Adding Up the Reasons for Expensive Healthcare

Steven Pearlstein, in yesterday's Washington Post, relays the findings of a recent McKinsey report on the sources for high healthcare costs in the U.S. It's worth a read, but some key points are:

• We spend $477 billion a year more on health care than would be expected if the United States fit the spending pattern of 13 other advanced countries. That staggering waste of money works out to 3.6 percent of the nation's entire economic output, or $1,645 per person, every year.
• The average incomes of $274,000 for specialists and $173,000 for general practitioners are, respectively, 6.6 and 4.2 times those of the average patient. The rate in the other countries is 4 and 3.2. [The difference costs $58 Billion a year and is after accounting for malpractice insurance premiums.]
• While Americans spend fewer days in the hospital than people elsewhere, that efficiency is more than offset by a higher average cost per day -- $1,666, four times the industrial-country average. There are multiple causes for this $224 billion in annual overspending on hospital services -- everything from more serious illnesses to more nurses per bed to extraordinary overhead and capital costs.
• Americans pop fewer pills than people elsewhere[, but] spend $57 billion a year more for drugs than other developed countries.... [D]rug companies are able to charge, on average, 60 to 70 percent more for branded prescription drugs.
• But as long as Americans continue to reject a government-run health system, a private system will require something close to the $30 billion a year in after-tax profits earned by health insurance companies. What may not be necessary, McKinsey suggests, is the $32 billion that the industry spends each year on marketing and figuring out the premium for each individual or group customer in each state. Insurance-market reform could eliminate much of that expense.
• Offering universal coverage without reining in costs would add another $77 billion each year in unnecessary and unproductive health spending.