Cutting the Fat in Healthcare

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Matt Yglesias is basically right about the overall shape of the river when it comes to healthcare spending:

I think there’s a lot of waste in our health care sector. That said, I think discussion of health care costs sometimes ignore the fact that something has to go up as a share of GDP. Americans are getting richer, agriculture is becoming more efficient, apparel is increasingly made by Bangladeshis or robots, etc. At the same time, computers and other electronic gadgets are getting cheaper in real terms. And if some things shrink as a share of our income, other things need to grow. The biggest of those things has been health care. And that makes perfect sense.

As GDP goes up, and we have more collective income to spend on things other than the basics, we’re going to spend that extra income on whatever we most value. And for a lot of us, that something is healthcare. Put simply, as GDP per capita goes up, we’d expect healthcare spending not just to go up, but to go up even as a percentage of GDP.

However, there’s evidence that the U.S. is an outlier even when you take this into account. You’d expect America to spend a higher percentage of GDP of healthcare than most countries because America is richer than most countries. But if McKinsey Consulting is to be believed, that number probably ought to be about $5,000 per person, not the $7,000 per person we actually spend. Put another way, you’d expect a country as rich as the U.S. to spend 13-14% of GDP on healthcare, but in reality we spend more like 17-18%. You can read the McKinsey conclusions here, or you can read Aaron Carroll’s multipart blog series explaining it here. (Note that these are 2006 numbers. They’ve gone up a bit since then.)

Why do we spend so much? Some is pure waste, some is because our system is so inefficient, and some is because the healthcare industry is far more profitable in the U.S. than in most other countries. Somebody has to pay for those country club memberships, after all.

But keep in mind that this is actually good news if you look at things from a certain point of view. If our healthcare sector were super efficient, there wouldn’t be much scope for reducing its size. But if there’s lots of fat in it, there is. It won’t be easy, since one man’s fat is another man’s dividend check, but at least there’s fat to cut.

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate