US Health Care System is Plagued by High Cost and Waste

by VR Sreeraman on  March 4, 2009 at 12:46 PM General Health News   - G J E 4
The United States has one of the world's most advanced but also most complicated health care systems, plagued by widespread waste and costs that have escalated as the US population ages, experts say.
 US Health Care System is Plagued by High Cost and Waste
US Health Care System is Plagued by High Cost and Waste

Venturing where others have failed, President Barack Obama is now proposing to spend 634 billion dollars on reforms aimed at expanding health care coverage among the nearly 46 million uninsured Americans.

How he should do it, and whether it should be done at all, are likely to be the subject of fierce debate. But, in the words of one economist, the system he inherits is "an administrative monstrosity."

Economist Henry Aaron, in a 2003 paper, called it "a truly bizarre melange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird."

Following are some aspects of the system revealed in a review of the scientific literature by the Rand Corp., a non-partisan think tank, and posted on the website

First, Americans are living longer but two of every three are overweight or obese, one in 10 have diabetes, and about a quarter of the population between the ages of 45 and 54 suffer from hypertension.

More than half are covered by insurance provided by their employers, but it is not required and the quality of coverage varies widely. Nearly 16 percent of Americans have no insurance at all.

Meanwhile, US spending on health care is growing faster than the economy as a whole.

It hit 2.1 trillion dollars in 2006 and was projected to reach 2.25 trillion dollars by 2007, an annual increase of 6.7 percent, according to the Centers for Medicare and Medicaid Services. It could reach 4.3 trillion dollars a year in a decade.

"By 2017, about 20 cents of every dollar spent in the US economy will be spent on health care," Rand said.

The federal government in 2006 covered about a third of US healthcare spending, mainly through its health insurance programs for the poor and elderly, Medicaid and Medicare.

Payments by private insurances companies accounted for another 34 percent, while out-of-pocket payments by individuals amounted to 14 percent of the total. The remainder came from state and local funds and other private funds.

On average, Americans spend about six percent of their after-tax income on health care, although in the case of the poor or elderly the share is larger.

Among the trends driving up health care spending, the Rand survey found, are lengthening life spans, the spread of obesity, and technological innovations that push back mortality but at a higher cost.

Technological advances alone account for over half the increase in overall US health spending, according to an estimate by the Congressional Budget Office.

"Certain technological changes, for example some vaccines, may reduce spending. However, in general new technologies tend to increase the number of health services that an individual receives, thereby increasing costs," Rand said.

At the same time, the US system is seen as wasteful compared to those of other countries.

The United States spends significantly more on administrative costs than countries with single payer systems, seven percent compared to 1.9 percent for France, for example, according to the Organization for Economic Cooperation and Development.

And private insurance companies have higher administrative costs (14 percent) than public insurance programs like Medicare or Medicaid, which come in at three to five percent of the total, the literature shows.

"Practitioners and hospitals, in their interactions with multiple payers, are encumbered by numerous billing requirements, a multitude of formulars and clinical care guidelines, and patients with different covered benefits," Rand said.

Studies also have shown that one-third or more procedures performed in the United States were of questionable benefit, according to the think tank.

A 2008 study that compared health care systems in developed countries found that US patients reported waiting less time to get an appointment to see a specialist, but also more problems with the cost of the care and the efficacy of procedures.

Within the United States, however, patients covered by Medicare consistently gave higher marks for the care they received than did those insured by private companies, according to surveys funded by the Agency for Healthcare Research and Quality.

Source: AFP

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