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Why Are American Health Care Costs So High?

2013-08-20 · explainer · John · 7:52 · watch on YouTube

Topic: US politics & society · mode: Explainer · tags: community lore

John argues US health care costs so much because everything costs more and the US does not negotiate prices centrally (save Medicare), not because of overuse, obesity or malpractice alone; the problem is complex, with no simple fix.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — Mind-blower: US spends more tax money per capita on health care than Germany, Australia, UK, Canada; 28% publicly insured; 18% of GDP vs Australia 9%

  • ★★★ John says that, although free health care elsewhere is said to be paid for by higher taxes, the US spends more tax money per capita on health care than Germany, Australia, the UK or Canada. — 00:00:08 · United States, Australia, United Kingdom, Canada
  • ★★ John tells Hank that he pays more in health-care taxes than he would as a Briton and, being privately insured, gets no health care for those taxes. (playful) — 00:00:31 · United Kingdom
  • ★★ John says only about 28% of Americans get health insurance through government-funded programs (mostly poor people, old people and congresspeople); most are privately insured through employers, and private spending is far higher than anywhere else. — 00:00:39 · United States
  • ★★★ John says the US spends about 18% of its GDP on health care, against 9% in Australia. — 00:00:55 · United States, Australia

00:01:03 — Everything costs more: hip replacement, colonoscopy and Lipitor prices abroad; a ton more spent for no better outcomes

  • ★★★ John says US health care costs more because everything costs more, not, as articles claim, because of malpractice insurance, obesity, too many doctor visits or too many prescriptions. — 00:01:03
  • ★★★ John compares prices: a hip replacement costs $13,000 in Belgium but often over $100,000 in the US; a colonoscopy over $1,100 in the US vs $655 in Switzerland; a month of Lipitor $124 in the US vs $7 in New Zealand. — 00:01:20 · United States
  • ★★★ John says the richer US spends not a little but a ton more and gets nothing for the extra money (like paying people to dig and refill holes): it ranks 33rd in life expectancy, and a nonpartisan study finds outcomes not notably superior. — 00:01:40 · United States

00:02:08 — Not the cause: overutilization, being sicker, obesity

  • ★★ John says overutilization is not the problem: Americans go to the doctor less than Europeans and spend much less time in hospitals, though seven nights in a Dutch hospital cost what one American night does. — 00:02:13 · Europe, United States
  • ★★ John says costs are not high because Americans are sicker: blaming obesity is not supported by data, and disease prevalence does not affect costs that much. — 00:02:34
  • ★★ John says the US has more obesity but fewer smokers and less alcohol consumption, so compared with the British or French it is probably a wash. (hedged) — 00:02:47 · United Kingdom, United States

00:03:01 — Hard-to-measure inefficiencies: the uninsured, bankruptcy, emergency rooms

  • ★★ John names hard-to-measure inefficiencies: the uninsured still get care but often cannot pay and go bankrupt, everyone else pays for that care and its collection, and their only options are usually the most expensive, like emergency rooms. — 00:03:01

00:03:37 — Measurable excess spending: defensive medicine, doctors' pay, administration, drugs, inpatient/outpatient care ($500 billion)

  • ★★ John says defensive medicine adds tests, but tort-reform states like Texas saw costs drop only 0.1% on average; the biggest estimates put it at about $55 billion, only 2% of total costs. — 00:03:48
  • ★★ John says US doctors (and to a lesser extent nurses) are paid more than elsewhere, which by his possibly faulty math adds about $75 billion more than expected. (hedged) — 00:04:23
  • ★★ John says insurance and administration (paperwork, marketing, negotiating) cost about $90 billion more than expected, and drugs about $100 billion more, because each pill costs more, not because Americans take more. — 00:04:33
  • ★★★ John says the biggest item, inpatient and outpatient care lumped together, is $500 billion a year more than expected for the size of the US economy. — 00:04:51 · United States

00:05:11 — Why: no centralized price negotiation (NHS hips, Medicare), inelastic demand; costs will keep rising

  • ★★★ John says the reason is that the US does not negotiate as aggressively as other countries with providers, drug makers and device makers, as the UK's NHS does when it puts a huge hip contract out to the cheapest safe bidder. — 00:05:11 · United Kingdom, United States
  • ★★ John says that without centralized negotiation the US lacks leverage, and the one big exception, Medicare, not coincidentally always gets the lowest prices. — 00:05:52 · United States

  • ★★★ John says providers charge whatever they can get away with because it is hard to put a price on not dying: inelastic demand means people will pay $7 or $124 a month for a drug they need. — 00:06:04

    “it's really difficult to put a price on, like, not dying. This is a phenomenon called "inelastic demand,"”

  • ★★★ John says that until the US negotiates with health-care providers as effectively as Australians and British people do, its costs will keep rising faster than anywhere else without better outcomes. — 00:06:41 · Australia, United Kingdom, United States

00:06:54 — No simple explanation: it is all of those things and more; the biggest drag on the economy, not political theater

  • ★★★ John says he is tired of simple explanations (malpractice, doctors as businesspeople, insurers, insurance rules, drug companies, bureaucracy, no price negotiation): it is all of those and more, with no simple solution. — 00:06:54
  • ★★ John says health care costs are probably the biggest single drag on the American economy and must be grappled with meaningfully rather than treated as political theater. (hedged) — 00:07:20 · United States

00:07:31 — Links in the description, welcome back Hank, four-minute-rule reminder, sign-off

In the description and comments

  • ★★ For a much more thorough look at US health care expenses, John recommends a series at The Incidental Economist. — video description
  • ★★ John cites the Commonwealth Fund's study of US health care prices and says some of the video's figures also come from a New York Times story. — video description · The New York Times
  • ★★ John says this is the first part of a periodic series on health care costs and reforms leading up to the introduction of the Affordable Care Act (Obamacare) in 2014. — video description

Threads in this video

Where the stories that moved here went next

Mentioned

Central: health care prices in the United States · price elasticity of demand · United States

Also: Works: Sherlock

Organizations: National Health Service

Rituals: Four-minute rule

Concepts: defensive medicine · obesity · tort reform

Places: Australia · Belgium · Canada · England · Europe · France · Germany · Netherlands · New Zealand · Northern Ireland · Scotland · Switzerland · Texas · United Kingdom · Wales

Products: Lipitor · MacBook Air

Policies: Medicare

Only in the description or credits: Affordable Care Act · The Commonwealth Fund · The Incidental Economist · The New York Times

Also centred on health care prices in the United States: The Political Situation at the County Fair · Health Care Reform Thought Bubble · The 1200% Increase in my Prescription Drug Costs · Question Tuesday! Paula Deen Riding Me (and critical reading) · Is Obamacare Working? The Affordable Care Act Five Years Later · Understanding Donald Trump and Hillary Clinton's Health Care Reform Proposals

Later videos replying to this one

Part of an exchange of 3 videos, 2013-08-20 – 2013-09-06.