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Thursday, February 15, 2007
National Health Care Could Save a Bundle
McKinsey, a nonpartisan consulting company, has answered my prayers and put out a comprehensive report on our overpriced, waste-ridden health care system. They even estimate tremendous savings from a national health care system. Steven Pearlstein makes the key point (emph. mine):
Proponents of a government-run "single-payer" system will certainly home in on the $84 billion a year that McKinsey found that Americans spend to administer the private sector portion of its health system -- a cost that national health plans largely avoid. But as long as Americans continue to reject a government-run health system, a private system will require something close to the $30 billion a year in after-tax profits earned by health insurance companies. What may not be necessary, McKinsey suggests, is the $32 billion that the industry spends each year on marketing and figuring out the premium for each individual or group customer in each state. Insurance-market reform could eliminate much of that expense.
Of course, any effort to reduce these excess costs faces determined opposition from well-financed lobbies, which is why many reformers prefer to focus on the goal of extending coverage to the 47 million Americans who don't have health insurance. But doing the one without the other, the McKinsey researchers warn, would be economic folly. Offering universal coverage without reining in costs would add another $77 billion each year in unnecessary and unproductive health spending.
You read right: a single-payer insurance system could save the country $84 billion a year.
But Pearlstein's other example -that universal health insurance could add more waste to the system- shows that insurance is just one piece of the puzzle. In total, the report found that we overpay by $477 billion each year- or $1,645 per person. We overpay doctors, nurses, and other professionals. We pay too much for prescription drugs. Everyone in the health care industry makes tremendous profits. And we have to deal with vast inefficiencies in health care operations.
That's all money we could save if the government responds.
Now, we'll have to wait and see if the commentariat finds flaws in the study. And it's not clear to me how these numbers translate into government savings. But a report like this may steer the conversation on health care in the right direction: toward the potential to contain costs, fix long-term budget problems, and promote fiscal responsibility. Perhaps it will also move the debate over long-term budget problems in the direction of expanding government intervention to contain costs.
For more commentary, see Tapped and Gooznews.
Posted by Matt Lewis
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