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Why is the US Spending so Much on Healthcare Delivery?

, Why is the US Spending so Much on Healthcare Delivery?

Healthcare costs in the United States have skyrocketed in the last few decades, and everyone seems to have their own pet explanation as to why. There are spending problems at every stage of the healthcare delivery process, from legislation to implementation to reimbursement. The United States spends more relative to its economy than any other nation in the industrialized world. This fact carries particular resonance given that an enormous amount of American citizens have neither health insurance coverage nor regular access to healthcare services. In fact, US taxpayers pay more taxes into their healthcare delivery system than any other industrialized nation, yet there is no universal coverage. This means that for the millions of working American citizens who do not receive health insurance coverage from their employer, the costs of even basic healthcare services must be financed entirely out-of-pocket.


Many explanations have been put forth to address the discrepancy between costs and healthcare services received in the United States: the cost of the uninsured, for example, which is absorbed by public revenue to pay not only for healthcare services provided to those without health insurance, but also to address legal costs incurred in trying to obtain reimbursement. This means that in addition to financing the cost of healthcare services rendered to the uninsured, Americans also pay tax revenue used to recoup legal costs incurred by healthcare providers who have tried to obtain reimbursement all the way through a patient bankruptcy. Pharmaceutical drugs generally cost more to manufacture and market in the United States. The US also pays its physicians and specialized surgeons significantly more than other advanced nations. Medical malpractice insurance is also another factor, given that many advanced surgeries carry an element of risk that compounds their natural difficulty. The private health insurance bureaucracy itself represents another massive cost, as administrative costs sap revenue that would otherwise go toward healthcare delivery.


All of these problems pale in comparison to a problem unique to the United States, however. By far, the largest spending problem (by some estimates $500 billion a year) occurs as a direct result of the US government having very little leverage in negotiating prices with health insurance companies and healthcare providers. In nations with universal coverage, on the other hand, the government has strong leverage due to its ability to award very large health contracts to healthcare providers for specific services and products (artificial knees, for example). This means that in a nation with universal coverage, the government can award the national contract for artificial knees to a single manufacturer (Company X, let’s say). All knee replacement procedures from that point forward must then by law use Company X’s artificial knee. The potential for a massive national contract gives private healthcare providers a tremendous incentive to a) make sure their product or service is safe and effective and b) keep costs down. Though the Affordable Care Act of 2010 is a step toward providing the government with more leverage, it is by no means a universal coverage healthcare delivery system. Until consumers can negotiate effectively with their healthcare providers via their elected officials, US healthcare costs will continue to rise.


healthcare services, health insurance, universal coverage, healthcare delivery

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