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Robert Kuttner on Health Care Costs

He writes:

NEJM -- Market-Based Failure -- A Second Opinion on U.S. Health Care Costs: Changing demographics and medical technology pose a cost challenge for every nation's system, but ours is the outlier. The extreme failure of the United States to contain medical costs results primarily from our unique, pervasive commercialization.... Profits, billing, marketing, and the gratuitous costs of private bureaucracies siphon off $400 billion to $500 billion of the $2.1 trillion spent, but the more serious and less appreciated syndrome is the set of perverse incentives produced by commercial dominance of the system... medicine... does not lend itself to market discipline. Why not?

The private insurance system's main techniques for holding down costs are practicing risk selection, limiting the services covered, constraining payments to providers, and shifting costs to patients. But given the system's fragmentation and perverse incentives, much cost-effective care is squeezed out... unnecessary medical care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game the system. The result is a blend of overtreatment and undertreatment....

Great health improvements can be achieved through basic public health measures and a population-based approach to wellness and medical care. But entrepreneurs do not prosper by providing these services.... [C]onsistent application of standard protocols for conditions such as diabetes, asthma, and elevated cholesterol levels, use of clinically proven screenings... and changes to diet and exercise can improve health and prevent larger outlays later on. Comprehensive, government-organized, universal health insurance systems are far better equipped to realize these efficiencies....

Many U.S. insurers do reward physicians for following standard clinical practices, but these incentives do not aggregate to an efficient national system of care....

A second cost-containment tactic is to hike deductibles and copayments, whose frank purpose is to dissuade people from going to the doctor. But sometimes seeing the doctor is medically indicated, and waiting until conditions are dire costs the system far more money than it saves...

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