Question

Medicare and Medicaid

Is the rapidly expanding share of total GDP of the healthcare sector in the United States necessary evidence of wasteful health care spending?

Answer 1

Health care costs in the United States are much higher than those in industrial countries with similar or better health system performance.

Health care costs in the United States now account for 16 percent of the country's GDP and per capita health care spending is approximately twice that of other major industrialized countries. US immense spending makes health care and health insurance increasingly unaffordable, and furthermore, 45.7 million Americans have no health insurance. It also threatens the nation's ability to pay for new treatments and technologies, which often are expensive, and to make other discretionary expenditures .

Fee-for-service providers are paid for all services, whether or not they are necessary. Furthermore, because physicians advise patients on what care they need and also provide that care, they lack incentives to ration. Insurance and medical uncertainties muffle price competition and, in our litigious climate, promote overscreening and overtreatment. Health insurers, chastened by the backlash against managed care, act passively in reimbursing health care spending and, as expenditures increase, merely pass costs along to purchasers in the form of higher premiums. The impact of these higher premiums on the insured is limited, however, owing to Medicare and other public insurance entitlements, as well as the tax subsidization of employer-sponsored health insurance. Together, all these factors allow inefficiency to thrive in the U.S. health care system.