US spending on health care

Despite Obamacare, the United States continues to spend vastly more on health care than any other country in the world, with generally worse outcomes.

Part of the reason for this waste is the burden of administration costs that come with private insurance plans. Obamacare retains private insurance for those not eligible for public insurance (Medicare – limited to the elderly and disabled), and it is supposed to be mandatory. Not all states comply with the mandatory requirement, so healthy young people tend to purchase insurance only after they become seriously ill. Insurance companies are not allowed to charge higher premiums for those with pre-existing health conditions. Premiums increase, of course, when the healthy opt out of insurance.

There are other reasons, as well, for the high cost of US health care. Timothy Taylor, the ‘Conversable Economist’, discussed all this more than four years ago in a post that, sadly, is still relevant today.

A single-payer system – such as Medicare for the elderly and disabled – would lower the cost of health care, but only one presidential candidate (Donald Trump) has come out in favour of this reform. Medicare is very popular in the United States, so I cannot understand why it is politically difficult to lower the age of universal coverage from 65 years to zero.

Here is the concluding paragraph of Timothy Taylor’s post from May, 2012. Click on the link to access the full post, which contains links to more information.

The question of why the U.S. spends more than 50% more per person on health care than the next highest countries (Switzerland and Netherlands), and more than double per person what many other countries spend, may never have a simple answer. Still, the main ingredients of an answer are becoming more clear. The U.S. spends vastly more on hospitalization and acute care, with a substantial share of that going to high-tech procedures like surgery and imaging. The U.S. does a poor job of managing chronic conditions, which then lead to episodes of costly hospitalization. The U.S. also seems to spend vastly more on administration and paperwork, with much of that related to credentialing, documenting, and billing–which is again a particular important issue in hospitals. Any honest effort to come to grips with high and rising U.S. health care costs will have to tackle these factors head-on.

Timothy Taylor, “Why Does the U.S. Spend More on Health Care than Other Countries?“. Conversable Economist, 14 May 2012.

2 Responses to “US spending on health care”

  1. Charlie Rothwell says:

    To understand why changing healthcare away from for profit insurance companies is difficult you need to understand that the US supreme court has ruled that bribery of elected officials is equal to free speech. The insurance companies have very deep pockets to bribe politicians.

  2. Good point. That may explain why public insurance is not allowed in Obamacare, even as an option. But why is medicare for the elderly different, with public insurance the default, and private insurance (Medicare Advantage) allowed (I think) only as an option?