Health Care Costs ("bending the curve")

Below is an graph of three phases of healthcare costs, from 1960-1979, 1980-1989, and 1990-2010*. The data are taken from the OECD statistics database. The red curve tracks US spending on healthcare (normalized to the beginning of each period) and the blue curve tracks the normalized spending of all other OECD countries**.



The graph represents a comparison of cost growth between the US and non-US-OECD during three unique phases. What strikes me about the plot is that the growth in costs has been remarkably similar between the two groups for forty of the past fifty years, despite differences between the systems. This indicates to me that claims that changing the system alone will "bend the curve" are ill-founded.

That's not to say the US's system is ideal, or good, or fair, or efficient, or anything else. It's just to say that inasmuch as long term costs are driven by growth, and growth seems to be relatively similar between the US and non-US-OECD countries, simply changing the healthcare system is unlikely to control long-term costs.

What I really want to know is what happened during the 1980's. Up until that point, the US costs were fairly similar to most OECD countries (again, despite differences in the delivery systems) both in terms of absolute costs and growth. But during the 1980's, the US saw healthcare spending relative to GDP grow at a similar to the previous two decades, while other OECD countries saw no appreciable growth (on average). Does anyone have a thought on why that would be? Did something change in Europe in the late 70s early 80s? Or something in the US that caused us not to realize the relative gains our industrialized brethren enjoyed?

*Note: the downtick in the blue curve at 2010 is due to sparsity of reporting. Data isn't yet available from most countries, so the final data point is largely spurious.

**The set of OECD countries expanded throughout the period graphed. So each blue data point is the average of a slightly different set of countries.

Next Book of the Month, and an aside

I'm going with "The Quants" for the Book of the Month.  The question now is, which month?  I have a somewhat long vacation coming up over Easter, and will be reading it then.  And it seems like everyone's been pretty busy anyway, so should we just bump things back and make this the Book of the Month for April?

As an aside, I found this article to be the most sensible political piece I've read from a Republican in a while (granted, I haven't been reading too many political articles lately): http://www.cnn.com/2010/OPINION/03/22/frum.healthcare.gop.strategy/index.html?eref=rss_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+rss/cnn_topstories+(RSS:+Top+Stories)&utm_content=Google+Reader.

I'm especially in favor of dumping government incentives for employer-subsidized health care, for both the reasons he mentions (hiding the cost of health care to the end consumer), and for the reason that, ultimately, I suspect that government incentives for employer-subsidized health care result in an unfair distribution of government subsidies to those who 1) are employed; and 2) are employed by employers who can afford to offer health care.  (However, I'm not familiar enough with the tax code to be able to say with certainty that tax breaks on health care plans selected by individuals aren't commensurate with tax breaks offered to employers).

Anyone want to discuss?

(The only point I disagree with is his point #1.  Surely the $500,000 is or would eventually be keyed to inflation, rendering his primary argument that it would cover increasingly more Americans moot.)