McKinsey Analyzes Why US Spends so Much on Health Care

[Ericokle]

Why the U.S. Spends So Much on Health Care
by Jacob Goldstein

The U.S. spends $650 billion a year more on health care than you’d expect for a country with our GDP. That’s the headline figure from a McKinsey report out this week that parses the numbers and tries to explain why we spend so much.

Do we spend so much because we’re sicker than other developed countries? No, the report says. We’re more obese — but we’re younger and less likely to smoke than our counterparts in other countries, so the disease burden is actually slightly lower here.

Do we get higher-quality care for all that extra money? Yes and no, the McKinsey folks say. New drugs and treatments are often available sooner here, and wait times to see a physician tend to be lower. But access to health care is uneven (45 million Americans are uninsured), and we lag behind other countries in measures such as infant mortality and life expectancy. “This picture suggests a clear opportunity for improvement,” the authors note dryly.

So where is all that excess spending going? Mostly to outpatient care. That segment, which includes visits to doctors offices, emergency rooms and outpatient surgery centers and imaging facilities, accounts for a total of $850 billion out of the $2.1 trillion we spend on health care — about 41% of the total. But it accounts for about $436 of $650 billion in excess spending — or about 67%. That segment is also growing faster than overall health care spending.

The report explains the economic incentives driving much of this growth:

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http://blogs.wsj.com/health/2008/12/17/why-the-us-spends-so-much-on-health-care/

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[docB]

Do we spend so much because we’re sicker than other developed countries? No, the report says. We’re more obese — but we’re younger and less likely to smoke than our counterparts in other countries, so the disease burden is actually slightly lower here.

Does the fact that we smoke less cost us less or more? If someone kicks off from small cell CA at 65 they cost us less than the 85 yo nursing home patient who's been running up costs for an extra 2 decades. I recall many discussions over the last several years about how our decrease in smoking was going to contribute to the failure of Social Security because more people were collecting benefits longer.

 

[radslooking]

yeah, no surprise there. there's no use expecting people to do the right thing, you need to incentivize them as such. Right now, we go straight to very expensive, minimally helpful care virtually ALL the time. Excessive testing, excessive everything. And we allow drug companies to rape us, we have too much end of life care, etc, etc.

We need to start changing the incentives, bargaining with Pharma, cut out so much end of life care, reduce imaging, cut rates of obesity in america, create more pauses/stopgaps before expensive procedures, enhance primary care access, and don't have gaps in coverage. Get people covered, in whatever reasonable way you can. Create incentives for streamlined, effective care, not more care. Reduce threats of malpractice damage to doctors so they aren't scared shytless and covering their hiney's all the time.

Oh, and you gotta roll right over special interests. phrma and insurance cos have way, way, too much influence.

And that doesnt even get to the nitty gritty of how to deal with insurance companies..covering preexisting clauses, stopping them from inappropriately denying coverage or payments, etc.

Easier said than done. We have to start strongarming some people to get it done though. Too much is at stake.

 

[radslooking]

Does the fact that we smoke less cost us less or more? If someone kicks off from small cell CA at 65 they cost us less than the 85 yo nursing home patient who's been running up costs for an extra 2 decades. I recall many discussions over the last several years about how our decrease in smoking was going to contribute to the failure of Social Security because more people were collecting benefits longer.

you know, i agree with you that these things dont' save as much money as people think. the exception, i think, is that perhaps obesity does cost quite a bit more, because even though they may knock off sooner, dialysis and regular diabetic care is astronomical.

as for smoking...they may cost less I think then a healthy person, as i think they tend to die earlier. collect less benefits. and they don't tend to have the yearly diabetic costs like obese people.

If you reduce the end-of-life care spending, then keeping people healthier i think would actually save money, as they may have more productive working years, and less disability. if you don't try to treat the 85 yr old with lung cancer with 10 rounds of chemo, like we do now. Jesus christ, just let people die peacefully, like they were supposed to.

 

[docB]

We need to start changing the incentives, bargaining with Pharma, cut out so much end of life care, reduce imaging, cut rates of obesity in america, create more pauses/stopgaps before expensive procedures, enhance primary care access, and don't have gaps in coverage. Get people covered, in whatever reasonable way you can. Create incentives for streamlined, effective care, not more care. Reduce threats of malpractice damage to doctors so they aren't scared shytless and covering their hiney's all the time.

I would argue that just eliminating med mal would result in all of those improvements. I believe that if we eliminated med mal we'd save about 40% on healthcare once you combine the pay outs, lawyer and court costs and the elephant in the room, defensive medicine.