sinapore is the only country I know of where doctors are a significant chunk of the medical budget (half, I think), because they spend so little on the rest of medicine.

      It’s not any easier to get drugs approved in Europe, though maybe they’re free-riding on the FDA. Drugs are a much larger portion of the American budget, but still small in absolute terms.

      • Constant

        So what is the forest? You spent a comment saying what it isn’t.

      • Douglas Knight

        Sorry, I don’t see the forest, either; maybe it was a poor choice of cliche. I think it’s important that the price system has been almost totally destroyed in American health care, but I’m not sure how that happened. I’m impressed by Singapore maintaining a price system.

  • HH

    This one’s a no-brainer. Punitive damages should be capped, period. There is no benefit to society from having unlimited punitive damages, and it would be an enormous and direct cost savings to cap them. The only people who benefit from not having a cap are lawyers.

    Yeah, I’m going to have to disagree here. First, while punitive damages are not legally capped, they’re de facto limited. I don’t recall a judgment of $infinity being levied against anyone.

    Second, and more importantly, give the increasing economies of scale in medicine, large punitive damages become that much more necessary. The use of punitive damages is warranted when a defendant repeatedly engages in illegal conduct but when no particular case is worth pursuing. No one will bring a suit for being overcharged $5, or other similarly small infractions. To deter such conduct, large punitive damages (absent a class action suit) are necessary whenever someone does pursue the claim.

    I don’t see a reason why medical professionals should be protected from “unlimited” punitive damages when no other industry is. What makes them different? Why should they not be held responsible for their own actions?

  • http://shagbark.livejournal.com Phil Goetz

    I don’t see a reason why medical professionals should be protected from “unlimited” punitive damages when no other industry is. What makes them different? Why should they not be held responsible for their own actions?

    A good question. Perhaps punitive damages in all professions should be capped. It’s just that I’ve never heard of someone suing their plumber or their auto mechanic for tens of millions of dollars. Doctors are pretty much the only self-employed people who can be hit with lawsuits in that dollar range. If auto mechanics were regularly hit with million-dollar lawsuits, and all had to take out insurance against that, and the rising cost of auto repair was a major drain on our economy, then I would advocate capping punitive damages against auto mechanics.

    Also, perhaps punitive damages should not be capped for class-action suits.