• Reader Question – Why is reducing costs so hard?

    A reader (correctly) writes:

    You keep flippantly reducing to the fact that containing costs is politically difficult.  You also keep referring to the fact that the bills underconsideration do nothing to contain costs.  Why?  Don’t you want to be part of the solution and not just point out problems?

    The reader is correct.  I always say politicians won’t address the issue, but I should.  And so I’m very happy that Kevin Drum made my life easier by finding this graphic from a McKinsey Global Institute study of healthcare costs (which I had misplaced and have been searching for):

    Yes, it’s a bit overwhelming, but here’s the critical part.  The dark blue bars are the amount that the US spends which is more than you’d expect for what we get.  We like to demonize the private insurance industry, and the “wasteful” spending there is more than 60% of all spending on health administration and insurance, but it’s only a tiny percentage of overall spending.  Same goes for pharma, where wasteful spending is less than $100 billion.

    Wasteful spending in outpatient care, however, is over $430 billion a year.  Know who that includes?  Doctors.  Hospitals.  Nurses.  Actual things patients want, like tests and office visits.  There’s actually two and a half times more wasteful spending in actual care than in pharma and health insurance combined.  But it’s very hard, and politically unpopular, for us to attack those providing care.  And so we focus on things that are wasteful, but contribute much less to the overall cost.

    Until we are ready to address all the problems of our high cost, not just the easy targets, things won’t get much better.

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