HEALTH CARE COSTS IN AMERICA

Drawing from a New England Journal of Medicine article Brad De Long cuts through the jargon to help explain what makes our out of control health care costs so, well, out of control ...

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... medicine... does not lend itself to market discipline. Why not?

The private insurance system's main techniques for holding down costs are practicing risk selection, limiting the 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... unnecessary medical care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game the system. The result is a blend of overtreatment and undertreatment ...

There's probably an independent, and long, post for every category listed here. The end result is that what we have is not working. I'll be returning to this topic soon.

- Mark