Health and Education

I believe John Goodman’s Health Policy Blog is the only place on the Internet that routinely compares the fields of health and education (see previous posts here and here). The reason: lessons from one field are often applicable to the other.

The parallels are obvious: In both fields (1) we have systematically suppressed normal market forces; (2) the entity that pays the bill is usually separate from the beneficiaries of the spending; (3) providers of the services see the payers, not the beneficiaries, as their real customers and often shape their practice to satisfy the payers’ demands — even if the beneficiaries are made worse off; (4) even though the providers and the payers are in a constant tug-of-war over what is to be paid for and how much, the beneficiaries are almost never part of these discussions; and (5) there is rampant inefficiency on a scale not found in other markets.

Long before there was a Dartmouth Atlas for health care, education researchers found large differences in per pupil spending (more than three to one among large school districts, e.g.) that were unrelated to differences in results. In fact, study after study has found no correlation between education spending and education results. (See Linda Gorman’s summary at Econlog.)

Internationally, the parallels continue. Just as the United States is said to spend more than any other country and produce worse outcomes in health care, the same claim is now made for education.

The Programme for International Student Assessment (PISA) tests 15-year-olds for proficiency in reading, math and science in thousands of schools all over the world. Here is Richard Posner’s summary:

The latest results (which are for 2009) reveal among other things that although the United States spends more money per student on secondary school education than any other country except Switzerland and Austria, Americans’ performance on the PISA tests is mediocre. In the latest tests Americans ranked 17 in reading, 24 in science, and 30 in math. 15-year-old kids in East Asian nations (including Australia and New Zealand), along with Finland, Switzerland, the Netherlands, Belgium, and Canada, outperform the United States in all three subjects. Since 2000, when the PISA tests were first given, the United States has fallen in rank in reading and science, and is unchanged in math.

Yet, do we really spend more and get less? The fact that the market has been completely suppressed in both health and education means that no one is facing real prices. Spending totals, therefore, do not reflect real resource uses. In health care, National Center for Policy Analysis researchers found that doctors, nurses, hospitals days, hospital beds, etc., per capita in the U.S. are actually below the OECD average. As for outcomes, in those areas where medicine (rather than behavior and environment) make the greatest difference, the U.S. appears to be the best in the world. (See our international survey.)

Similar observations appear to apply to the field of education. If we take the pupil-teacher ratio as an indication of real resources used, the United States employs fewer teachers than the OECD average in secondary education and slightly more teachers in primary schools. Overall, we appear to be in the middle of the pack.

What about outcomes? As Posner notes:

The 2009 PISA test scores reveal that in American schools in which only a small percentage (no more than 10 percent) of the students receive free lunches or reduced-cost lunches, which are benefits provided to students from poor families, the PISA reading test scores are the highest in the world. But in the many American schools in which 75 percent or more of the students are from poor families, the scores are the second lowest among the 34 countries of the OECD; and the OECD includes such countries as Mexico, Turkey, Portugal, and Slovakia.

University of Chicago graduate student Tino Sanandaji (for whom English is obviously not the first language) has gone even further. He finds that when American students of European descent (removing Asians, Hispanics, African-Americans, etc.) are compared to Europeans (minus European immigrants), American students score well above the European average.

Overall, Catherine Rampell finds there is very little relationship between spending and results across countries.

Questions to ponder:

  1. Given all the similarities between health and education, why do so many people in each field ignore what’s happening in the other?
  2. Why do so many people in health policy think they can succeed with the very reforms that have failed (e.g., pilot programs, electronic gadgetry) in education for 25 years?

Let us know what you think.

Comments (23)

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  1. Ken says:

    Excellent post. Some problem in both areas: no real market.

  2. Nancy says:

    I agree that the problems are similar. And we aren’t going to solve the health care problem by copying everthing that we did wrong in education.

  3. Stephen C. says:

    This is the first and only place where I have seen the possibility seriously discussed that we may not spend more and get less in both areas.

  4. Joe S. says:

    Markets work. Bureaucracies don’t work. What more is there to say?

  5. Paul H. says:

    I think the inefficiency in education is much worse than the inefficiency in health care.

  6. Vicki says:

    I agree with Stephen’s comment. All we ever hear about is how bad the US is. I think there are a lot of people who revel in America bashing.

  7. Neil H. says:

    Do you realize how inefficient you have to be for there to be no relationship between spending and results? A little bit of inefficiency won’t cut it. You have to be extremely inefficient for there to be no relationship between inputs and outputs.

  8. David Alexander says:

    Free markets work; under all circumstances ie, good and bad. In both education and health care it is the incentives for behavior which create such difficult problems. In education the existence of a largely unionized workforce in a public sector entity creates a huge incentive to help elect politicians who vote for more taxes and bigger education budgets regardless of the impact on students. Similarly, in health care, the Internal Revenue Code along with other government regulations creates incentives which cause markets to behave in ways which result in inefficiencies and high cost for providers and patients but favor large third party payer organizations. To change the results, it is first necessary to change the market incentives. That’s why the task is so difficult. A couple of good starts would be to seriously revise the Tax code and reduce the impact of unions in public sector employment.

  9. Tom H. says:

    I second everything David Alexander said.

  10. Lynn Etheredge says:

    I have also been thinking about the parallels. As you note, there are many, and comparisons are useful, as some of the most promising reform strategies may share similarities.

    More specifically, I have been exploring the concept of a “rapid learning education system” that would be similar to a “rapid learning health system”, i.e. both systems need to learn much more quickly about how to improve performance and what healthcare or teaching technologies work best for individual students, etc. Indeed, the education sector may have the potential to move forward much faster, e.g. with more than 50 million students in school, and all the testing for learning in each subject.

    A recent panel discussion that touches on some of these issues was “The Next Decade of Educational Data” hosted on Dec 7 by the Education Sector (, video still up on the home page. Another person (Texas!) who has been doing a lot of work in both health and education sectors and thinks that the same reform strategies are needed in both sectors (a rigorous application of assessments, benchmarks, proven best practices, and process improvement, the centerpiece of performance advance over many industries & countries), is Jack Grayson at APQC (, & , on this point,– their North Star initiative).

    GW University

  11. John Seater says:

    Here are some thoughts on the two questions John asked at the end. The questions are related, so I will not distinguish between them in what follows.

    (1) Most people have no idea how markets work and how government policy disrupts them, so few people have the intellectual framework to see the connections between education and health care. A *lot* of people cannot comprehend markets at all. I can’t blame them. Markets are subtle. The first and second welfare theorems are truly amazing. In contrast, dictatorship and central planning are easy to understand. People think in terms of central planning all the time. Just look at the way newspaper articles are written. Everything is about government. Virtually nothing is said about supply, demand, prices, incentives, profit, entry and exit, market equilibrium, etc.

    (2) No only do people have no idea how markets work, they usually are quite adamant in believing that “essential” services, such as education and health care, cannot be provided properly by the private market and that those services cannot be priced in a useful or moral way. The idea that something like health care, which may be a matter of life or death, or even education, which definitely is a matter of competence or incompetence, can be rationed in a morally acceptable way or even in an efficient way is anathema to many people. When an economist says otherwise, they write off the economist as an idiot or a hard-hearted villain. I am not sure which they think is worse.

    (3) The similarities between education and health care markets have not been explained to most people, so they don’t see the relations between the two markets.

    (4) In general, most people believe what they want to believe, not what either theory or evidence tells them they should believe. That is why so many top-flight economists, including a slew of Nobel prize winners, abandon economics at the drop of a hat when economics contradicts their personal policy preferences. On top of that, socialism has a very appealing promise: free lunch for everybody. It happens to be a false promise, but most people want it to be true, so they believe it is true. We have about 80 years of evidence from many countries that it is nonsense, but that doesn’t matter to most people. They want it to be true, so they believe it to be true. For such people, learning the kinds of lessons that seem obvious to John is essentially impossible.

  12. Frank Timmins says:

    Ms. Etheredge suggests that possibly a good strategy centers around “a rigorous application of assessments, benchmarks, proven best practices, and process improvement…”

    Respectfully, it seems that she is merely recycling the same approach that has so clearly failed us for the past several decades. In other words she sees the answers in some even more sophisticated application of third party management. It doesn’t matter whether that third party is the government or other. The poison pill is the “third party”. This is not to say that health education related information is not good. But it should primarily be used by the patient and doctor, where the information can be most efficiently applied.

    Having said that, Ms. Etheredge is correct about the parallels between the education and healthcare problems. But the parallels in the problems (and possible solutions) between the two revolve around the failures to take (or opportunity to take) personal responsibility, not the failure of a system of public management.

  13. Ken says:

    @ John Seater

    Good comments.

  14. artk says:

    So, tell me which of the countries whose school systems outperform are “free market based”. One difference in those school systems is that they follow national standards, not the local school board model we seem to be wedded to.

  15. steve says:

    Dozens of blogs have compared problems with health care and education. I have had many long discussions on the topic. Heck, I have written on it.


  16. steve says:

    To answer artk’s question, Finland routinely comes out at the top in education. Nearly 100% unionized teachers.


  17. John Goodman says:

    @ artk and Steve

    Sweden has adopted a 100% school choice system.

  18. Linda Gorman says:

    Note that the international statistical comparisions don’t necessarily compare similar populations. This can change the results a lot when a) a population is as heterogeneous as in the United States and b) different cultures place different values on schooling. Suppose you compared market based school kids–homeschoolers and kids in districts where charters and private schools are an option–with broadly similar kids in government run schools in other countries?

  19. Robert Kramer says:

    I think you are off base with your comparison. Other than the fact that they both are receiving funds, the market forces that make such comparisons need to realize that the delivery of Health Care is unique in its goals, sources of income, and sociological demands. Education doesn’t need the layers of demands on a whole variety of road blocks like every demographic, ethnicity. Basically the educational requires a scant few; Quality teachers, family involvement, enough in funding that is transparent and most important, involvement of the family or it will die from our cumulative inertia.

    All the system needs 1) Good to great teachers, who are protected from physical harm; 2)a clean place to live and adequate environment,3)PARENTAL SUPPORT is what it takes to get them out of the gutter and a willingness to destroy the family unit and make being well dressed, studious, and speaking english as a goal and not something that the gangs want to preserve by avoiding what the real world can produce. This is far different and much easier to accomplish with the sad conditions our educational system needs. On the health care side, every conceivable social service and provider reimbursement are unique in and of itself. Access, wellness and educational delivery are all there, but there is the biggest problem about the value of life. We have neighbors who had taken in a black youngster into their lives and and home, to the point where he had a key to their house, where he could come after school to study. One day this young man brought home another friend, and when it got later, the lady of the house told her husband that she would take them home to the projects. When they were saying good night, etc, one of the kid grabbed her and the other stabbed her in her neck. It turns out that to get into their gang, they had to kill a white person. It was with

    …Forgive me for the length of this. But I was taught that comparisons are odious, and you have one system that requires mostly funding while the other that runs the gamut of social, educational, and all the other requirements, with health care heading the list, and that politeness and the awareness that all the positives in their lives come from a strong family, rules and regulations are strong providers, and that healthcare is most important, because a strong and healthy body can can provide a strong and healthy outlook for life’s exigensies.

    -Dr Bob Kramer

  20. steve says:

    @John Yes, they are vouchered, but two things to note. They are heavily unionized and they do not perform as well as Finland.


  21. David Rose says:

    Food, health care, education. All are important. Two are constantly in the news because of the public’s general unhappiness. One – the most important of the three – is not, however. Why? Because that one, food, has had its “problem” addressed by vouchers.

    Vouchers keep the lion’s share of a sector in private hands where action is mediated by competition, not government discretion. This is why the locution “X crisis” nearly always has the X filled with something delivered by or heavily regulated by government and almost never by something in the private sector. Think of it as evidence in the form of the dog that didn’t bark.


  22. Devon Herrick says:

    There is arguable no areas of life more personal than health and education. Education is the basis for how we spend our lives. Kids who fall behind in grade school are at a disadvantage in receiving the education that will sustain them in a professional career later in life. Grade school students with a poor foundation in math will probably not grow up to become engineers.

    Yet, health and education are two areas where proponents want to standardize procedures. They seem concerned with the aggregate performance of the group as a whole and care little about individual outcomes.

    School curriculum is designed to appeal to a narrow range of students’ abilities and backgrounds. Kids below that range fell behind and likely fell through the cracks. Kids beyond that range received no addition support to climb any higher. A voucher system would allow parents to place their kids in a specialized environment that could meet the unique needs of their kids.

    Likewise, when I’m sick I want personalized medical care that meets my unique needs rather than a standardized care designed to treat the average patient with a similar health condition. Similar to education (which is paid for collectively), the rise of third party payment and public insurance is also a move to more collectivist system of medical care were the needs of the individual are less important than the needs of the collective.

  23. Sheila says:

    Brown vs. Board of Education decision of 1954 that delcerad unconstitutional the racial segregation of public schools. Separate schools for black and white children are inherently unequal, Chief Justice Earl Warren said in an opinion that helped launch the civil-rights movement.LocalLinks State-enforced segregation laws are long gone, but for school officials today, a key question remains: Did the historic decision commit them to a policy of seeking integrated schools, or did it tell them not to assign students to a school based on their race?Today, lawyers in a pair of integration cases will debate whether school boards may use racial guidelines to assign students. Both sides will rely on the Brown decision to make their case. In Seattle, the school board adopted a policy, now suspended, that gave nonwhite students an edge if they sought to enroll in a popular, mostly white high school. In Jefferson County, Ky., which includes Louisville, the school district said black children should make up between 15 percent and 50 percent of the enrollment at each elementary school. In both cities, several white parents sued to have the plans delcerad unconstitutional after their children were barred from enrolling in the school of their choice because of their race. Although they lost in the lower courts, the Supreme Court voted in June to hear their appeals, leading many to predict the justices are poised to outlaw racial balancing in the public schools. At its core, the issue here is the promise made 52 years ago in Brown vs. Board of Education, said Theodore Shaw, president of the National Association for the Advancement of Colored People’s Legal Defense Fund, which won the ruling that struck down racial segregation in the South. Mandatory desegregation is now a thing of the past. All that’s left is voluntary desegregation, and now that is being challenged. Bush administration lawyers, who joined the case on the side of the parents, say the Brown decision sought to move the United States toward a color-blind policy. They say school officials may not open or close the door to particular students solely because of race. In short, race-based decisions are racial discrimination, even if the officials are pursuing a laudable goal, they say.