“Obamacare by morning. Why’s this taking so long? I’m going to wind up with haemorrhoids if I sit here too long”

Washington – As problems with Obamacare seem to grow by the day, anxious House Democrats have reached their tipping point. The Affordable Care Act is arguably to Obama what Hurricane Katrina was to Bush – a low point from which the President may not recover.

These recent efforts to fix health care in America have seen some of the worst displays of political brinkmanship in recent history. The White House was taken “hostage” by the Republicans. The lines in the sand were drawn: both sides refusing to back down on the health care law, leading to the infamous government shutdown.

But the questions surrounding the inefficiencies of the American health system are much bigger than congress. Trying to understand its complexities via the lens of politics and ideology is shallow and somewhat ignorant. There are much larger structural factors involved.

Common Myths

For most Americans, their understanding of ‘free healthcare’ around the world (in the UK, Canada, Australia) is due to much higher taxes. In reality, the United States spends more %GDP on Healthcare than almost all other countries. America spends around 20% to cover merely 28% of their population, and their private insurance rates are significantly higher than anywhere else in the world. Australia by comparison? Just over 9% for universal coverage.

That begs the question, why is America’s health care costs so high? The obvious answer is because things cost more. Instead people are settling for one liners like “it’s because of malpractice insurance” or “it’s because we’re too fat” or “we go to the doctor too much” or “people are prescribed too many medications.”

Not really.

Health care costs in the United States are so high in comparison to the rest of the world because everything costs more. A hip replacement in Australia costs around $12,000. In America, it’s over $100,000. Colonoscopies are over $1100 a pop compared to places like Switzerland and Belgium, where the procedure costs around $650. A months supply of cholesterol medication like Lipitor will cost you $7 if you live in New Zealand. In the U.S, that same drug and quantity costs over $120.

Here is where the inefficiencies come in. For what the United States spends on health care, they get very little. Life expectancy in U.S is just 33rd in the world and they have the highest levels of everything from asthma to cancer, making American healthcare outcomes “not notably superior” according to a recent study.

The one-liners I mentioned earlier are not actually problems. The problem with the American system is not “over-use.” In fact Americans see their GPs much less than us here in Australia (not an unfair outcome, considering the cost of staying one night in an American hospital is the same as the cost staying several nights in hospitals in other countries). The idea that America’s “obesity epidemic” is responsible for the higher costs is not backed up by data (in fact disease provenance has a very low impact on healthcare costs). While, on average, Americans are “fatter” then their international counterparts, they actually have a lower prevalence of smoking and alcohol consumption (conditions which are undoubtedly the cause of many health problems).

Harsh Realities

There are inefficiencies in the American system that are hard to measure. Not everyone has insurance. If you aren’t covered, paying for your healthcare falls on you. Paying for health care privately drives some people in the United States to bankruptcy. The health care procedures offered to uninsured patients are usually the most expensive, an example being the costs of being in the emergency room if you’re uninsured (anyone who has seen Michael Moore’s sicko will get what I am talking about).

But there are things we can measure.

The United States is one of the richest nations in the world so you would expect them to pay more for health care. But looking at the things that America pays more for than you would expect them to pay is when things get interesting.

Firstly, there is the idea of “defensive medicine”, a phenomena that arises when doctors are terrified of being sued for malpractice so they over-order unnecessary tests to cover their bases. This means that America now has the highest rates of MRI and CT scans then anywhere else in the world, something that cost a lot. This can be qualified when comparing the different states, like Texas who has introduced tort reform to limit the number of malpractice suits. This saw a drop in health care costs by 0.01%. Defensive medicine is said to cost around 55 billion dollars (although that amount is only 2% of what America pays on healthcare).

Secondly, doctors and (arguably) nurses are paid a much higher wage in America, with estimates indicated that they spend around 75 billion dollars more than you would expect to in wages.

Then there are administrative costs like paperwork, marketing and insurance costs which is said to be about 90 billion dollars more expensive than it needs to be. America also spends 100 billion dollars more on drugs, not because Americans are using more of them, but because each unit costs more (as my Lipitor example demonstrated).

Perhaps an even more important factor here is the fact that in America patient care is annually 500 billion dollars more than is expected for the size of their economy. This is in part due to the fact that the United States does not negotiate as aggressively with healthcare and medical device manufacturers as everyone else does.

Countries like Australia and Britain use tender systems, where manufactures are incentivised to price their devices competitively in order to acquire a massive contract (imagine being the supplier of all pacemaker parts for everyone covered under the NHS). The United States lacks any of that centralised negotiation or leverage. The only exception here is medicare, the US coverage system for the elderly which in-coincidentally gets the lowest prices from drug and medical device manufactures.

This means that for the most part, healthcare providers in the United States charge as much as they think they can get away with (because people shockingly like the idea of staying alive). In economic terms, this occurrence is known as inelastic demand, where demand is prevalent no matter the cost. If you were told to go on a life-saving drug, you would (presumably) take it regardless of whether it cost $7 a month or $120. Healthcare is something you need and providers are well aware of that. Negotiating on your own behalf for healthcare is almost impossible because of this phenomenon.

Unless the US can learn to negotiate as effectively as other countries with healthcare providers, costs will continue grow without necessarily gaining greater healthcare outcomes out of it.

There are no simple explanations for the inefficiencies of the American healthcare system. Rather, the issue is fuelled by a spectrum of intricate and somewhat culturally intractable problems.

Considering the fact that healthcare is likely the single largest weight on the American economy (and in recent months, its political functions), it is vital that people begin to grapple with it meaningfully instead of treating this issue as political theatre.

As for the recent attempts at ‘fixing’ the issue like the Affordable Health Care Act and Obamacare, as long as these structural inefficiencies remain, the American people will be left with a broken and ineffective system. All of the sitting and waiting for Obamacare to fix all of their problems will, in the words of Carrie Underwood at the recent Country Music Awards, leave them with haemorrhoids.