The Reasons for the increase in the cost of healthcare

Pajamas Media has an article on one of the reasons for the high cost of healthcare.

Reform Health Care Administration and Save Billions.

…….A few weeks ago, economist Arthur Laffer published an article in the Wall Street Journal called  “The 30-Cent Tax Premium.” In it he lamented the fact that Americans must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government. The direct result of a convoluted tax code riddled with loopholes and complexity, tax-compliance costs alone consume some $431 billion annually. Even more  is wasted as a result of people changing their economic behavior to fit  the tax code.

That’s a lot of money, but it pales before what we’ve done to undermine the affordability of our own health care system. If this were a  game of poker, health care’s administrative overhead expense could see the tax code’s wasted $431 billion and raise it another $320 billion. That’s right, the U.S. will spend nearly three-quarters of a trillion dollars on health care paperwork in 2011. The cost will consume one-third of every single dollar that Americans will spend, tax, or borrow to pay for health care. If health care administration expense were its own country it would be the 18th largest economy in the world. And not one penny of that vast sum will be spent on caring for patients or preventing disease.

Like the tax compliance industry, the health care administration
business has grown so large that it has become one of the country’s
largest employers. The number of non-clinical health care personnel has
skyrocketed over the past 40 years. In 1970, there were 1.5 managers and
support staff per physician; there are now about 5.7 administrators for
every doctor. While tax compliance employs “more workers than are
employed at the five biggest employers among the Fortune 500,” medical
paperwork employs as many workers as the top ten. That’s nearly five
million people. In health care, the bureaucracy really is expanding to
meet the needs of the expanding bureaucracy.

There’s more at Pajama’s Media.

I would like to comment on a couple of others.

Advertising. I am speaking here mainly of the drug industry.  How many of you are tired of seeing all the ads on TV? Ads in magazines, ads in the doctor’s offices, ads for drugs everywhere.

Separate contracts for every part of the services. Everything that happens when you go to the hospital is probably contracted to a different company.  The lab work, the imaging, respiratory therapist, even the nurses are under contract to the hospital from different companies.  Each one has to have salespersons, administrators and other support personnel.  Suppose all this was done by the hospital with one main administrator, local people, how much less do you suppose it would be?  I do not know but I know some high priced executives of those companies would be out of a job.

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