Americans Pay More to Die Earlier -- Why Is Our Health Care System So Screwed Up?

Editor's note: This is the first in a series looking at our uniquely dysfunctional health care system.

There are times when it's comforting to imagine that at some point in our history Satan hired Dr. Frankenstein to help him stitch together our health care system.

You can picture the Dark Lord standing over the good doctor in his underground lab barking orders for creating the most insane and irrational health care system in the industrialized world.

"It must cost more per person than any other health care system, and it must leave tens of millions uninsured!" Satan cackled. "It must rely on private markets that give most people no choice in who covers them! It must produce hundreds of thousands of bankruptcies every year! And, and, and! It must produce a system where some patients get excessive and wasteful care, while others have to shuttle off to emergency rooms just to receive primary care treatment! Mwah-ha-ha!"

The reason I consider this scenario to be "comforting" is because it's far less depressing than the actual truth, which is that our medical system has been haphazardly pieced together over the last century almost by accident.

After all, even the most dedicated malevolent entity lacks the creative imagination to devise a system that swallows up 16 percent of our economic output on health care while still producing lower average life expectancies than most industrialized nations.

This raises the question, though, of why our system is so screwed up.

Part of the problem that reform advocates have had in making their case to the public is that our insane system has so many moving parts and uniquely inefficient features that it's been extremely difficult to craft a master narrative that the average person can understand (opponents, meanwhile, only have to tell people that Barack Obama wants to slaughter the elderly).

This article is meant to serve as a basic guide for why our health care system is the most inefficient in the industrialized world and why reforming it has proven so incredibly difficult.

Follow the Money

Let's start with a simple premise: The problem with American health care has nothing to do with the quality of our doctors and hospitals and everything to do with how we pay them.

Most industrialized countries pay for their health care either through a single-payer system where hospitals receive payments directly from the government, or through a series of nonprofit private insurers who pay fees based on a rate negotiated by the government. In both models, the government assumes the role of primary negotiator for setting prices.

In the United States, needless to say, this is not the case. We rely on private insurers as the primary price negotiators for medical services. But because insurers lack the cohesion and clout to really drum down prices, Americans spend a lot more on health care than any other country in the world. A lot, lot, lot, lot more.

In 2007, the United States spent an average of $7,290 per person on health care -- 16 percent of gross domestic product. By contrast, our Canadian neighbors  spent an average of $3,895 per person, or 10 percent of GDP. The British spent $2,992 per person, or 8.4 percent of GDP. And the Japanese, who have some of the longest life expectancies in the world, spend $2,581 per person, or 8 percent of GDP.

The numbers for the U.S. are ridiculous by any measure, even if all this spending was producing a race of super beings capable of outswimming sharks and defeating grizzly bears in steel-cage death matches. But no: most studies of the world's healthiest nations don't even place the United States in the top 10, and the World Health Organization ranks our health care system 37th, just ahead of Slovenia's.