Tyler brought up an interesting question in this post on healthcare in Cuba. I think that the US has a lot to learn from comparative healthcare systems. So what can we learn from Cuba?
First, a look at per capita healthcare spending:
Data Source: World Health Organization 2006
From that, you can see that the US spends a lot on healthcare, while Cuba spends relatively little. The US spends around 16% of GDP on healthcare while Cuba spends 7.3% of their GDP on healthcare (as of 2008). In 2006, the US spent $6,714 per person while Cuba spent $363 per person. Why do we spend 18.5 times that of Cuba, when by most aggregate measures of health, we are not better off? Cubans have a life expectancy of 77.7 while United States citizens have a life expectancy of 78.37, barely more.
Cuban healthcare is free and universal for all Cuban citizens, and they place a lot of emphasis on primary care. Cuba has no private hospitals or clinics. They have more doctors per person than the US (627 per 100,000, compared to 225 per 100,000 in the US as of 2005).
The question quickly becomes, What inputs affect healthcare?
How do we prolong the average length of life? The simplest way to do this is to reduce infant mortality. “Healthcare” dollars spent on the elderly have the potential to extend average length of life a few years, while dollars spent on a neonate can extend their life twenty times as long. So, how does the US compare in infant mortality?
Data from: The CIA World Factbook 2011 estimates
You can see that the US has an infant mortality of about 6.06/1000 live births while Cuba has an infant mortality of 4.9/1000 live births. But this doesn’t tell the whole story. Cuba is very good at doing other things, as well.
Cuba has the highest treatment and control of hypertension in the world. They have free medical education for Cuban students as well as students from Africa and Latin America. They have a national biomedical internet. They have one of the world’s lowest national rates of AIDS1. They have a tuberculosis case detection rate of 98.2%, compared to the US’ rate of 85.1%. Their HbV three-dose vaccination rate is 99%, compared to the US’ 92%. Their adult literacy rate is 99.8%, the same as the US. They have a higher percentage of children enrolled in primary school than the US. They eradicated polio in 1962, diptheria in 1979, measles in 1993, and rubella and mumps in 1995. They had approximately 20,000 medical tourists in 2006. In 1988, the World Health Organization (WHO) gave Fidel Castro the Health for All award, for achieving the WHO goals for developing countries to achieve by 2000. How can they be so good at providing healthcare for so much less than the US?
What impacts healthcare expenditures?
Cuban doctors are paid substantially less than doctors in the US. A typical doctor in Cuba earned $15-20 in the 1990s, while a typical doctor in the US probably earned around $150,000. Cuban doctor’s medical education was completely subsidized as well. This has the ability to dramatically reduce healthcare expenditures.
But Cuba also has the ability to allocate more doctors to primary care than specialities. Since they control the entire system, they have an incredibly integrated system, where you have a family doctor that acts as a gatekeeper. Their system is vertically integrated. One of the major problems with the US healthcare is lack of integration. This likely leads to increased costs with multiple tests and reduced quality of care. They don’t have an American Medical Association or Congress requiring the number of doctors be held low to provide opportunities for rent-seeking behavior.
Cuban medical facilities are much older than facilities in the US. Their labor costs are also much less than ours. While hospitals here have an incentive to update their facilities and provide the latest technologies, hospitals in Cuba do not face competition, thus there is no Nash equilibrium or medical arms race. Consumers in the US often believe that the newest technology is best, but often it isn’t. Much of our new medical technology does little to improve health, and Cuba resists spending on newer technology. This brings up the next point.
Cuba spends dramatically less on research and development than the US does. This is also true of every other nation. Take the example of pharmaceuticals. Drugs are discovered for the US market. Other countries tell pharmaceutical companies how much they are willing to pay, and the companies agree. They agree because the marginal cost of producing another pill is near zero, and thus any price above the marginal costs can contribute to their fixed costs and profit. If the US was to demand lower prices it would be interesting to watch how this transformed the pharmaceutical industry (which is already hurting, check out p/e of bigPharma).
Most people have very little comprehension of what will improve their health. In the US, they rely on their agent, a doctor, to tell them what is best. Even so, with insurance and governmental programs, such as Medicare and Medicaid, reducing individual’s exposure to the cost of their consumption, there is substantial moral hazard in consuming healthcare. While Cuban’s don’t have the ability to earn a lot of money and spend it on their own health, if they wanted to, we do. When you have more income, you are more likely to want to spend it on improving your health, even if the probability that something will improve your health is lower.
There is no easy way to quantify how much US healthcare expenditures contribute to quality of life. We have the ability to receive many elective procedures that don’t necessarily improve our health, as defined by broad measures like length of life. Here is a graph of quality of life scores and life expectancy.
Data Source: Here
If you read the linked paper, you will discover that the quality of life scores are non-linear. However, it is extremely difficult to find a quality of life measurement for Cuba. Any measurements I found were similar: Cuban’s have dramatically lower quality of life than those in the US. If I had extended the graph out, you would discover that quality of life does seem to decrease with decreasing length of life. Anyways, all I wanted to point out was that having excellent healthcare does not mean you have excellent quality of life.
I think that looking at healthcare in Cuba should make on realize a few things. The first is that healthcare does not mean health. The US spends a lot on healthcare, but we don’t reap the benefits in terms of health. The second is the need for integration2. I believe integration will improve healthcare far more than increased spending. This is a way that we can add value without spending a lot more. The third is that we have no way of knowing that allocating even 7.3% of GDP in Cuba to healthcare is appropriate. Their healthcare system came at the expense of something else. Resources are scarce. While most will say that improving healthcare is important, perhaps Cubans would rather enjoy US cinema, and spend more money on it. Perhaps they would rather enjoy quality food. They lack many of the choices that we enjoy any and every day.
The fourth realization is that often the best ways to improve health involve those that can least afford them as well as externalities. How much better off would we be if we had broad TB and HIV testing and treatment? Fighting infectious disease often involves vaccines that have externalities. Cuba does a much better job at prevention because they can tell their citizens what to do. We cannot force everyone in the US to be vaccinated, even though we all would be better off. We cannot force doctors to enter primary care. We must discuss how to achieve goals of disease eradication in light of privacy and personal rights.
Politicians chose recently to reduce federal spending on important programs for those that need them most, rather than reduce spending on Medicare, those that need the dollars the least. We must choose to cut spending, but not all spending cuts are equal. We should begin by cutting what doesn’t provide much benefit. We should finish by cutting everything and dissolving government, but that is a conversation for another day.
1 In the 1980s, Cuba had mandatory testing for HIV and quarantined anyone who was HIV positive. This was discontinued in the 1990s. Now they manufacture their own generic antiretroviral medications, allowing them to provide them at substantially lower costs than other developed nations. Highly active antiretroviral therapy (HAART) has the ability to reduce transmission risk. All pregnant women are tested, and those positive are given HAART, substantially reducing mother-to-child transmission.
2 A major reason why we lack integration as well as competition is the AMA. For more, read this link on why they prevent transparent pricing or sharing of medical records.