Real Problem with Health Care: The Costs

| by The Pediatric Insider

The Pediatric Insider

© 2010 Roy Benaroch, MD

Better access to health insurance is a good idea, but lack of insurance availability isn’t the fundamental problem with health care in The United States.

The problem is cost.

Look, people can get health insurance right now– but only if they can afford it. Employers want to buy health insurance for their employees, but not if the premiums are unsustainable. What about people who don’t have health insurance? They’re screwed. The “list prices” of health services (doctor bills, hospital bills, and drug costs) are truly beyond anything that would be considered reasonable in any other business. The only reason these prices are tolerated is that so many people don’t have to pay them. If you’ve got insurance, your health insurer pays some kind of “discounted rate”, and you don’t really even care what the alleged price is.

Unfortunately, recently-passed health care legislation offers more of the same. Sure, more people might be able to get health insurance, but nothing that I’ve seen in the legislation is likely to drive down costs. More people with more insurance just means more spending of more money that we haven’t got. We’ll be counting on our grandchildren to pay back the bills for the money we’re spending now. Classy.

Why is health care so expensive? Where is all of that money going?

From this Department of Justice summary published in 2003, health care money goes into one of four areas:

Figure 1:
Pie Chart of Total Health Care Spending

Hospital Care

Physician & Clinical Services

Prescription Drugs

Other Spending

OK, I know, it’s not a Pie Chart. But it makes a good point: about 65% of health care spending goes to doctors, hospitals, and pharmacies; over a third goes to “other spending.” I have no idea what that is, but I guarantee that the missing third isn’t making anyone healthier. How much money are we talking about? Total health care expenditures are probably 2 trillion dollars a year, so a third of that is about 600 billion a year. That’s  money down the drain that could more-than-easily purchase health insurance for every single uninsured American, leaving plenty extra to fill in the “donut hole” in grandma’s prescription plan.

In future posts, I’m going to go into more detail about how health care money is being spent. I’ll give you a preview: every single player in this game is guilty of overspending, and no one is paying any attention to the bottom line.

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