Managing health care costs

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This story is based on a radio interview. Listen to the full interview.

Audio Transcript:

LISA MULLINS: President Barack Obama has often spoke of the need to reduce the cost health care in the United States. Well, today he spoke of the danger of failing to.

PRESIDENT BARACK OBAMA: When it comes to health care spending, we are on an unsustainable course that threatens the financial stability of families, businesses, and government itself.

MULLINS: The President spoke today at the White House. He welcomed health care industry leaders to join him in his efforts, and they responded with a promise to achieve $2 trillion dollars in savings during the next 10 years. Mr. Obama said the current system is just not working.

OBAMA: In fact, we're spending more on health care than any other nation on Earth, even though millions of Americans don't have the affordable quality care they deserve and nearly 46 million Americans don't have any health insurance at all.

MULLINS: Well, those facts got us to thinking, how do the countries manage to spend less? Karen Davies has written extensively on this issue. She's President of The Commonwealth Fund, a private foundation that supports research on health issues. Welcome, Ms. Davies. How about a reality check? Is it true that America spends a lot more per capita on health care than other developed countries? And if so, how much more?

DAVIES: The President is absolutely right that the US spends far more than any other country. In fact, we spend twice per capita what other countries spend on healthcare. Just to put that in concrete terms, the US spent $6700 dollars per capita on health care in 2006 -- and contrast that with the Netherlands that was spending $3400 dollars. There's a lot of room to eliminate waste and achieve savings.

MULLINS: Although, can we assume that the quality of care was similar in, for instance, the Netherlands and the United States?

DAVIES: Absolutely. If you look at measures that help outcomes, such as mortality and medical to medical care, the US ranks 19th out of 19 countries. We conduct annual surveys in the Netherlands and 7 other countries, and the US typically ranks last on all of those countries on measures of accessibility of care, coordination of care, and are the highest in terms of waste or repetition of tests.

MULLINS: So what is the problem here? Is it that other countries, including the Netherlands � you mentioned others as well � are especially good at delivering quality health care and keeping costs down, or is it the United States has quality health care at an extremely high cost?

DAVIES: Other countries invest far more in basic primary care, so it's very easy to get to a regular doctor who knows you well and makes sure that your health conditions are controlled. We have a highly specialized health care system but one that is very fragmented. People see multiple doctors, take multiple drugs, and there's lots of opportunity for medical errors if people are losing about the health care system. We're simply not getting value for what we're spending on health care. Other countries are really doing better for their population in terms of better health outcomes, improved quality of care.

MULLINS: Is America the only country in the developed world that has private health care?

DAVIES: No, there are other countries. The Netherlands has a mixed public-private system as does Switzerland; Germany has elements of private insurance in their country. But they simply use wasteless money on administrative overhead. For example, only 5 percent of the premium dollar goes for overhead in the Netherlands and in Switzerland. In the US, with the five largest insurance companies, it's 17 percent. And when people buy insurance on the individual market or through small businesses, that administrative overhead can be anywhere from 25 percent of the premium to 40 percent.

MULLINS: Well, today's initiative from the health industry seems to focus on what you're talking about there: bureaucratic changes, reducing administrative costs and improving the coordination of care. Could this really be enough, though?

DAVIES: It will take more than that, but that's an important down payment. Our Commonwealth Fund national scorecard on health system performance found that if the US had the same administrative costs as the percent of health spending as other countries, we could save $100 billion dollars a year. But improvements in the organization and the delivery of care are very important. We estimate that we could save 100,000 lives a year if we invested in primary care, had good accountability for control of chronic conditions, and eliminated many of the medical errors that occur in our system.

MULLINS: Karen Davies is President of The Commonwealth Fund, which is a private foundation that supports research on health issues. Thank you very much for your time and for your thoughts.

DAVIES: Thank you.