Workers' Compensation: Why does health care cost so much in America? Ask Harvard's David Cutler

The cost of medical treatment continues to increase yearly. A major component of the Workers' Compensation benefits system is now the cost of medical care. Workers' Compensation insurance is not alone in experiencing this phenomena. Soaring medical costs pervades the entire Insurance industry and are a major concern of both Medicare and Medicaid solvency. Over the next two decades, the United States will have to reinvent the wheel I am determined what limitations on the cost of medical care must be imposed. The entire delivery system will ultimately experience change. It is more likely than not that Congress will again, "kick the can down the road, and delay implementation of significant change until after the baby boomer generation. Without a creative approach being offered now, the options will be limited, and will probably result in the universal medical care delivery system under a federal umbrella. The American health care system is structured differently from systems in other countries, making it more expensive.

Paul Solman: Harvard's David Cutler is among the country's foremost health economists, famous for -- among other research -- a controversial paper arguing that even our exorbitant health care industry, in terms of increased productivity and life span outcomes, delivers more than what we pay for it.
Cutler, who was profiled by Roger Lowenstein in the New York Times Magazine in 2005,

healthcare

subsequently worked for President Barack Obama on health care issues, and talked to us recently for a story about cost savings. But far more of what he had to say seemed worthwhile than what we have time to air. Here is some of it.
Paul Solman: Why does health care cost so much in America?
David Cutler: Let me give you three reasons why. The first one is because the administrative costs of running our health care system are astronomical. About one quarter of health care cost is associated with administration, which is far higher than in any other country.
Paul Solman: What's the next highest?
David Cutler: About 10, 15 percent. Just to give you one example, Duke University Hospital has 900 hospital beds and 1,300 billing clerks. The typical Canadian hospital has a handful of billing clerks. Single-payer systems have fewer administrative needs. That's not to say they're better, but that's just on one dimension that they clearly cost less. What a lot of those people are...

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