Mr Samuelson has curiously omitted malpractice costs from the problem of total healthcare costs. Malpractice costs drive up total costs in several ways. The direct costs of the insurance can be over $100,000 per year per doctor and the consumer surely pays for that eventually. Litigation fears also stimulate the doctor to use the newer, more expensive drugs, schedule more frequent visits, order more tests, and stop seeing problematic patients.
This is a health care cost that can be fixed. Let's seen some legislative action.
JUDGMENT CALLS
Robert J. Samuelson
Obama’s Unhealthy Choices
He can't control long-term entitlement spending unless he curbs health care, which accounts for a quarter of the federal budget.
Published Jan 10, 2009
From the magazine issue dated Jan 19, 2009
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Barack Obama talked somberly last week about getting the federal budget under control once the present economic crisis is past. By simple arithmetic, that means he'll have to confront the rapid growth of health spending, which already accounts for a quarter of the budget. In 2007, that was about $700 billion out of total federal spending of $2.7 trillion. If Obama is serious—and no president yet has been—he could start by reading a fascinating new study from the McKinsey Global Institute, the research arm of the famed consulting company.
Almost everyone agrees that the U.S. health-care system has gone haywire. It provides much splendid care but is so costly that 15 percent of the population lacks health insurance. Equally troubling, runaway spending is crowding out other government programs and, through bloated insurance premiums, squeezing workers' take-home pay. What McKinsey provides is a plausible estimate of the extent of overspending: almost one third.
This means that, compared with other advanced societies, the United States spends about a third more on health care than high American incomes alone would predict. In 2006, all U.S. health spending totaled about $2.1 trillion. Of that, McKinsey figures that nearly $650 billion exceeded what other rich societies, adjusted for relative incomes, spent.
For the extra money, we receive no indisputably large benefit in national well-being. On some health measures (breast-cancer survival rates, for instance), we do better than many countries; on some others (life expectancy, for instance), we do slightly worse. We are constantly searching for villains to explain this unsatisfactory situation. Because it's not peddling a political agenda and simply describes U.S. health spending, the McKinsey study debunks some popular theories.
One is that our mixed private-public insurance system drives up costs through high administrative overhead. Claim forms create a paperwork morass; marketing expenses add to the burden. True, overhead costs in the United States are more than double the level in other countries. But the effect is modest, because all administrative costs account for a mere 7 percent of total health costs. Even halving administrative costs would offset only about six months of the annual growth in health spending of 6 to 7 percent.
The same is true of the alleged overuse of emergency-room care: another common scapegoat. In 2006, all emergency-room care cost $75 billion, about 3.5 percent of total health spending. That's too small to explain overall trends.
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