Huh?

Andrew points to an article showing that 70,000 British people a year fly abroad to get basic life-saving procedures such as hip replacements, heart bypasses, and dentistry.

Ezra responds that 100,000 Americans go abroad for plastic surgery a year! And untold numbers more are going for non-cosmetic procedures. This would be a more devastating critique if

a) Britain were not one-fifth the size of America

b) we had hard figures on how many people in America were seeking procedures abroad that are normally provided in a timely manner by national health systems

Ezra also claims that Americans are creating the industry; Britons are just free riding. Beg pardon, but if Americans were going abroad en masse for dentistry, I'm pretty sure that Hungary wouldn't be their first destination.

But the weirdest thing is that he seems to think that low-cost free market care is an indictment of the free market. And yet, this subtly undercuts the argument that Ezra et al. consistently make: health care in Europe is cheaper than health care in America; health care in Europe is paid for by the government; ergo, if America had health care like Europe's, it would be cheaper.

Let me try my own version: privately provided health care in Bangkok is very, very cheap, much cheaper than publicly provided health care in Europe. Ergo, Europe should privatise health care.

The liberal instantly recognizes that this is ludicrous: cost structures in Europe are much different from cost structures in Bangkok. But the same is true of America and Europe.

Health care systems suffer from Baumol's cost disease: it's a labor-intensive service that doesn't offer huge scope for gains in labor productivity. The number of hours it takes to manufacture a car is consistently falling, but the number of hours it takes to perform doctor's visits is roughly the same as it has always been. As a society gets richer, in order to attract workers, the labor intensive service has to pay competitive wages with the sectors where productivity is rising rapidly; that means that costs for labor-intensive services rise faster than the general price level.

Bangkok's doctors are so cheap because a doctor making a modest wage by British standards can have an enormous house and a flock of servants to take care of him, putting him in the very top echelon of Thai earners. Nurses too, can make an American pittance and still live very well. As Bangkok gets richer, the servants and the gigantic house will not be so affordable--and neither will the health care.

Likewise, America is richer than Europe; it therefore has to pay its doctors, nurses, etc. more. (A doctor in France makes about what a moderately experienced RN makes here.) Also, health systems held down wages in previous periods, which is much easier to do than inducing everyone to take a 75% pay cut now. If we did slash wages by that much, workers would exit the public system in droves, immediately destroying it. We literally cannot get there from here.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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