I first saw this story over at Ezra Klein's place, but it is also reported in the  Washington Post.  The "non-partisan" McKinsey Group sought to determine how much we overpay for healthcare by constructing an "Estimated Spending According to Wealth" index, that takes into account not only how much a country spends on health care, but also its per capita earnings.  The results?

In this new report MGI finds that the United States spends approximately $480 billion ($1,600 per capita) more on health care than other OECD countries and that additional spending is not explained by a higher disease burden; the research shows that the U.S. population is not significantly sicker than the other countries studied.

The reason why we pay $1,600 more per capita, even when you figure in that we make much more per capita than many countries, is because of....the free market.

Ezra describes it best, so I won't try to write the same thing in my own words, which really amounts to plagarism after all.

In essence, we're getting a terrible deal.

Take drugs.  The report finds that we overpay for prescription drugs by $66 billion.  If you compare brand name drugs in the US and Canada, the same drug will cost you a full 60% more here.  If you restrict that to the top selling drugs, you find we pay 230% more than anyone else.  For generics, the difference evaporates.  So on average, we overpay by 60-70% for pharmaceuticals, largely because we don't bargain down the costs just like every other country...

Doctor's compensations are also problematic: We overpay here by $58 billion.  In other nations, specialists make 4 times the average salary.  In America, they make 6.6 times the mean.  Meanwhile, the overall profits of the system add on another $75 billion in costs.  Another $147 billion in increased spending, much of it a consequence of the fee-for-service system, wherein doctors are paid based on how many procedures they recommend and carry out.  Doctors with equity in facilities where they can co-refer cases conduct between two and eight times more tests than those without equity interests.  Just another way the profit incentive helps us out. 

And of course, there's administration, where we pay $98 billion more than anyone else, $84 billion of it in oh-so-efficient private sector.  64% of those costs come from insurer underwriting and advertising -- in other words, we're paying more than $50 billion dollars so insurers can convince us we need care and then figure out how to deny those of us who'll actually use it.  That's some added value.

Its the free market people, which is why I am in support of single-payer health care, and why even though I would rather have it all, I'll accept giving people access to single payer through the Edwards health care plan.  This plan is also great, because from now on when I hear doctor's saying things like this (which I received in an email):

Here are physician fees for various coronary artery surgery you should compare these to charges for these procedures and I think you will be amazed.  The Medicare fees are really out of line with even a reasonable charge.  Granted the charges billed are inflated in part to cover the loses generated by this level of Medicare reimbursement and are generally shifted to the higher paying insurance plans who pay a higher percentage of the charge. Whether you get 95 or 100% makes little real difference at this level of reimbursement.

Now, what I am not sure of is if this study took into account the high costs of malpractice insurance. Oops, there it is in the Washington Post story:

Don't be distracted by arguments that American doctors need to make more because they have to pay $20 billion a year in malpractice insurance premiums forced on them by a hostile legal system, or an equal amount for all the paperwork required by our private insurance system. The $58 billion in what the study defines as excess physician income is calculated after those expenses are paid.

Let's not forget folks that HMOs were going to save us from Doctors that were prescribing unnecessary tests just to pad their bills. Well, they are still doing it AND we're getting screwed by the HMOs. What a freaking disaster our medical system is in this country.

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