Are high US healthcare costs just an illusion?

Random Critical Analysis (or RCA, in honor of the dizzying array of acronyms the author there employs) has a blog post up in response to a recent New York Times article by Austin Frakt and Aaron Carroll in which they (Frakt and Carroll) reiterate the case famously made by Uwe Reinhardt that the astronomical costs of the US healthcare system can be attributed to the astronomically high prices found in the US healthcare system (rather than, say, higher utilization), which has always seemed a pretty straightforward and obvious case to me. RCA claims that this is wrong. The thrust of their (RCA’s) argument seems to be that, if you look at healthcare spending in relation to the average disposable household income of various countries, rather than, say, as a % of GDP, US spending is not out of line at all, and therefore there’s little to explain in the first place. This is not the only argument that RCA makes, but it underlies most of the post, and it’s the one I am going to address here, briefly. RCA’s full post is very thoroughly written, very interesting, and well worth reading (as are the previous posts that it summarizes and links back to).

RCA claims that using real household disposable income is the proper way to put US healthcare spending in context, for two reasons. First, it is an incredibly accurate predictor for how much per capita health expenditure there will be in any given country. Second, it most reflects how people would intuitively think about healthcare spending as “domestic opportunity cost (i.e., how much real…