The big story of the health reform debate is not what the bills provide, but what they don't provide--no liability overhaul and no serious effort at cost-containment. American healthcare may bankrupt the country unless the waste and inefficiency--an estimated 30% to 40% of total costs--is wrung out of the system. The waste is $700 billion to $1 trillion every year. There can be no greater domestic priority.
Building a coherent new framework, however, is almost impossible in our political system. Devising a new healthcare system through hundreds of separate negotiations, with 535 members of Congress each trying to do the bidding of different constituents, is like constructing a building without any ability to make sure the walls and other elements fit together.
Containing costs requires changing the rules for all participants. Underlying incentive structures conspire to drive doctors and hospitals to do what they will be reimbursed for, not what is needed. Providers spend their days in a bureaucratic maze, focused on compliance and avoiding legal risks. Patients have no incentive to be prudent in their demands on healthcare providers, or in their personal habits.
Studies indicate that the largest drivers of waste, with rough percentages each contributing to unnecessary costs, are these: fee-for-service incentives for unnecessary care (50%), the lack of consumer responsibility (40%; see here and here also), defensive medicine (20%; see here also), excess bureaucracy (20%), and fraud (10%). The numbers total more than 100% because the skewed incentives overlap--a doctor orders expensive tests because it is profitable, provides a potential defense in a lawsuit, and the patient has no financial incentive to question the decision. Fraud thrives in a dense bureaucratic thicket with no patient incentive to check the false invoice.