The failure of the United States to contain medical costs, which now exceed $2.1 trillion (£1.1 trillion; €1.4 trillion) a year or more than $7000 for every man, woman, and child in the country, results primarily from the unique and pervasive commercialisation of the sector, an article in this week’s New England Journal of Medicine says (2008;358:549-51).
Inthe perspective article Robert Kuttner, coeditor of the magazine The American Prospect and a senior fellow at Demos, a public policy research and advocacy organisation based in New York, contends that what raises costs and distorts resource allocation are “the dominance of for-profit insurance and pharmaceutical companies, a new wave of investor-owned specialty hospitals, and profit-maximising behaviour even by nonprofit players.”
He continues: “Profits, billing, marketing, and the gratuitous costs of private bureaucracies siphon off $400 billion to $500 billion of the $2.1 trillion spent, but the more serious and less appreciated syndrome is the set of perverse incentives produced by commercial dominance of the system.”
He says that spending on health care rose by nearly 7% in 2006 and that the costs of Medicare, the federally funded health insurance system for people aged 65 or older and for disabled people, jumped by a record 19%, driven by a new privatised drug benefit.
Total spending on health care, which now amounts to 16% of the gross domestic product, is projected to reach 20% in just seven years.
Medicine does not lend itself to market discipline, says Mr Kuttner. “The private insurance system’s main technique for holding down costs are practising risk selection, limiting services covered, constraining payments to providers, and shifting costs to patients.
“But given the system’s fragmentation and perverse incentives, much cost-effective care is squeezed out, resources are increasingly allocated in response to profit opportunities rather than medical needs, many attainable efficiencies are not achieved, unnecessary medical care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game [exploit] the system. Researchers calculate that between one fifth and one third of medical outlays do nothing to improve health.”
Great improvements in health can be achieved through basic public health measures and a population based approach to wellness and medical care, he says, but entrepreneurs do not prosper by providing these services, and the people who need them the most are the least likely to be insured.
“Comprehensive, government-organised universal health insurance systems are far better equipped to realise these efficiencies because everyone is covered and there are no incentives to pursue the most profitable treatments rather than those dictated by medical need.” Data from the Organisation for Economic Cooperation and Development show that growth in spending on health care has been slowest in countries with universal health insurance systems.
A comprehensive national system is far better able to match resources to needs and would save huge sums that are currently wasted in the US on administration, billing, marketing, profit, executive compensation, and risk selection, says Mr Kuttner. The privately regulated medical market puts pressure on doctors to act more like entrepreneurs, inspiring some to undertake “boutique medicine,” in which well off patients pay a premium, doctors maintain a high income, and both enjoy a leisurely consultation time. “It’s a convenient solution, but only for the very affluent and their doctors, and it increases overall medical outlays.”