KEVIN DRUM responds to my post on health-care costs and the free market by pointing out that while it's true that other countries, where governments intervene more aggressively in negotiating prices, have far lower costs and spending than the United States, those countries aren't necessarily doing better right now at holding down health-care inflation. They're starting from a much lower base of spending, he says, but at the moment they're having trouble controlling their health-care costs too. He adduces the following graph derived from the Kaiser Family Foundation's April report on the subject:

This graph surprised me. I remembered the same Kaiser Foundation report (I blogged about it a while back). The thing is, it also contains a graph showing that the portion of its overall economy the United States spends on health care isn't growing at a comparable speed to all of these countries. It's growing significantly faster.

You'd think that if, as in Mr Drum's chart, the rise in health-care spending per capita were higher in Britain than in the United States between 1990-2008, then the portion of the economy devoted to health care would also be rising faster in Britain than in the United States. But it's not. In Britain, it grew 2.8%; in America, it grew 3.8%. So what's going on here?

I don't really know. I tried a couple of theories. The first was that maybe British per-capita economic output grew faster than American per-capita economic output, so that while health spending per capita rose faster in Britain, it grew less quickly as a portion of the economy. And according to OECD figures, this is in fact the case: British per-capita GDP rose 42.9% from 1990-2008, while American per-capita GDP rose 35.5%. Those numbers, like the ones in Mr Drum's chart (according to the Kaiser report), are PPP-adjusted. Does this explain the difference? Well, the chart shows health-care spending averaging an annual increase of 2.7% in America, which over the 18 years from 1990-2008 should give you an aggregate increase of 61.5%. In Britain, annual spending rising at 3.3% over the same period should give you an aggregate increase of 79.4%. When you do the division, that still leaves you with a ratio of per-capita health-care spending to per-capita GDP that grew faster in Britain than in America, which contradicts the second Kaiser chart showing that it grew much faster in America than in Britain.

Another possibility is that there's something going on with the PPP conversions. The PPP factor is based on comparing prices for a basket of goods in Britain to those in the US, and if the prices of non-medical goods shifted differently than medical goods, one could imagine this might somehow affect the comparison of medical prices. It's not specified whether the Kaiser per-capita spending figures use constant or floating PPP conversions. But in 1990, the PPP conversion factor for the pound was 0.614, while in 2008 it was 0.667 (UN figures). That should actually have driven costs in Britain lower compared to those in the US, all things being equal: a pill that cost £1 in 1990 would be weighted as costing $1.63, while in 2008 it would be weighted as costing $1.50.

So I really don't know what's going on here. What I would say is that what we're ultimately trying to figure out is whether our economy can afford what we're spending on health care. Assuming that the chart showing the growth rate in the health-care portion of the economy is correct, I think that's the most important number to consider. I would, however, be grateful to anyone who can explain what's going on with these confusing numbers.

Update: Kevin Drum explains via email that the numbers on his chart represent multiples, not annual percentage growth. US per-capita health spending grew 2.7 times, while UK per capita spending grew 3.3 times. I looked at the underlying OECD health statistics and I get the same numbers he does, so ignore all that nonsense about aggregated percentage growth. But we still have this problem of a discrepancy: the Kaiser report itself has a chart that shows US annual growth in per-capita health spending as somewhere in the middle of the pack, which doesn't seem to accord with the same report's chart showing US growth in medical spending as a share of GDP that's higher than anybody else's...