There are many reasons why adopting universal health care in the United States is the right thing to do. First, it would save money. Yes, you read that right – SAVE money. At first glance it would appear that providing better health care to more citizens would add substantial cost. There are more than 40 million Americans without health insurance. If no other changes were made in our health care system, providing basic health care to those 40 million Americans would increase the $1.9 trillion per year cost of the American health care system by an estimated $77 billion — about a 4% increase. But that 4% increase would only be present if we added yet another level of complexity to our bloated private payer system, and that would be foolish.
How can providing health care for the 16% of Americans who don't have insurance add only 4% to our nation's health care bill? The only health care now available to those without insurance is emergency rooms — the most expensive and least efficient mechanism for handling medical care. Routine care, preventative treatment and medication are far lower cost as well as being more humane than waiting until crisis drives sick people to the emergency room. In addition, today, many people enter our medicare system at 65 with conditions that could and should have been addressed years earlier under a more reasonable system. It costs our nation fully as much to perform a hip transplant at age 65 as it would have cost to save the individual years of suffering by performing the procedure earlier.
The statistics, but not the conclusion, that I present here are based on the 94 page document Accounting for the cost of health care in the United States by the prestigious McKinsey Global Institute. It's available free, and if you have the time, I highly recommend reading the whole report. It's packed with facts, and stops short of making recommendations.
Around the world, the per capita cost of health care is generally proportional to national income levels. The United States is the only developed country whose health care costs are dramatically higher than would be expected from our income levels. Our costs are $480 billion per year (33%) higher than would be expected from our income levels. Do we receive better health care for those dollars? Objectively, no. $480 billion is a huge amount of money. It's $1600 per year for every man, woman, and child. It's more than six times the additional cost of providing ongoing health care to those now without medical insurance. So where does that $480 billion go?
Are Americans sicker than others? The bottom line is, no. We get a few conditions more often, many others less often, and we are on average younger than the citizens of other highly developed countries, which would be expected to lower our health care cost substantially. How about the costs of medical malpractice insurance and litigation? Our country's excess in damage awards costs us $20 billion per year. While this is certainly an area for correction, it only represents 4% of the overspending.
$66 billion of the overage is due to the cost of drugs, even though we use 20% less prescription drugs than other developed nations. Our cost for a prescription is 70% higher than the same drug in other countries. Another $18 billion of overage is attributable to non-drug supplies. Devices such as pacemakers and knee implants are over 50% more expensive than the same devices sold in other countries. There is a remarkable correlation between the highest profit procedures and those which are performed much more frequently in the United States than in other countries. Unnecessary testing, in part driven by fear of malpractice lawsuits, adds billions more to our costs. Inefficient administration, such as assigning menial tasks to skilled nurses, adds additional billions.
The $412 annual per capita that the United States spends on the administration of it's health care system is six times more than it is projected to be under a public system — that's a savings of almost $100 billion per year. A full $75 billion per year of that currently goes directly to the corporate profits and additional costs imposed by the private payer system. That alone is equivalent to the incremental cost of providing health care to our 40 million uninsured Americans. Moreover, a universal system would provide a platform for reducing the costs of drugs, devices, and other costs that have become run-away under our current system.