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How to compare national health-care systems?

January 26, 2008

We often hear from the proponents of socialized medicine that the nationalized health-care systems in Europe are so much cheaper and yet provide much better results.A debate is raging on the latter part, the “results”. Are they really better on the other side of the pond etc…But what puzzles me is actually the first part, the “cheaper” part.

In a market, prices are determined by the interaction of supply and demand. But how are prices determined in a nationalized health-care system? How much does a hip-replacement surgery costs in, say, France? How do they estimate the price of various health-care provisions when such price does not exist by definition? Do they just add up the costs of production? If so, then comparing these made-up prices to actual market prices doesn’t make much sense.

Now, it could be that, even in the US, prices are not really subject to the forces of competition (I’m not an expert). But the conventional knowledge is that the US health-care system is more market-oriented. Is it really so? Does a C-section costs more in Beverly Hills than in Lincoln Nebraska? Probably. What about hip-replacements? I don’t know.

Economics stresses costs and benefits. But they’re both so hard to measure in practice (at the macro level), that they should be handled with great care.

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