Federal Reserve Chairman Jerome Powell has taken the U.S. healthcare system to task for delivering little in return for what is spent.
Powell appeared Wednesday before the Senate Banking Committee to provide routine testimony that focuses on Fed policy and employment issues. But when Sen. Ben Sasse (R-Neb.) asked Powell about the effect of the healthcare system on the economy, the Fed chief didn’t hold back.
"The outcomes are perfectly average for a first-world nation, but we spend 6 percent to 7 percent of GDP more than other countries," Powell told lawmakers. "So it's about the delivery. That's a lot of money that you are effectively spending and getting nothing."
The United States has one of the highest costs of healthcare in the world, according to the Peter G. Peterson Foundation.
“In 2017, the U.S. spent about $3.5 trillion on healthcare, which averages to about $11,000 per person,” the foundation says on its website.
Federal healthcare spending
A sizable portion of that total is spent by the federal government, directing the resources of about 8 percent of the U.S. economy toward healthcare. The Committee for a Responsible Federal Budget estimates that government healthcare spending will rise to $2.9 trillion by 2028.
Meanwhile, a 2018 survey by the Pew Research Center found that a “substantial majority” of Americans believe the cost of getting quality healthcare was more than they could afford.
What makes U.S. healthcare so expensive? It depends on who you ask. Blue Cross Blue Shield, a major insurer, cites three factors.
Prescription drugs: The costs are projected to increase by 136 percent between 2010 and 2025.
Chronic diseases: They’re among the most costly and preventable conditions.
Lifestyle: Smoking, lack of exercise and too much alcohol led to more medical treatment.
Maybe a simple answer
But it might be more simple than that. There’s an old saying among economists that “if you can pass on the costs, you don’t care what the costs are.”
Over the years, so many patients have had healthcare benefits that paid most of their expenses that they’ve paid little attention to what they’re spending.
In 2018, Dr. Ashish Jha of the Harvard T.H. Chan School of Public Health agreed that the system hasn’t paid enough attention to prices. He noted then that “we’re just higher for everything” relating to healthcare.
On Wednesday, Powell agreed and added that we aren’t getting anything extra for the additional spending.