Monthly Archives: June 2009

Health Care Expenditure by Country

There’s a lot of talk about health care proposals in Washington these days.  Personally, I have been having issues with my health insurance and health care provider getting on the same page – i.e. they’re making me pay for a routine visit that should be fully covered.  In my case, I have (great) insurance, and yet I’m forced to settle between the (at least) 4 parties involved: the doctor, the back office billing for the doctor, the insurer, and the network provider.  It’s crazy.

Anyways, many analysts bring up how we pay more per capita for health care – well here’s the data, courtesy of World Health Organization’s Statistical Information System (WHOSIS), an excellent resource.  I broke it down into a single chart, using the top 37 countries by population (over 30M) in 2006.  It’s crowded, but still readable I think.  Note, the right vertical axis is age and percentage, and PPP stands for purchasing power parity.

Health Expenditure, by Country

The results are fascinating.  We can easily gather that the US spends over $3,000 more than any other country on health, per capita.  Yet the life expectancy and healthy life expectancy are on par and often lower than the other top countries.  Makes me wonder where all our additional money is going.  Actually, I know that answer – it’s in the administration, e.g. see my problem above (and this doesn’t account for lost productivity at work for patients trying to figure out the system).

The thing I learned, that I never realized before, was that for countries where health expenditures are at least $500 per capita, the government in the US contributes the least (as a percentage), by a significant margin.  That means that private expenditure is huge, i.e. we have placed a larger burden on businesses to cover health care than comparable countries.  The fact that out-of-pocket expenditure makes up a lower percentage of private spending in the US is most likely due to the high contributions by the private sector overall.

The question is this, if the government contributed more to health care and we asked individuals to pay slightly more out-of-pocket, would we be able to bring down the overall health costs?   Keep in mind that the US government already spends more per capita than any other government listed here.  There’s no easy answer.

Deficit Should Not Impact Health Care

Last week the NYTimes released some very interesting data (methodology) about how we went from an $846 billion surplus when Clinton left office in 2001 to a $1.2 trillion deficit currently estimated for this year (via Freakonomics and Matthew Yglesias).  That’s a $2 trillion swing in yearly spending – in just over 8 years.  It’s amazing how fast things can change.  Check out the timeline:

NYTimes - Leonhardt

NYTimes - Leonhardt

Taking Yglesias’ idea for a pie chart, but breaking it down with percentages:

deficit-pie

The data helps put some of the recent programs in perspective, as well as give some context in regards to cost figures related to the recent health care proposals (estimated at $1 trillion over 10 years, or $100 billion per year).  $100 billion is obviously significant, but I would argue that the relative importance of health care reform is greater compared to the overall budget deficit (especially the Bush tax cut).  Either way, the finger-pointing should stop from the apparently freshly minted deficit-hawks among Republicans, as this deficit has everyone’s fingerprints on it.  If the federal government can continue to work towards fixing the economy and ending the war in Iraq, we may find ourselves with a lot more money that would pale in comparision to savings generated by skimping on health care.

UPDATE: According to the Congressional Budget Office, there would be a net decrease of 16 million uninsured people with this plan:

“Once the proposal was fully implemented, about 39 million individuals would obtain coverage through the new insurance exchanges,” it said. “At the same time, the number of people who had coverage through an employer would decline by about 15 million . . . and coverage from other sources would fall by about 8 million.

Cell Phone Contract Termination

I don’t like cell phone contracts.  But maybe I should.  I recently bought a Blackberry Bold on AT&T and signed a two year contract.  Turns out that AT&T’s 3G network (as most AT&T subscribers can tell you) is beyond atrocious.  I should have returned the phone within 30 days, but I didn’t.  Now I’m in a quandary with no recourse, or so I thought.

The early termination fees (ETF) are there to inhibit switching, and they work well.  However, the contracts can actually work in your favor.  Most phones are subsidized around $100-$200 if you sign the contract.  Check out the below table, and you’ll find that over time, the ETFs become lower than the subsidized amount – i.e. it behooves you to buy a phone on contract as long as you don’t cancel within a couple months (depending on the carrier).   There are caveats (activation fees are meant to even it out, though these are sometimes negotiable), but at least we have the flexibility.

Ultimately, I still believe that cell phone service would be vastly improved if 1) we got rid of contracts altogether and 2) they shared a similar technology platform.  The carrier technology would then be a commodity (much to their chagrin) and service + cost would win customers (instead of devices, which is where the iPhone has done an extreme disservice to service quality-conscious customers,  as we have shown our buying choice can be based entirely on phones).

Problem is CDMA and GSM are both prevalent, however the evolution to LTE will help even the field (whenever that happens).  Contracts create (illusory or not) a feeling of stickiness.  If a carrier truly felt that they were good enough, they would allow customers to change whenever without ETFs.   Thing is, if contracts were eliminated, phones would be more expensive (though one could argue the market would be more efficient since platform barriers would be eliminated).  However, monthly plans would decrease, assuming that carriers currently make up subsidies over the life of the contract.  It’s an interesting conundrum.

Anyways, since I’m very seriously considering changing networks, I decided to look up all the return policies and ETFs, as I feel this is extremely relevant to what network I do end up on next.

Return Policy

Early Termination Fee (ETF)

AT&T

30 day

$175 minus $5 for each month on contract

Verizon

30 day

$175 minus $5 for each month on contract

T Mobile

14 day *

180 days + remaining on contract: $200 **
91-180 days remaining: $100
31-91 days remaining: $50
Less than 31 days: Lesser of monthly or $50

Sprint

30 day

$200 minus $10 each month beginning month 5 ***

* Another page on their website says 20 days. Phones activated in CA have 30 days.

** Only for contracts on or after June 28, 2008. No idea what is before that date.

*** Only for contracts after Nov 2, 2008. All contracts signed before subject to full amount.

[Product] is [not] an [incumbent market leader] killer

I think I summarized a significant number of headlines.  I find these extremely unuseful.  I agree it’s a good idea to compare a new product to an old, incumbent.  However, what is not useful (to me at least) is to compare them in a black and white modicum.   It’s most prevalant with two products –  Google Search and the iPhone.  Every new company that has focus on search is compared to Google, and labeled as a Google-killer, or not.  Cuil was victimized by this.  Wolfram and Bing are newer examples.  For the iPhone, it’s the Blackberry Storm or the Palm Pre.

While most of these companies didn’t mind the publicity (at least before it started), it’s not fair for anyone involved.  the iPhone and Google Search were paradigm shifters.  When both came out, they transformed user behavior, and forced others in the market to follow suit.  The fact that we have to label something an x-killer means that it probably failed at killing x because it instantly reminds everyone of x.  Did anyone call the iPhone a Razr-killer?  Or the Google an Altavista-killer?

The other issue – not being a killer does not preclude success.  I would have a legitimate argument that Verizon is doing better than AT&T with the Storm.  Verizon sold 500,000 units the first month, and 1M units in the first two months (compare that to the iPhone 3G, which sold 2.4M in the first three months).  Verizon, for one, probably pays a significantly lower amount to RIM than AT&T does for the iPhone exclusivity.  Second, the margins for the network have to be MUCH better on Verizon.  Check out the recent AdMob metrics report – while  RIM represented 17% of smartphone sales, they only represented 9% of HTML traffic measured by AdMob.  Compare that to Apple – 8% of smartphone sales with 43% of the traffic.  The actual difference is probably worse – the report uses 2008 sales data as a proxy of  current market share.  Anyways, this defines success from the network perspective, not the consumer perspective, but I think it’s important that we keep that in mind (and as a consumer on AT&T’s network, I can tell you that more phone sales, especially iPhone sales, is ruining my experience and is about to drive me to another network).

One interesting article to check out – apparently we did miss that Google was a killer until it was already popular.