The Economics of Access to Healthcare

a guest post by Keith McCullough

Keith McCullough is a Senior Research Analyst at Arbor Research


     The economics of healthcare are complex, even within a single country. When making comparisons across countries, “How many poor people are there?”  – is a difficult question, let alone what we’re really interested in: “How does poverty impact access to healthcare?”
     Who is poor? How many poor people are there? The World Bank uses the purchasing power parity (PPP) statistic to address these problems. This statistic ‘translates’ the value of someone’s wages into a ‘standard’ basket of goods. Of course, there are difficulties with this approach. Prices for various goods can vary wildly depending on local circumstances, or whether the particular good is imported. Each item in the basket may need to be ‘translated’ to a local equivalent (e.g. a bag of rice instead of a bag of flour). The World Bank has described some of their efforts along these lines, including the need to consider urban v. rural, changes in value over time, and lack of data due to turbulent local conditions.
      The PPP is a reasonable metric for their purposes, but healthcare is not an easily-described ‘good’ with a well defined ‘price’. In many countries, including countries with universal healthcare (which is not the same as single-payer!), payment for a medical treatment or procedure can involve a combination of public insurance, private insurance, and ‘out of pocket’ costs. These costs might be calculated for each service, or bundled together into a single overall payment, which may make it nearly impossible to assign a single ‘price’ to a specific procedure.
     Even if we had a good set of healthcare procedures with well-defined costs, examining financial barriers to healthcare access is more complex than just translating someone’s income into a ‘healthcare’ PPP.
      Income alone isn’t enough information: A retiree with very low income might have good public and/or private insurance, and thus very good access to healthcare.
Wealth + income isn’t enough information: Many procedures are simply outside the purchasing power of the vast majority of the population, which is why we have insurance.
        Wealth + income + insurance isn’t enough information: Our ‘healthcare’ PPP is extremely sensitive to location (it’s hard to ‘ship’ healthcare). For example, pregnancy ultrasounds cost over four times higher (on average) in Alaska than in Arizona. Many procedures and treatments are simply not available in some countries at any reasonable cost, due to lack of infrastructure, patent issues, or other reasons.
Wealth + income + insurance + location isn’t enough information: Even if a procedure is completely covered by some sort of insurance, and you live in an area where the procedure is available, there may still be long wait times for some procedures (e.g. hip replacement). Wait times limit access to the people who survive the wait. In many countries with universal healthcare, citizens who are capable of doing so will purchase additional insurance to improve their access (via decreased wait times), or go to other countries for procedures, but sometimes this is not an option. Someone’s access to a procedure depends on what everyone else is doing, not just their own resources and location.
      Just to be clear: my description of the difficulties in comparing international data is not an attempt to rationalize away international comparisons that indicate that US citizens have generally low access compared to other first-world countries. I favor increased healthcare coverage, mainly because current research shows that increased coverage saves lives, e.g. through early detection of serious conditions. I also like the fact that increased coverage reduces the unfairly high prices poor people tend to pay for the same procedures. This article is simply describing the fact that this is a complex issue that researchers have been working on for some time.



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