Paying for health care with savings from waste

Campaign season traditionally has a lot of promises from candidates about the things government will do for you if only that candidate is elected. When asked how this will be paid for, often politicians will tell you that it can be paid for by squeezing waste out of current government operations. See, e.g., Indianapolis mayor Ballard’s campaign against Bart Peterson – when he got there, somehow he couldn’t find all that waste. I’m picking Ballard, but he’s far, far from the only one. I suspect finding challengers who promise to pay for stuff by squeezing out waste is easier than finding challengers who do not.

So, when President Obama claims that he can pay for health care reform by squeezing waste out of the system, people are understandably skeptical. But, in this case, there is reason for hope. Unlike, say, President Bush proposing to go to war in Iraq for next to nothing; health care is already something we’re paying for.

We spend about $7,290 per person per year on health care (or possibly $7,439 per person). Compare this to about $3,000 to $3,500 in other industrialized democracies such as Japan, the UK, Australia, Sweden, Germany, Canada, and France. Back of the napkin math suggests, therefore, that at 300 million people, if we’re spending about $3,700 more per person than we need to — unless we’re willing to concede that we’re simply less capable than these other nations — that means there is $1.1 trillion in potential savings. Perhaps there are reasons why we can’t get our expenses down to $3,500 per person like the rest of the world seems to be able to do. Even so, it sure looks like there is an awful lot of room to maneuver here using the money we’re already spending.