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From the CEO’s Desk | How much can the healthcare industry contribute to US deficit reduction? More than most think and more than leaders of the industry may ever admit…
February 14, 2025
2 min read time
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In the February 13, 2025 article, Ray Dalio to the Trump administration: Cut debt now or face an 'economic heart attack,' CNBC reported on Ray Dalio's recommendation to reduce the US budget deficit from 7.5% to 3% of gross domestic product.
So just how much expense could come out of the healthcare system... maybe more than you would think... maybe an amount nearly equal to the US deficit in 2024.
According to the OECD, the US spent $12,555 per capita on healthcare in 2022. This isn't just a little bit more per capita than the rest of the world; it is a staggering amount more. Switzerland is reported to have the second highest per capita healthcare spend at $8,049!! So, here in the US, we spend 56% more than Switzerland and more than double many other countries.
If we found a way to reduce our US per capita expense to equal that of Switzerland, the resulting savings would be $1.5 trillion (keep in mind, we'd still be a high-cost provider and tied for first as the most expensive country in the world in terms of per capita spending on healthcare). That's nearly enough to wipe out the entire US 2024 deficit of $1.8 trillion.
How is this possible some will ask? And how could we ever take that much out of the US health system without massive negative consequences? Well, it would have to be done carefully. While getting there would no doubt be a multi-faceted effort, consider that hospitals in the US have established prices for insured patients (and I mean the actual price paid, not charges) that range from around 150% of Medicare to 300% of Medicare and more.
We know from the RAND Corporation that the average hospital is paid somewhere in the neighborhood of 250% of the Medicare fee schedule. And we know that some amazing health systems provide care for far less than the national average.
So if some leading hospitals can provide exceptional care for well under 200% of Medicare, why can't others? I have personally worked for health systems and in markets where amazing care is made available for well under 200% of Medicare. So from both data review and personal experience, I can confidently share my belief that prices in healthcare can be reduced... probably by a lot more than most people realize and others may be willing to admit.
I suspect Ray Dalio and others are right when they admonish our government to reduce its spending. And I can buy the arguments that to achieve this end and preserve the strength of our nation we will have to see contributions and sacrifices from many industries and sectors of the US economy.
The healthcare industry can do its part, but it is likely that high prices for care will continue to plague our country, our corporations, and us as individuals until we adopt a market system in which hospitals, health systems, and any other provider of high-cost care compete openly on price.
My bet is that only coalitions of employers can lead the way to the market reforms we need unless we are all willing to accept a broad, government-led solution (i.e., Medicare for All).
To read the original article, click here.
So just how much expense could come out of the healthcare system... maybe more than you would think... maybe an amount nearly equal to the US deficit in 2024.
According to the OECD, the US spent $12,555 per capita on healthcare in 2022. This isn't just a little bit more per capita than the rest of the world; it is a staggering amount more. Switzerland is reported to have the second highest per capita healthcare spend at $8,049!! So, here in the US, we spend 56% more than Switzerland and more than double many other countries.
If we found a way to reduce our US per capita expense to equal that of Switzerland, the resulting savings would be $1.5 trillion (keep in mind, we'd still be a high-cost provider and tied for first as the most expensive country in the world in terms of per capita spending on healthcare). That's nearly enough to wipe out the entire US 2024 deficit of $1.8 trillion.
How is this possible some will ask? And how could we ever take that much out of the US health system without massive negative consequences? Well, it would have to be done carefully. While getting there would no doubt be a multi-faceted effort, consider that hospitals in the US have established prices for insured patients (and I mean the actual price paid, not charges) that range from around 150% of Medicare to 300% of Medicare and more.
We know from the RAND Corporation that the average hospital is paid somewhere in the neighborhood of 250% of the Medicare fee schedule. And we know that some amazing health systems provide care for far less than the national average.
So if some leading hospitals can provide exceptional care for well under 200% of Medicare, why can't others? I have personally worked for health systems and in markets where amazing care is made available for well under 200% of Medicare. So from both data review and personal experience, I can confidently share my belief that prices in healthcare can be reduced... probably by a lot more than most people realize and others may be willing to admit.
I suspect Ray Dalio and others are right when they admonish our government to reduce its spending. And I can buy the arguments that to achieve this end and preserve the strength of our nation we will have to see contributions and sacrifices from many industries and sectors of the US economy.
The healthcare industry can do its part, but it is likely that high prices for care will continue to plague our country, our corporations, and us as individuals until we adopt a market system in which hospitals, health systems, and any other provider of high-cost care compete openly on price.
My bet is that only coalitions of employers can lead the way to the market reforms we need unless we are all willing to accept a broad, government-led solution (i.e., Medicare for All).
To read the original article, click here.
