I recently listened to a couple of This American Life episodes that provide an excellent overview of the cost drivers in the US health care system. As a starting point, see this chart.
Ah, but why? I give you episodes 391 and 392.By a mile, we pay more for pretty much everything, and this is a big reason that our overall healthcare costs are the highest on the planet. As a bonus, I've highlighted Switzerland in purple. Aside from the U.S., they probably have the biggest free-market component to their healthcare system in the rich world, and guess what? They come in second or third on all but one of the procedures. You may draw your own conclusions.
On the demand and provider side
• One-third of spending is on unnecessary items. Yes, 33%.
• The US system is decentralized and provides wildly varying standards of care, even from nearby city to city. The hysterectomy rate in one city was so high, for no statistically observable reason, that it was predicted 80% of women would get one eventually.
• The number of providers in an area correlates rather well with the services consumed, regardless of statistical need.
• The system is fee-for-service, not fee-for-outcome, so providers have a strong incentive to provide more often and more expensive services.
• Customer understanding of return-on-investment is spotty at best, resulting in demand for trendy, marginal or negative value things like unnecessary CAT scans. Things like huge marketing campaigns for marginal or negative value prostate cancer screenings don't help.
On the insurance side, or, sympathy for the devil
• Did you know there was a big round of recent hospital and provider system consolidation? As a result, insurance companies often have little negotiation power vs. these big consoliated systems.
• The way the negotiations work out is that the biggest insurance company players get good rates. Everyone else pays sky-high rates because hey, the providers don't need your tiny number of customers.
• There is near-zero pricing transparency. All deals are individually negotiated between insurers and providers. Doctors often have no idea what things cost.
• Did you know that pharmaceuticals introduced those coupons and discount cards as a pushback against the insurance company co-pay system? The co-pays are there to keep you and your doctors from getting the more-expensive, no-difference non-generic versions; the cards are the drug company returning fire to get your costs back down so you'll spend more of the insurer's money.
• In the 1990s HMOs actually controlled costs without lowering health. The health care share of GDP was flat through the 1990s, with no detectable result on overall health. No, really. In retrospect this explains why it fell off the political radar.