As I have stated many times on this blog, our country’s biggest problem is the rapidly growing and out of control national debt. Furthermore our debt problem is driven primarily by the increasing cost of entitlements, and more specifically by healthcare spending.
In other words, we need to understand why healthcare spending, both public and private, is growing so fast and figure out an effective way to control these costs. A good source of information about healthcare costs is a new book by the economist, Uwe Reinhardt, “Priced Out: the economic and ethical costs of American healthcare”
Here is some of the pertinent information provided by Mr. Reinhardt:
- U.S. health spending per capita in 2017 amounted to an estimated average of $10,209 – twice as much as is spent per capita in most of the rest of developed countries.
- Although Americans actually consume fewer healthcare services than do Europeans, for example, prices for virtually any healthcare product or service in the U.S. tend to be at least twice as high as for comparable products or services in other countries. (As an example, see chart for a comparison of childbirth costs)
- Most nations have relatively simple health insurance systems. By comparison, the U.S. health insurance system is highly complex. The typical American physician spends $80,000 per year interacting with health insurers, nearly four times as much as is spent by physicians in other developed countries.
- From 1990 to 2012, the number of workers in the U.S. health system grew by nearly 75%. Nearly 95% of this growth was in non-doctor workers. Today, for every doctor, only 6 of the 16 non-doctor workers have clinical roles such as nurses and care coordinators. The other 10 are purely administrative staff.
- Total spending on healthcare provided by employment-based health insurance is growing at an average annual rate of 8% (see chart for growth of healthcare costs for a family of four), four times faster than the rate of increase of inflation.
Summary. High prices for healthcare products and services (hospitals, doctors and drugs), the complexity of the U.S. health insurance system, the rapid growth of healthcare administrative staff: these are the major reasons for the high cost of healthcare in the U.S. How are we going to get these costs under control? Stay tuned!