The U.S. as a Health Care Spending Outlier
By Arnold Kling
In a study comparing the United States and the United Kingdom, Aaron showed that the United States has four times the number of CT scanners per person, and performs four times the number of scans per person…It has been argued, including by British radiologists, that the United States scans more people than is medically, or economically warranted…It is a similar picture with MRI scanners. Catton et al and others have argued that the development and proliferation of expensive medical technologies such as CT scanners and MRIs (as well as expensive pharmaceuticals) has been a significant factor driving up the cost of US health care.
One finding that surprised me is that the proportion of specialists among U.S. physicians–64 percent–is not higher than that in the OECD average. Average compensation for specialists is 6.6 times GDP per capita in the U.S., compared with 4 times GDP per capita in the OECD average. For generalists, the ratios are 4.2 and 3.2, respectively.Compensation, particularly in the U.S., is price times the volume of procedures. Some of the higher compensation for U.S. physicians reflects a higher work load in terms of procedures (whether these procedures are all necessary is, of course, doubtful).
McKinsey finds that 64 percent of administrative costs in private health insurance consist of product design, underwriting, and marketing. Paul Krugman writes about this as though all of the money is spent to screen out sick patients. I do not think it is fair to characterize it this way, but it is still somewhat disturbing to see that much overhead incurred before the insurance company even gets around to settling claims.