McKinsey Study Gets It

Judging by today's column by Steven Pearlstein in the Washington Post, a new study on why the U.S. health care system is so expensive by the McKinsey Global Institute pins the tail on the right donkeys' asses. I haven't had a chance to peruse it myself, but Pearlstein took a hard-left turn after reading it (a few weeks ago, he was praising Bush's tax plan, which would undermine existing employer-based plans and add to the growing ranks of the uninsured). I took him to task for that column. But today, he starts by:

* Going after physician salaries, which, because they're paid on a fee-for-service basis, are a third to half higher than other advanced industrial nations;

* Going after the high prices charged by hospitals and drug companies. "McKinsey found that drug companies are able to charge, on average, 60 to 70 percent more for branded prescription drugs" here. "We can debate whether drug companies really need the extraordinary returns they get to sustain the level of innovation they produce; one can certainly point to other innovative high-tech industries that manage to thrive on more reasonable returns"; and

* Going after the insurance industry, which skims $30 billion in after-tax profits after spending $32 billion a year in marketing.

He concludes his column today with a statement on the importance of cost control, which I have been trying to hammer home to proponents of reform (see my posts here and here, for instance).

"Any effort to reduce these excess costs faces determined opposition from well-financed lobbies, which is why many reformers prefer to focus on the goal of extending coverage to the 47 million Americans who don't have health insurance. But doing the one without the other, the McKinsey researchers warn, would be economic folly. Offering universal coverage without reining in costs would add another $77 billion each year in unnecessary and unproductive health spending."

Way to go McKinsey. And way to go Steve. Welcome to the real world.