EVERY year America spends approximately $5000 more per person on health care than other rich countries execute. Yet its people are not any healthier. Where does all the money go? One explanation is waste,with patients wolfing down too many pills and administrators churning out red tape. There is also the cost of services that may be popular and lega but execute nothing to improve medical outcomes. Manhattan’s hospitals, with their swish reception desks and menus, or can seem like hotels compared with London’s bleached Victorian structures.
The most controversial source of excess spending,though, is rent-seeking by health-care firms. This is when companies extract outsize profits relative to the capital they deploy and risks they engage. Schumpeter has estimated the scale of gouging across the health-care system. Although it does not explain the huge bulk of America’s overspending, and the sums are big by any other standard,with health-care firms making excess profits of $65bn a year. Surprisingly, the worst...
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Source: economist.com