Why is health care so damn expensive?

Never has there been more talk of innovation and yet more disappointment in the future than in the health care industry. AngelList shows almost a thousand startups just in the digital health space alone, and VCs invested $3.5 billion in digital health startups in just the first half of 2017 according to Rock Health’s industry analysis. There are dozens of health innovation conferences hosted in the United States every year, with participants chattering, chattering, chattering about this or that “innovation.”

All of that innovation has done practically nothing though to fix the single worst problem of modern American health care: it’s cost. Health care in the United States has never been more expensive. The United States is spending about $3.5 trillion a year on health care expenses, an increase of 12,300% since 1960. In that timeframe, health care spending increased from 5% of U.S. GDP to about 17.5% of GDP.

Despite all of that spending, the age-adjusted mortality rate for Americans has declined practically every year since 1980. Unsurprisingly, life expectancy for Americans — among the most typical metrics for measuring broad health and wellness outcomes for a country — declined for the second year in a row in 2017.

It’s Juicero innovation at its finest. We’re paying more, way more, than we used to, and yet our outcomes have never been worse.

This is the problem known as “cost disease” — the rapidly escalating costs of basic human services like health care, housing, education, construction, and infrastructure. It’s a problem that plagues the developed world, but none more so than in the United States. Scott Alexander, who blogs at Slate Star Codex, wrote a masterful summary of the problem a year ago that’s worth reading for how this pattern seems to emerge across all of these industries.

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