Thread by @RCAFDM

@jdcmedlock @Noahpinion @UnhWut @gl0balism To be clear, my argument isn't that obesity and related metabolic conditions drive costs between countries (even if it clearly predicts some within countries), but that it produces a lot of excess mortality and generally reduces physical health and well-being.

@jdcmedlock @Noahpinion @UnhWut @gl0balism My argument is the real income of HH is essentially the sole determinant of spending in the long run. Tho prices explain little, aging & other available indicators of population health do not appear to be robust, significant independent determinants of overall spending levels.

@jdcmedlock @Noahpinion @UnhWut @gl0balism Well measured, broadly representative health prices (BEA/PCE and CMS) cannot explain the rise in spending in the United States. The derived quantity of health consumed per capita has increased faster than real income growth.

fred.stlouisfed.org/graph/?g=pMyJ

@jdcmedlock @Noahpinion @UnhWut @gl0balism Similar patterns are found internationally: the quantity of health consumed, i.e., adjusting for well-measured health prices, rises faster than real incomes and real consumption (AIC). The US spends more because we consume much more in real terms.

@jdcmedlock @Noahpinion @UnhWut @gl0balism This, of course, implies that overall health prices are not rising faster than incomes in intl cross-section. This, too, is consistent with patterns observed domestically.

@jdcmedlock @Noahpinion @UnhWut @gl0balism Though health inflation over and above the rate of general inflation is clearly a thing in the United States, this does not imply it's increasing faster than income and it's clearly not unique to the United States.

@jdcmedlock @Noahpinion @UnhWut @gl0balism Further, at least some of this is likely explained by baumol's effect (cost disease). Similar patterns are found in other labor-intensive services that are likely inherently less subject to productivity gains (given cur tech state). Price of services rise faster than goods

@jdcmedlock @Noahpinion @UnhWut @gl0balism The apparent increase in quantities/person, as opposed to prices/income, is also consistent with proxies for observed inputs. We have a much larger % of the population and workforce in healthcare than we did in earlier decades and than lower-income countries.

@jdcmedlock @Noahpinion @UnhWut @gl0balism Indeed, estimates of mean compensation in healthcare derived from macro and micro data indicate that it's very close to the national average (probably somewhat *less* than mean non-health comp today).

@jdcmedlock @Noahpinion @UnhWut @gl0balism People that want to try to explain rising healthcare costs by high average wages or high average profits clearly haven't looked very closely at the data. The explanation is much more mundane and, if cost-cutting is the order of the day, politically challenging.

@jdcmedlock @Noahpinion @UnhWut @gl0balism Clearly, healthcare compensation did rise several decades ago, but this is likely mostly attributable to rising nursing wages (initially not well paid) and rising skills in the workforce, not so much physician comp (contrary to popular wisdom).

@jdcmedlock @Noahpinion @UnhWut @gl0balism Physicians have always enjoyed significantly higher than average compensation. Arguably more than necessary, but the change in their compensation is unlikely to explain much & not so far from other high-income countries.

@jdcmedlock @Noahpinion @UnhWut @gl0balism (Last several plots borrowed from Louise Sheiner's presentation at Brookings)

brookings.edu/wp-content/upl…