U.S. healthcare system may be on track for a crash

Is the U.S. healthcare system on a course destined to suffer a "fatal accident"?

That's the premise of Charles Hugh Smith. The commentator posted an article at Daily Reckoning suggesting that the way the healthcare system is currently constructed cannot operate in this manner for the long run.

"It is abundantly clear to anyone who peeks beneath the surface of America's state-cartel healthcare system that roughly half of all expenditures are needless, counterproductive, profiteering, fraud, etc., compared to a system that was actually designed to be efficient, transparent, and that gave consumers real choices, real power and real responsibilities," Smith wrote.

Moreover, the long history of providing consumers their healthcare without providing them any financial information about their services they are receiving means "pricing is now purposefully opaque. The cost for a test or procedure is all over the map, and insurers have few incentives to demand truly transparent pricing." And the multiple components of the current system mean that up to 40 percent of all healthcare costs are pegged to administration and paperwork.

According to Smith, now that healthcare comprises nearly a quarter of the gross domestic product, it should spin out of control in the intervening years, noting that it is a "fatal accident waiting to happen." 

For the moment, healthcare costs and spending are near historic lows, with some economists attributing the slow growth to the Affordable Care Act (ACA) and a hangover from the Great Recession.

Smith is not alone in his assessment. Other experts have said that it will be tougher for insurers to make their margins with the narrowing of risk corridors under the ACA, and that slowing of economic activity could also lead to double-digit growth in costs in the coming years.

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