Why Are Medical Costs So High?

Photo by Lilli Day / Getty Images.

Paul Solman answers questions from NewsHour viewers and web users on business and economic news here on his Making Sen$e page. Here’s Thursday’s query:

Name: Curt Carpenter

Question: I would really like to see you do some hard reporting on why health care inflation is so high. What are the drivers? What evidence is there for those being the real drivers? All I can find are platitudes about Americans living longer and expensive medical technology.

Paul Solman: Why do you call them “platitudes”? Aren’t they true? We are living longer, year after year. New technology is expensive, as it always is. And medical technology continues to advance. Would you rather these things weren’t true? Speaking for myself, I’m enormously relieved that heart stents were invented, since I have one. Indeed, that may be why I’m I’m still in an upright position to answer your question.

Other cost drivers include Brobdingnagian administrative costs due to multiple providers and insurers, Herculean efforts in the last few months of life (for premies, in the first few). Oh, and substantial marketing costs for drugs. Plus the fact that the government won’t use its buying power to muscle pharmaceutical companies. Not to mention sky-high doctor salaries, relative to other countries.

That all said, check out the work of Dr. David Cutler and others, who make a strong argument, with plenty of careful reckoning, that given the imputed value of an extra year of human life, we’re getting more than we pay for.

This entry is cross-posted on the Rundown– NewsHour’s blog of news and insight. Follow Paul on Twitter.