Saturday, August 8, 2009

Health care re-form III (Why we spend more)

OK, so what accounts for the significantly higher level of health care expenditures in the U.S.? Studies to investigate this include one by McKinsey, Why Americans spend more for health. It found that, taking all factors into account:
  • The U.S. spends approximately USD 643 billion "extra" per year when compared to "peer OECD members" while not necessarily ending up with ending up with a healthier population overall.
    • Of this "extra" approximately two thirds, or USD 436 billion is in the outpatient care arena
    • Fifteen percent, or USD 98 billion, of the "extra" was spent on pharmaceuticals. Factors that played into this result included that: a) drug prices were higher, b) the U.S. uses a more expensive mix f drugs than the OECD comparisons, and, c) newer drugs (which generally are more expensive) come to market faster in the U.S. than in Europe...
    • Approximately fourteen percent of the "extra" represents health administration and insurance. Factors that played into this result included a) taxes and profits, b) the fragmentation of the market among multiple members, and, c) regulation by multiple states and the federal government.
So, presumably, any attempt to "fix" the current health care system should both work to reduce this "extra" or "excess" level of expenditure, and also work to reduce the increase of the underlying expenditures... After all, the other OECD countries are having problems with increasing health expenditures as well, for example France...

Well, how do the efforts in Congress stack up? In general the biggest emphasis appears to be in the health insurance arena. In matter of fact, most of the players appear to treat "health insurance reform" and "health care reform" as synonymous. Unfortunately they are not... The process of developing the legislation also looked to the pharmaceutical companies for "savings." They (pharma) appear to have dodged the bullet by "volunteering" to help fill the "doughnut hole" in senior pharmaceutical coverage to the tune of $80 billion over ten years... This ($8 billion/year) seems rather cheap given the estimate of "excess" spending of $98 billion a year in pharmaceuticals.

The bottom line: Overall, it is not clear that the legislation thus far (i.e. HR3200) does enough to "fix" the problems in our current health care system, but is merely a first step in that direction.

Previous entries on hospitals & health care:

Health care re-form II (P4P) - Aug 4th, 2009
Health care re-form I (Issues) - Aug 4th, 2009
So? - Jul 27th, 2009
Random chart... - Jul 12th, 2009
Random charts... - May 22nd, 2009
Random chart... - May 9th, 2009
Wyeth v. Levine - Mar 22nd, 2009
Financial crisis & hospitals - III - Mar 22nd, 2009
Random chart... - Feb 1st, 2009
Financial crisis & hospitals - II - Jan 27th, 2009
Random chart... - Jan 26th, 2009
Hospitals' financial update - Dec 25th, 2008
Good for the goose - Dec 11th, 2008
Studies of intererst - IV - Nov 16th, 2008
Studies of interest - II - Nov 16th, 2008
Financial crisis & hospitals - I - Nov 14th, 2008

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