THE TREATMENT NOVEMBER 2, 2009
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Ezra Klein, channeling Kaiser Permanente CEO George Halvorson:
There is a simple explanation for why American health care costs so much more than health care in any other country: because we pay so much more for each unit of care. As Halvorson explained, and academics and consultancies have repeatedly confirmed, if you leave everything else the same -- the volume of procedures, the days we spend in the hospital, the number of surgeries we need -- but plug in the prices Canadians pay, our health-care spending falls by about 50 percent.
Halvorson's charts, two of which appear below, are pretty compelling.
Of course, some critics would argue that the extra money buys us innovation. But, as I've written before, that argument doesn't really hold up.
Update: Austin Frakt presents more evidence and ponders the significance: "What do you call a transaction in which you pay more than others for the same product? I call it a rip-off."
3 comments
Innovation? It happens even in countries that don't spend like us; in fact a lot of it happens outside of the US. I'm sick of that argument. Plus, we don't have the responsibility to carry the entire medical R&D expense of the world either. Next BS argument please.
- tnmats
November 2, 2009 at 3:14pm
There are probably five or so things which lead to our extra costs: Physician salaries-roughly double (in some cases, triple), OECD averages. Nurses salaries-same thing, roughly double. In addition, in general, American salaries are higher for all medical jobs. That can account for 40% or more of the difference. Lack of single payer system-with insurance company, physician office and hospital overhead here, probably over $200 billion annually. Drugs-OECD negotiates, for entire country, drug prices. They also, in many cases, regulate when drug can be used and how often. Probably accounts for another 10% of difference. If US bought drugs like OECD, odds are, OECD discounts would be cut in half. So, this is really a 5% net impact on differentials. Torts-both medical malpractice premiums and defensive medicine. Study last week estimated potential savings of about $250 billion here. Is America more productive and effective in practicing medicine? Studies I've seen which looked at procedures (heart, cancer, etc.) noted: US has better results at lower inputs. However, our inputs are more expensive. Washington Post noted in September, compared to Japan, heart patients die twice as often there. A Lancet study on cancers showed, amongst most of the OECD countries and US-US signficantly better on survivability. Some commentators indicate that 80% of the world class medical techniques are invented in US. Is the idea: cut doctor and nurse salaries? Seems strange when common idea is to attract the best and the brightest to the profession. Not clear if, during the health care debates, anyone has opined that their pay is too high. If innovation was strong around world, then we could easily beg, steal and borrow their "best practices"-both in procedures and how they structure their practices. Truth is, the world currently trades its best practices and as most of OECD, if not all, are "fee for services" arrangements-there is no guidance for accountable care organizations (which were tested by MedPac and found to be more expensive), medical homes or specialty care arrangements (again, MedPac tested for obesity and found the costs actually increase).
- lobosven
November 2, 2009 at 3:36pm
We're the only country that tries to combine private for profit insurance with government programs, i.e. Medicare, Medicaid, VA, SCHIP, etc. We need either a single payer system or private not for profit companies processing claims, all playing by the same publicly determined set of rules. Without that, we're stuck not covering everyone and paying way too much for our care.
- bsemple
November 4, 2009 at 12:44am