good morning hank, it's tuesday. i want totalk today about why healthcare costs in the united states are so phenomenally, fascinatinglyexpensive, but first i have to blow your mind: alright, so you've probably heard that thereason that people enjoy "free" healthcare in australia and the uk and canada, etc, etcis that they pay higher taxes. that money then goes into a big pot and is used to payfor people's healthcare, but in fact, in the us, we spend more tax money per capita onhealthcare than germany, australia, the uk, or canada. that's right hank: you pay more in taxes forhealthcare than you would if you were british, and in exchange for those taxes, you get nohealthcare.
in fact, only about 28% of americans get theirhealth insurance through government funded programs, mostly poor people, old people,and congresspeople. but as you can see in this graph our private healthcare spending(most americans are privately insured through their employers) is way higher than anywhereelse in the world. in total, the us currently spends about 18% of its gross domestic product on healthcare costs. australia by comparison? 9%. why is this? well because everything costsmore, which seems obvious, but apparently isn't, because every article you read is like"oh it's because of malpractice insurance" or "it's because we're obese" or we go tothe doctor too much or people are prescribed
too many medications. well, not really. it's because everything costs more. a hipreplacement in belgium costs $13,000. in the us it's often over $100,000. colonoscopiesaverage over $1100 a piece in the us; in switzerland they're $655. and on average a month of thedrug lipitor will cost you $124 if you live in the us. if you live in new zealand? $7. now we are also—not to brag—richer thanall of these countries, so it makes sense that we should spend a little more on healthcare.but we don't spend a little more. we spend a ton more. and vitally, we don't get anythingfor that money, which means we are essentially paying people to dig holes and then fill thoseholes back up. like we don't live longer—in
fact we're 33rd in life expectancy—and ineverything from asthma to cancer, according to one recent nonpartisan study, american healthcareoutcomes are "not notably superior." so why are we spending all of this money fornothing? well first, let's discuss some of the problems that are not actually problems. for instance, the problem is not so-called"overutilization:" the idea that americans go to the doctor more and get more tests andspend more time in hospitals. we know this because americans actually go to the doctorless than europeans and spend much less time in hospitals, although to be fair, you canstay in a dutch hospital for seven nights for what it costs to stay in an american hospitalfor one night, so no wonder we're hesitant.
also it is not because we're sicker than otherpeople. everyone likes to blame obesity on our rising healthcare costs, but yeah, no.that argument is just not supported by data. for one thing, disease prevalence does notaffect healthcare costs that much. and for another thing, while we do have more obesityin the united states, which sometimes leads to health problems, we have fewer smokersand less alcohol consumption (really? apparently yes). so that saves us a little money, andif you compare us to like the british or the french, in the end it's probably a wash. hank, the truth, as usual, is complex. like,there are obvious inefficiencies in our healthcare system. for instance, not everyone has insurance.if you don't have insurance, you still get
healthcare, but you're responsible for payingfor that healthcare, which often you can't do, so you end up going bankrupt. that sucksfor you, obviously, because you're bankrupt, but it also sucks for the rest of us becausewe have to pay not only for your care, but also for all the money the hospital spenttrying to get you to pay for your care. also the only options available to uninsured peopleare usually the most expensive options, like emergency rooms, which is just bananas. but thoseinefficiencies are hard to measure. fortunately, there are things we can measure. so like i said before, because the us is oneof the richest countries in the world, you would expect us to pay a little more for healthcarethan most people. the question is, when do
we pay more than you would expect us to pay,and that turns out to be pretty interesting. let's start with malpractice and so-called"defensive medicine." the idea here is that doctors are scared of huge malpractice suitsso they order a lot of unnecessary tests in order to, like, cover their butts. thatdoes contribute to our healthcare costs, like there are more mri and ct scans in the usthan anywhere else. however, there are a bunch of states like texas that have passed tortreform to limit malpractice suits, and in those states healthcare costs have droppedby an average of a whopping 0.1%. the biggest estimates for the total costs of defensivemedicine put it at around 55 billion dollars, which is a lot of money, but only 2% of our totalhealthcare costs.
another smallish factor: doctors (and to alesser extent, nurses) are paid more in the us than they are in other countries, and bymy possibly-faulty math we end up spending about 75 billion dollars more than you wouldexpect us to there. and then we have the cost of insurance andadministration costs, like paperwork and marketing and negotiating prices. that's about 90 billiondollars more than you would expect us to spend. we spend about $100 billion more than youwould expect on drugs, not so much because we take more of them, but because the oneswe take cost more per pill. okay, and now for the big one. i'm gonna lumpinpatient and outpatient care together, because in the us we do a lot of things as outpatientprocedures, like gallbladder surgeries, that
are often inpatient procedures in other hospitals.we're just gonna make a big ball [gestures]. that big ball is $500 billion more than whatyou would expect given the size of our economy. per year. why? because in the united states we do not negotiateas aggressively as other countries do with healthcare providers and drug manufacturersand medical device makers. so like in the uk the government goes out to all the peoplewho make artificial hips and says "one of you is going to get to make a crapton of fakehips for everybody who is covered by the nhs here in the united kingdom. but you bettermake sure your hips are safe, and you better make sure that they are cheap, because otherwisewe're going to give our business to a different
company." and then all the fake hip companiesare motivated to offer really low prices because it's a really huge contract. like think ifyour company got to put hips inside of everyone in england and scotland and walesand northern ireland (i guess not everyone. just the people who need hips). but in the us we don't have any of that centralizednegotiation, so we don't have as much leverage. the only big exception is medicare, the government-fundedhealthcare for old people, which, not coincidentally, always gets the lowest prices. so basically, hank, in the united states,providers charge whatever they think they can get away with, and they can get away witha lot, because it's really difficult to put
a price on, like, not dying. this is a phenomenoncalled "inelastic demand," like if you tell me that this drug will save my life costs$7 a month, i will pay you $7 a month for it. if you tell me that it costs $124 a month,i will find a way to find $124 a month to pay for it. you can't negotiate effectivelyon your own behalf for healthcare services because you need them. and not like you needa macbook air or the new season of sherlock, but actual, physical need (i guess it is likethe new season of sherlock). so basically, hank, until and unless we cannegotiate as effectively with the people providing healthcare as australians and british peopledo, us healthcare costs will continue to rise faster than anywhere else in the world andwe won't get better healthcare outcomes.
hank, i know this video is long, althoughit could have been much longer, but i am so tired of people offering up simple explanationsfor what's wrong with our healthcare system. they say "oh, it's malpractice," or "it'sdoctors who must also be businesspeople" or "it's insurance companies" or "it's insanerules for who can get insurance." it's drug companies, it's government bureaucracy, it'san inability to negotiate prices. yes, yes, yes, yes, and yes! it is all of those thingsand more! it is not a simple problem, there will not be a simple solution, but it is probablythe biggest single drag on the american economy and it's vital that we grapple with it meaningfullyinstead of just treating healthcare costs as political theatre.
so i hope i've at least introduced the complexityof the problem. i've put some thoroughly nonpartisan links in the doobly-doo for further reading.hank, welcome back to the united states. as you can see, everything is peachy here. i'llsee you on friday. friendly reminder, educational videos are allowed to be more than four minutes long. all of the people who are commenting about how punished i am did not watch to the end of the video.i feel dizzy.
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