It’s a Ripoff! -or- Why America Spends So Much on Health Care
As you can see in this helpful chart from the Kaiser Family Foundation, America pays much more for health care than any other first-world country.
There are a lot of false ideas or very minor explanations that are overstated to try to justify why we pay so much.
- Other countries are just evil nations that allow thousands to die in the street for lack of care. False
- Our costs are hidden by things like the tax exemptions so we need more consumer-driven smart shopping like an excise tax to eliminate low-deductible insurance and insurance exchanges. False–basically every cheaper country has lower co-pays, deductibles, out of pocket costs and are, in general, less consumer driven.
- American’s health care costs are high because we are fat. Only a minor part of the answer–the UK has much lower costS despite very high obesity rates.
- America’s use of fee-for-service result in too much care. Only a minor part of the answer–many cheaper countries use fee-for-service (Japan, Germany, France) and our average hospitals stays tend to be short.
The main reason for our abnormally high health care costs is that our politicians let the hospitals, drug makers, device makers and diagnostic labs rip us off.
To understand the real problem, I recommend quickly looking through the slides in this document (PDF), produced by the International Federation of Health Plans, comparing the cost of health care services in America to the rest of the world. I have reproduced just two below to give you an idea.
Looking through the charts, you will see the amount more that we pay for almost every individual health care service is very similar to the amount more we spend as a country on health care, overall, compared to the rest of the world.
I think the most damning are the brandname drug price charts. These are the same pills made by the same companies for every country, but we pay significantly more.
What is the solution every other country has hit upon to lower their costs? Central price regulation.
Most of medicine doesn’t really work like a free market because it is either more like a monopoly or hostage situation–you can’t put a price on your urgent need to be saved from death. Even when it could work like a market, the huge imbalance of knowledge makes smart consumerism basically impossible. So, all sensible countries do the same thing when dealing essential and unavoidable monopolies, they regulate prices, as we do with utilities.
In single-payer countries, this is obviously done as an inherent part of having only the one government insurer. In other countries like Japan, Germany, or Switzerland, they use all-payer. This is were the federal or local government works with the providers and insurers to establish a fair, uniform pricing system.
Not only do collective negotiations result in lower prices, but it doesn’t have the massive amount of administrative waste you see in our system. When you have thousands of insurers independently negotiating with thousands of providers, the system needs to spend huge amounts on paperwork, billing, coding, and processing claims, to name just a few.
There is no secret about the solution, so why don’t we have it?
So, with basic data around the world looking as it does, why were Democrats talking about bending cost curve, IT, accountable care organizations, more individual health care cost consciousness, and smarter insurance markets, but not all-payer or single-payer? The answer is good old fashion corruption.
The drug makers don’t really want reforms that would allow regular Americans and the government to pay 30 percent less for their products. So, big health care industry players take just a small amount of the billions in profits they make overcharging us and use it to spend hundreds of millions on lobbying Congress, ensuring our politicians will ignore the solution and choose to let the ripping off of American consumers continue.