Thursday, March 27, 2008

Florentine Stakes

I had a chance to talk with the head of the Tuscany health service, who informed me that the province spends about 1400 Euros per year per person to cover the full range of health care services -- from cradle to grave -- from childhood vaccinations to nursing homes -- for its population. This struck me as an extraordinarily low amount, but he assured me it was the full bill.

Recall that a similar figure for the Netherlands was 2800 Euros per year (and I am not sure it was as all-inclusive as the Tuscany figure.) And the number for the United States is just under $7000. For these purposes, I am assuming comparability in value between Euros and dollars. While exchange rates between countries vary (sometimes inaccurately) and affect the relative price of imports and exports, the local currency represents a reasonably close approximation of purchasing power for domestically produced and consumed services.

We have talked before about some of the explanations for the disparity between the US and other European countries, for example in Iceland. A single payment system that simplifies transactions could be part of it. A strong primary care network that probably helps prevent some diseases and certainly treats many people at the lower end of the acuity and specialty spectrum and thereby reduces the cost of care is probably part of the reason, too. A parallel private system to the public system that provides services that are rationed by the public system -- but is not counted in the public financial figures -- can also be part of it. But what might account for the very low number in Tuscany, even relative to other parts of Europe?

From observation, you can see that there is less obesity and a more foot-dependent lifestyle than in the US -- although I am not sure those characteristics are very different from the rest of Europe. Certainly, too, the food is more healthy, with an emphasis on olive oil, fresh vegetables, less processed food (and consistent consumption of very good Chianti!) (But assuming away the effects of bistecca a la Fiorentina!) Perhaps, too, there is a genetic component attributable to the phenotype of people living in this part of Italy, a population that has been quite homogeneous for centuries.

But there is something else. The doctors in Tuscany get paid very little. An attending physician in a hospital will earn 2500 to 3000 Euros per month. A chief, 4000 to 5000 Euros per month. How can this be? There is a history, but basically it results from government policies years ago that made it relatively easy and financially attractive for people to go to medical school and become doctors. Indeed, the course of study was tuition-free. There are now so many doctors that they actually staff ambulances, rather than the EMTs we would have in the United States.

So, we could hypothesize that this surplus has bid down the wages of the medical profession. (Nurses are paid still less.) And, if you don't have to pay off your debt from school, you can accept lower wages. (In the US, the average amount of medical school debt is about $100,000, but that includes people who have no debt, and it also does not include carry-over debt from undergraduate college. It is not unusual for doctors to have accumulated debt of $300,000 or more by the time they finish residency training.) So, we have to assume that a significant share of the cost of medical school shows up as a underlying component of our overall health care costs, as a necessary component of doctors' salaries.

Also, after undergraduate medical education is over, the cost of residency training in the United States is covered mainly by the federal government as part of the Medicare program, so it is counted in our overall $7000 figure. I am guessing that this portion of the cost of physician training also does not show up in the health ministry book of accounts, so it is not in the 1400 Euros.

I am not suggesting here that the disparity in salaries and other such matters accounts for the entire difference, but this point is emblematic of discussions about national differences in health care costs. As you dig down into the issue, you often find that people are not counting the same things in the same ways.

But, based on recent experience, I will suggest that having a glass or two of Chianti while discussing the topic makes one care less about getting the numbers exactly right . . . .


Anonymous said...

An excellent post as usual. It is interesting to compare and contrast systems without jumping into rhetorics. Many of the points you made about Italy also apply to France.
Thank you!
David O., MIT CTL

Shafique said...

Hello Paul,

I would like to bring up a subject that is indirectly related to this post; I'm wondering whether there may be a failure in the labor market in the U.S. for fresh medical school graduates. I would think that if the labor market functioned well then hospitals would compete for the top medical graduates, in part on salary but perhaps also on benefits such as work hours, time off, etc. In this case there would be significant dispersion in salaries, and you would see graduates of higher-ranked schools receiving better compensation than graduates of lower ranked schools. Perhaps ambitious hospitals would try to lure top interns away from the Longwood Medical Area, resulting in salaries being bid up? I think that when med students interview for placements, they don't get reimbursed for travel expenses, which is certainly not the norm in other professions where there is healthy competition for labor. From my limited understanding (from speaking to some MD interns), there isn't much competition for labor.

Of course the current equilibrium could be explained by several factors: First, the matching/placement system (which I also don't understand very well). I would be interesting to know who's interest that systems serves (or whether it serves any interests in particular); second, it could be the case that the better hospitals/clinics use their reputation and facilities as currency; third, if there were a glut, i.e. an oversupply of med graduates, this would explain why employers aren't competing vigorously for them.

I haven't done any research into the labor market for fresh med graduates, so I could be wrong on the facts above. In any case I would be interested to hear your thoughts on this issue.


Anonymous said...

The match process throws any kind of usual labor market into a tizzy. Therein lies the answer to your questions.