In 2017, US health care spending reached $3.5 trillion, or $10,739 per person. This amounts to 17.9% of the US gross domestic product (GDP): twice as much as what other developed countries spend, on average. To add insult to injury, Americans aren’t getting much bang for their buck: around a quarter of the spending is unnecessary. Per a recent JAMA study, as much as $935 billion of US healthcare spending is wasted. Here’s the breakdown:
Wasteful spending on health care is not a trivial problem. It represents resources that could be redirected to, say, higher wages, R & D budgets, affordable housing, or climate change adaptation. Yet it is a problem the political class has pretty much downplayed or ignored, probably because serious spending reform would anger a lot of voters, especially the healthcare workers who lose their jobs or get their pay cut as a result of reform. Luckily, the media and some politicians are finally beginning to grapple with the issue:
Analysis: A Health Care Overhaul Could Kill 2 Million Jobs, And That’s OK - Elisabeth Rosenthal /Kaiser Health News May 24, 2019
Warren agrees Medicare-for-All could result in two million jobs lost: 'This is part of the cost issue' - Louis Casiano/Fox News October 31, 2019
Administrative complexity, over-treatment, low-value care, pricing failures (e.g., over-charging), and fraud account for almost three-quarters of the waste - or around $700 billion a year. Most of the burden of fixing these areas of excess spending would fall on healthcare providers and their employees. Executives, physicians, and other well-paid professionals would earn less in base salaries, bonuses and profit-sharing (or take a big cut in business income if business owners)*. And healthcare jobs would be shed along with unnecessary hospitalization, testing and treatment. How many? I haven’t seen any detailed estimates. Here’s a guess:
Provided healthcare spending reform were implemented gradually, many of the jobs lost would be positions that would have been created in the absence of reform (so not many currently employed healthcare workers would be laid off)**. Note the Bureau of Labor Statistics (BLS) projects healthcare employment would grow 14 percent from 2018 to 2028, adding about 1.9 million new jobs. But the BLS estimate assumes the old healthcare system will remain in place. Hopefully, it won’t.
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* I shed no tears for US physicians, who earn, on average, more than $300K a year - about twice as much as their peers in other developed countries. Let them earn $50,000 less a year. The money saved can go towards retraining laid-off healthcare support workers.
** What about job cuts in the private health insurance sector? Note that almost all countries with universal healthcare systems also have private insurers, including UK, Canada, Denmark, Switzerland, and Japan. In these countries, private health insurance often helps with expenses and services not covered by the state. Even if the US went single-payer, private insurers would still be around. The health insurance industry would probably lose fewer than 500,000 jobs under a single-payer system, given that the industry currently employs well under a million workers. (Of course, there are ways to achieve universal healthcare other than through a single-payer system).
References:
Barlas S. Are Hospital Prices a Bigger Problem than Drug Prices? Congress Doesn't Know, Doesn't Care. P T. 2019;44(5):259–299. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6487976/
Laugesen, MJ and Rice, T “Is the Doctor In? The Evolving Role of Organized Medicine in Health Policy”. J Health Politics, Policy, and the Law 1 June 2003; 28 (2-3): 289–316. doi: https://doi.org/10.1215/03616878-28-2-3-289
Shrank WH, Rogstad TL, Parekh N. Waste in the US Health Care System: Estimated Costs and Potential for Savings JAMA. Published online October 07, 2019.