Monday, January 12, 2009

Samuelson on Health Care Costs

The always insightful Robert Samuelson has a column today on health care costs in the United States. A recent study by the folks at the McKinsey Global Institute Samuelson cites bursts the bubble on some common misconceptions about where the runaway costs for US heath care come from. Is it the high administrative costs associated with our system? Nope. Well then it must be the high cost of emergency room care, especially that associated with the uninsured for whom the emergency room is the venue of choice? Nope. Not that either.

Where do the costs come from? Americans receive more costly medical services than do other peoples, and they pay more for them. Adjusting for population differences, the number of CT Scans in the US was 72% higher than in Germany. In 2005, one study reported that the number of knee and hip replacements in the US had increased 70% in five years.

The key graph: "We have a health-care system that reflects our national values. It's highly individualistic, entrepreneurial and suspicious of centralized supervision. In practice, Medicare and private insurers impose few effective controls on doctors' and patients' choices. That's the way most Americans want it. Patients understandably desire the most advanced surgeries, diagnostic tests and drugs. Doctors want the freedom to prescribe."

But don't expect this to change any time soon. Writes Samuelson, "There is no major constituency for controlling spending. Because most patients don't pay medical bills directly, they have little interest in using less care or shopping for lower-priced services. Providers (doctors, hospitals, drug companies) have no interest in limiting care. What others call "health costs" are their incomes -- wages, salaries, profits." Which means, that until Americans are forced to pay more out of their own pockets for their health care (out of pocket spending for health care in 1960 was about half--in 2005, 13%), there will be no effective mechanism for controlling cost.

You get what you pay for. We here in the US (at least the 85% of us with health insurance) get a fantastic system, especially when compared to the rest of the world.


Mudge said...

It would be interesting to see how many global citizens fly to the US for health care vs how many US citizens fly to other countries for their health care. I like my health care just fine and would appreciate it if those in government would keep their mitts off of it. As an aside, I can't help but wonder how so many voters who yell "Stay out of my womb" to government seem very eager to have that same government managing their health care and making their other health care choices for them. Pro choice? Then keep government out of your health care altogther.

Productivity Guy said...

Sorry, don't mean to blog spam, but couldn't see a "contact" link... Might want to check out these new research results on how healthcare costs will be affected by the Obama administration:

Anonymous said...

It is interesting that (excluding Medicare/Medicaid) our system exists of the two extremes; the first in which one has no clue as to the true cost because we have gotten used to the $20 co-pay at the doc or the second being the sky high cost of insurance who must buy it on their own.

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