By Sandip Madan (Last updated, May 4, 2008)
The full circle below represents the annual healthcare expenses for an average American. Compare it to the blue section of the circle at upper right. That is the corresponding expense for an average first world citizen (like a European.) The other sections of the circle show the wastes and the excess costs in the US (over and above those in other countries) that make US healthcare so expensive. And what do we Americans get in return? The table under the circle shows the answer - the same or worse care overall when we look at the standard metrics of quality. The article below has more details.
There’s a popular
misconception about the fact that
For example, lawyers cite patient rights and full protection to thwart tort reforms. This maintains the current litigious climate with its paralyzing inefficiencies. Insurance companies espouse consumer choice and lobby against “big government” to prevent a single payer public system of universal healthcare. Such a system would eliminate the staggering overlap, waste and bureaucracy created by thousands of disparate coverage plans. Drug companies use “free market” prices to charge Americans twice as much as Canadians or Europeans pay, and use safety concerns to lobby against cheaper imports of the same drugs. Finally, in the guise of “privatizing” a government function, a private body dominated by doctors is allowed to limit the supply of physicians so as to keep their salaries high.
The consequences are clear in comparing statistics from the official body of 30 developed countries, the Organization for Economic Cooperation and Development (OECD).(i)The
An analysis of data
drawn from a number of sources identifies seven factors primarily
responsible for higher
The largest of these factors, the waste of medical resources, is also the least visible. It is mostly a productivity loss preventing hospitals, doctors and expensive equipment from treating more patients, increasing the cost per patient. For example, hospitals may schedule only six heart patients a day for nuclear stress tests using the same equipment and personnel that enables a cardiologist’s private clinic to examine 20. Doctors see fewer patients because of the time spent between examinations to make lengthy annotations, recover dues, or perform other extraneous tasks. These are consequences of a litigious climate, over-regulation and restrictive work procedures. A smaller cause is some caregivers performing unnecessary tests and procedures only to profit themselves (as opposed to avoiding legal exposure through practice of “defensive medicine” as described below.) This overall efficiency loss is about $973 per capita.(ii)
The extra administrative costs are primarily the
result of a large number of insurers offering thousands of disparate
plans, resulting in high overhead costs and expanded bureaucracy of payers
and providers alike.
Bureaucracy is 31 percent of
Defensive medicine is unnecessary tests and procedures conducted out of fear of lawsuits, rather than to benefit patients. A May 1996 Stanford study put them at up to nine percent of costs(iv) or $576 per capita in 2005.
Remarkably, the malpractice premium paid by
non-physician personnel have no significant wage differences,
Over-priced drugs cost Americans $317 per capita
more than the OECD median.(vii)
Critics decry what they call drug industry greed, wastefulness and
price gouging, while the drug companies defend the current
last factor is treatments that reduce disabilities and improve patient
comfort and productivity, even if they do not prolong life. The
these higher cost contributors is a diagnostic first step. The moves for reform are gaining
momentum as the health burden worsens. Remedies face political rather
than administrative hurdles.
The extent to which these are overcome will determine the well
[ii] This is the amount calculated after accounting for all the other factors.
[iii] See the New
England Journal of Medicine, “Costs of Healthcare Administration in
[iv] Joint Economic Committee, U.S. Congress study, “Liability for Medical Malpractice: Issues and Evidence,” May 2003, p. 13. See also Daniel P. Kessler and Mark McClellan, “Do Doctors Practice Defensive Medicine,” National Bureau of Economic Analysis Working Paper, 5466, February 1996. Also quoted in the Quarterly Journal of Economics, May 1996. The study estimated defensive medicine costs to be between five and nine percent of the total. This appears to be overly conservative, so the upper end of this range is taken. For context, defensive medicine accounts for 25 percent of the total U.S. health bill, according to J.W. Smith, “World’s Wasted Wealth II” 1994, Section 5, published by The Institute for Economic Democracy.
[v] These physician salary differences are quoted in
Health Affairs, May-June 2002,
p. 175, “Cross-National Comparisons of Health Systems Using OECD Data,
1999” by Uwe E. Reinhardt, et al.
Active U.S. Physicians numbered 902,100 and the total
[vii] OECD healthcare data, Oct. 12, 2005 edition, for 2003.
data lists the most common major treatments where the
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