November 23, 2013

IT'S JUST ANOTHER CONSUMER GOOD...BUT SUBSIDIZED:

Why Does Health Care Cost so Much in America? Ask Harvard's David Cutler (Paul Solman & David Cutler, 11/19/13, PBS)

Paul Solman: Why does health care cost so much in America?

David Cutler: Let me give you three reasons why. The first one is because the administrative costs of running our health care system are astronomical. About one quarter of health care cost is associated with administration, which is far higher than in any other country.

Paul Solman: What's the next highest?

David Cutler: About 10, 15 percent. Just to give you one example, Duke University Hospital has 900 hospital beds and 1,300 billing clerks. The typical Canadian hospital has a handful of billing clerks. Single-payer systems have fewer administrative needs. That's not to say they're better, but that's just on one dimension that they clearly cost less. What a lot of those people are doing in America is they are figuring out how to bill different insurers for different systems, figuring out how to collect money from people, all of that sort of stuff.

The second reason health care costs so much in America is that the U.S. spends more than other countries do on many of the same things. Drugs are the most commonly noted item, where a branded drug will cost much more in the U.S. than in other countries. But, for example, doctors also earn more for doing the same thing in the U.S. than they do in other countries, and a lot of suppliers charge more for things like durable medical equipment in the U.S. than in other countries.

Paul Solman: And that's not only doctors being paid more in this country, but the United States making the decision as a government not to buy drugs in bulk and therefore to bid down the price that pharmaceutical companies can charge.

David Cutler: The lowest prices for pharmaceuticals, and a variety of other medical devices and payments to physicians, are in government plans. So Medicaid gets the best prices on pharmaceuticals. In terms of physician payments, Medicaid payments are the lowest. Medicare payments are above that and private payments are above that. The more leverage the buyer has, the lower the price they get. That's true in every industry. In health care, the United States doesn't utilize that leverage as much as other countries do.

Paul Solman: Okay, so that's two and what's the third reason?

David Cutler: The third one is Americans receive more medical care than people do in other countries, not so much in terms of doctor visits, but if a person has a heart attack in the United States, they're much more likely to get open heart surgery than they are in most other countries.

Go back to Canada. In all of Ontario there are 11 hospitals that can do open heart surgery. Pennsylvania has roughly the population of Ontario and it has a bit over 60 hospitals that can do open heart surgery. So there's no way you can operate on as many people in Ontario as you can in Pennsylvania even if you operated around the clock.

Paul Solman: But that means that the people in Canada or in Ontario have to wait longer right?

David Cutler: Sometimes they wait longer. What's much more common is that there's a lot of gray area where it's not clear if you need the open heart surgery or not, and in the U.S., people will get it and in Canada, they don't. The interesting thing about it is that life expectancy or one-year mortality after a heart attack is the same in the two countries.

Make us spend our money.


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Posted by at November 23, 2013 7:13 AM
  

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