Alright, so you've probably heard that the reason people enjoy "free" healthcare in Australia and the UK and Canada, etc., etc., is that they pay higher taxes. That money then goes into a big pot and is used to pay for peoples' healthcare. But IN FACT, in the United States, we spend more tax money per capita on healthcare than Germany, Australia, the United Kingdom, or Canada. That's right Hank, you pay more in taxes for healthcare than you would if you were British, and in exchange for those taxes, you get... no healthcare.
Transcript for Why Are American Health Care Costs So High?
Doctors–and many Republicans–constantly carp about the costs of “defensive medicine” because it forces providers to perform unnecessary procedures and tests to insulate them from potential lawsuits. But excessive physician salaries contribute nearly three times more to wasteful health care spending than the $20 billion or so that defensive medicine does....
But how has the AMA managed to get away with such princely remuneration that ordinary mortals in other professions–even ones such as law and engineering that also require arduous training–can only dream of? After all, in a functioning market, a profession offering such handsome returns would become a magnet for more people who, over time, would bid down “excess” wages.
But that’s not how it has worked in medicine since 1910 when the Flexner report, commissioned by the AMA, declared that a surplus of substandard medical schools in the country were producing a surplus of substandard doctors. The AMA convinced lawmakers to shut down “deficient” medical schools, drastically paring back the supply of doctors almost 30% over 30 years. No new medical schools have been allowed to open since the 1980s.
Still, the AMA along with other industry organizations until recently had issued dire warnings of an impending physician “glut” (whatever that means beyond depressing member wages), even convincing Congress to limit the number of residencies it funds to about 100,000 a year. This imposes a de facto cap on new doctors every year given that without completing their residencies from accredited medical schools, physicians cannot obtain a license to legally practice medicine in the U.S. Even foreign doctors with years of experience in their home countries have to redo their residencies–along with taking a slew of exams–before they are allowed to practice here.
Will tort reform “bend the cost curve?” Health-care providers and tort reform advocates insist the answer is “yes.” They claim that defensive medicine is responsible for hundreds of billions of dollars in health-care spending every year. If providers and reform advocates are right, once damages are capped and lawsuits are otherwise restricted, defensive medicine, and thus overall health-care spending, will fall substantially. We study how Medicare spending changed after Texas adopted comprehensive tort reform in 2003, including a strict damages cap. We compare Medicare spending in Texas counties with high claim rates (high risk) to spending in Texas counties with low claim rates (low risk), since tort reform should have a greater impact on physician incentives in high-risk counties. Pre-reform, Medicare spending levels and trends were similar in high- and low-risk counties. Post-reform, we find no evidence that spending levels or trends in high-risk counties declined relative to low-risk counties and some evidence of increased physician spending in high-risk counties. We also compare spending trends in Texas to national trends, and find no evidence of reduced spending in Texas post-reform, and some evidence that physician spending rose in Texas relative to control states. In sum, we find no evidence that Texas’s tort reforms bent the cost curve downward.
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