Few political undertakings equal healthcare reform in size, complexity, and importance to the nation's economic status and well-being. The U.S. way of dispensing medicine reflects its big, diverse, wildly creative, and opportunistic culture. Its 305 million inhabitants want long and healthy lives, free from the tragedies of stillbirth, childhood disease, disability, or premature death from infectious disease, diabetes, myocardial infarction, or cancer.
So do residents in other countries. Yet no other industrialized nation came close to spending the $2.1 trillion that the U.S. funneled into healthcare in 2006. Spending on healthcare services exceeds 16% of the U.S. gross domestic product. The federal government spends more on medical research through the National Institutes of Health and the National Science Foundation than do all the countries of the European Union combined.
Healthcare is one of the fastest growing sectors of the U.S. economy. In the past four decades, it has grown, on average, 2.5 percentage points per year faster than the GDP (Figure 1). If this rate of growth continues, healthcare spending will exceed 22% of GDP by 2020 and will reach nearly 30% by 2030, according to testimony during a recent healthcare reform summit sponsored by the Senate Finance Committee.
In 2007, healthcare accounted for about one-quarter of federal spending. The Congressional Budget Office estimates that if current policies continue, health spending will account for almost half of all federal noninterest outlays by 2050.
YOUR MONEY OR YOUR LIFE?
For all this expenditure, however, the U.S. healthcare colossus is chronically troubled with problems concerning access and quality, as well as cost. If properly insured, residents of the U.S. can receive excellent healthcare. If uninsured or underinsured, they can be forced to live with their untreated symptoms, sometimes succumbing to preventable death. Despite $35 million spent annually to finance uncompensated care, 47 million U.S. patients are exiled to the fringes of the healthcare system for lack of insurance.
Healthcare is emmeshed in the corporate fabric of the U.S. Unlike their foreign competition, which often benefits from socialized medicine, employers in the U.S. finance 61% of healthcare costs through workplace-connected insurance (Figure 2). Such costs in the manufacturing sector amounted to $2.38 per worker per hour of work in 2005, compared with less than a dollar for foreign manufacturers, according to a report from the New America Foundation.
An extraordinary amount of that money is wasted. Based on more than 20 years of utilization research, Dr. John E. Wennberg, director of the Center for the Evaluative Clinical Sciences at Dartmouth Medical School, has established that nearly 30% of U.S. healthcare spending—roughly $630 billion annually—is spent on ineffective, redundant, or inappropriate diagnosis and treatment.
