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Americans pay $650 billion more for health care than comparable countries…

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It is technically $643 billion, the additional amount Americans paid for health care in 2006 compared to the other countries with comparable wealth and health, according to the research article “Why Americans Pay More for Health Care?” in the December 2008 issue of the venerable McKinsey Quarterly. (Ok, probably not as venerable as The Harvard Business Review, but still a good thing to be inserted into your conversation with your interviewers…)
Please don’t freak out: this article is actually quite easy to follow and it is written in plain English, so there is no “Huh? WTF are they talking about?” or “Do they know what they themselves are saying?” moment. I promise. In addition, there are a lot of charts. We love charts! And these charts actually say something and make sense. Bonus.

Some quick takeaways:

Countries spend more on health care as they become wealthier.

The main source of this gap of $650 billion? Outpatient care. “Outpatient care is by far the largest and fastest-growing part of it, accounting for $436 billion, or two-thirds of the $650 billion figure. The cost of drugs and the cost of health care administration and insurance (all nonmedical costs incurred by health care payers) account for an additional $98 billion and $91 billion, respectively, in extra spending.”

“Today, the US system delivers 65 percent of all care in outpatient contexts, up from 43 percent in 1980.”

Although in theory this shift should have cut the cost down, in reality the overall cost went up because of the high utilization rate of outpatient care. However, it is not because we go to see the doctors a lot more often, rather, the average costs per visit has gone up and the number of expensive tests, such as MRIs and CT scans, are performed more frequently.

The root cause of this? Insurance and low out-of-pocket expense.

There is no check in place to guard the price increase. On the contrary, seeing a doctor may be like buying a high-end purse — if it is expensive, it must be good. And vice versa.

The article concludes thus, “In the United States, the ‘average’ consumer of health care pays for only 12 percent of its total cost directly out of pocket (down from 47 percent in 1960), as well as for 25 percent of health care insurance premiums, a share that has stayed relatively constant for the last decade.  Well-insured patients who bear little, if any, of the cost of their treatment have no incentive to be value-conscious health care consumers.”

This sounds familiar but now we have the numbers to back up our suspicions: in order for any health care reform to work and stick, it is important that we carry out the education and cultivation of a new generation of patients that are “value conscious” and treat the burden of health care, even when they do not have to pay for it DIRECTLY, as ultimately their own INDIRECT cross to bear.