The thrust of their (RCA’s) argument seems to be that, if you look at healthcare spending in relation to the average disposable household income of various countries, rather than, say, as a % of GDP, US spending is not out of line at all, and therefore there’s little to explain in the first place.

Whenever I’ve seen health care costs expressed as a % of GDP, I’ve always had this nagging feeling of “who cares?”.

Whether health care is “expensive” or “cheap” can only be measured at the household level, IOW, the % of the median after-tax income it consumes, compared to other nations. (Normalized for the fact that most other nations cover more of their health care costs in taxes than the US does, of course.)

Per capita disposable household income is a great predictor of a country’s per capita healthcare spending level. And when we look at things like this, the US is right in line.

So, IOW, an American family spends about the same on health care as any other family in any other country does, once you normalize for the fact that we earn a lot more here.

if I have a lot of disposable income, then of course I’m going to spend more freely on healthcare.

It’s also an argument for the theory that states that the more money people have, the more prices rise to consume that additional $$. (Which is the counter argument to raising minimum wage, it should be said, but let’s not digress.)

So, where we seem to be at with RCA’s argument is that we have the perception that we spend a lot on health care, because in other countries, those costs are either (a) better spread out across the entire population than in the US, leading to the perception that they are lower, AND/OR (b) not subsidized by the government to as large an extend, AND/OR (c ) the “pain” of the costs is hidden in other countries by the fact they are largely managed as part of their income taxes.

he primary reason that it does is because per capita means average, and in any given country, income may be distributed radically unequally.

This is why you always should use medians, as opposed to averages.

As can be seen, we are quite a bit away from our regression line. What does it mean? Well, it means that relative to the typical person in the typical country, the typical American is indeed facing absurdly high healthcare costs.

I think you’re reaching, here. I’d like to see you redo your original graph using medians instead of averages. There are a lot of reasons why using GINI is problematic, not the least of which is that that GINI and household income are not independent variables.

Data Driven Econophile. Muslim, USA born. Been “woke” 2x: 1st, when I realized the world isn’t fair; 2nd, when I realized the “woke” people are full of shit.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store