Healthcare Costs

HEALTHCARE COSTS….Reader Bill Nazzaro sends along a link to this study in the journal Health Affairs compairing worldwide healthcare spending. Here are few interesting excerpts:

  • The United States spends about 13% of GDP on healthcare (page 91).

  • As countries get richer, they spend a greater percentage of their income on healthcare, a result that makes sense (page 92). If the United States followed the patterns of other countries, it would spend 10-11% of GDP on healthcare.

  • Public spending on healthcare in the United States amounted to 5.8% of GDP (page 93). I didn’t realize the number was so high. An obvious conclusion from these facts is that if our total healthcare spending decreased to 11% and our public financing increased to 75% of that total (both figures in line with world averages for a country of our wealth), it would require additional government expenditures of only about 2.5% of GDP (i.e., 5.8% –> 8.3%). This doesn’t make the case that we should do it, of course, but it certainly suggests that a national healthcare system could have a much lower impact on total government expenditures than I would have guessed.

  • Why are our costs so high? The picture is mixed. U.S. spending on pharmaceuticals is higher than average, but not wildly so. Salaries for doctors and nurses are higher, which accounts for some of it. A greater use of expensive technology is part of the answer. And greater administrative costs due to our weird tangle of buyers and sellers accounts for some of it.

  • The authors also suggest that despite paying a lot more for healthcare, the total amount of healthcare resources received by Americans (physician visits, hospital stays, etc.) is less than average for rich countries.

Food for thought, no? My own guess is that the free market has broken down on both sides of the Atlantic, ours in favor of providers and Europe’s in favor of consumers. So more than likely, we pay doctors too much and they pay too little compared to the results of a pure free market solution. The end result is that we have rich doctors and ? on average ? mediocre healthcare. Maybe not such a great bargain.

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