For example, a McKinsey Global Institute study has found our drug prices are 60 percent higher than other countries. We spend $25 billion more on medical devices due—which were taxed under Obamacare and the Senate still may yet repeal. Defensive medicine at hospitals, from an over-reliance on tests and procedures, adds another $700 billion.
“Our health care cost crisis is not due to overutilization, and it will not be helped by promoting more competition, because it is driven by administrative waste due to insurance industry to monopolistic pricing by providers (including drug companies) more powerful than any insurer,” Friedman testified. “The fastest increases in cost in the American health care system over the last decades have been in drug prices and administrative costs… [that] account for over two-thirds of the excess increase in our health care costs.”
This underscores why so many progressives have been saying that expanding Medicare is the best first step, as its administrative costs are the same as Canada’s nationwide system. Friedman’s testimony was predicated on making the case for Massachusetts to adopt a single-payer system, suggesting it could reduce its costs by almost 20 percent—and pay for everything by an 8 percent payroll tax, which is less than private insurance costs.
But that can only be done if government largely replaces the industry’s administrators.