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1.3. Health Care in Crisis

Few things affect our quality of life more than health, so few issues are more important than health care. But, while we often speak of it as such, health care is not a single, monolithic topic. It ranges from delivery of basic public health in the poorest regions of the globe to stimulation of scientific breakthroughs in the advanced research laboratories of the world’s wealthiest nations. As such, health care is too vast a subject for any single book. In this one, we focus specifically on a key part of the health care system: hospitals in developed countries. In addition to constituting a significant percentage of total health care expenditures, these hospitals are central to the delivery process, which makes them candidates as catalysts for improvements in the quality and efficiency of the overall health care system.

Compared to other developed countries, the United States spends significantly more on health care. Exhibit 1.1 shows that health care consumes 17.6% of the gross domestic product (GDP), which is 47% more than the next highest country (The Netherlands, at 12%) in the OECD (Organization for Economic Cooperation and Development, consisting of 34 largely developed countries). Exhibit 1.2 shows that the per capita expenditure in the United States is $8,233, which is more than double the OECD average of $3,268 and significantly higher than the next most profligate country (Norway at $5,388).

Exhibit 1.1

Exhibit 1.1. Health expenditures as a percent of GDP, 2010 or nearest year.

Exhibit 1.2

Exhibit 1.2. Health expenditure per capita, US$ PPP1, 2010 or nearest year.

As high as these costs are now, projections are for U.S. health care costs to escalate significantly in the future. The U.S. Department of Health and Human Services predicts that health care will consume 19.8% of GDP by 2020 (CMS 2011). The high cost of health care, and particularly the gap with the rest of the world, threatens the competitiveness of the U.S. economy.2

Financial costs are not the only cost dimension along which the United States fares poorly; America’s current health care system imposes costs beyond expenditures. Almost 50 million Americans (16% of the population) are uninsured, and even more are underinsured. The United States, Mexico, and Turkey are the only OECD countries without some form of universal health coverage (OECD 2008). What is the “cost” of the anxiety of nonwealthy Americans wondering if they will be bankrupted by a single major medical event? What is the social cost of the labor frictions injected into the economy when people hold onto jobs they don’t like and are ill-suited for, simply because it is the only way they can get affordable medical coverage? When vibrancy in the economy is commonly tied to entrepreneurial start-ups and small businesses, what is the social cost of tying affordable health insurance to employment by large companies? These issues place an even bigger burden on the U.S. economy than that indicated by direct costs alone.

While the United States spends much more on health care than any other country in the world, we do not get a good return on our investment. Exhibit 1.3 shows life expectancy in the 34 OECD countries (2010 data). The United States is below the OECD average and lower than all the OECD countries except the Czech Republic, Poland, Estonia, Mexico, the Slovak Republic, Hungary and Turkey. It is also well below the leaders (Japan, Switzerland, Spain, and Italy). Exhibit 1.4 shows infant mortality in the OECD countries, and again the United States does not fare well, with rates above the average and higher than all but Chile, Turkey, and Mexico. Also, although insured Americans experience shorter wait times for elective surgeries than citizens of many other countries, the percentage of people able to see a doctor within 48 hours is lower in the United States than in Australia, France, Germany, New Zealand, the Netherlands, Switzerland, and the UK according to a Commonwealth Fund (2010) survey.

Exhibit 1.3

Exhibit 1.3. Total life expectancy in OECD countries, 2010 or nearest year.

Exhibit 1.4

Exhibit 1.4. Infant mortality (deaths per 1,000 live births) in OECD countries, 2010 or nearest year.

The U.S. health care system does some things very well, as evidenced by the fact that some people travel great distances to come here for treatment. However, such “medical tourism” travel is typically for advanced procedures at the highest end of the health care spectrum, in which the United States excels. It is not exotic procedures for the rich that drive our embarrassing macro-statistics; it is in the inefficient (or absent) delivery of basic care (both prevention and cure) for the general population. The benefits of superior health care are not distributed evenly in the U.S. population, where death rates tend to correlate with income, race, and education (see Anderson et al. 2007, Barr 2008). To address this imbalance, we do not need more exotic procedures. We need a rationalization of basic care delivery. In this book, we focus on that rationalization within hospitals.

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