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Expert Voices: Why America Spends More on Health Care

Eric Jensen, Consultant
Lenny Mendonca, Director of Firm Knowledge, McKinsey & Company
 

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November 2009

Pathbreaking work by the McKinsey Global Institute (MGI) shows that, relative to other peer countries from the Organisation for Economic Cooperation and Development, the U.S. spends nearly $650 billion more on health care than would be expected after adjusting for cross-country differences in wealth. Fully two-thirds of this added spending occurs in the outpatient sector. The highly profitable nature of many outpatient services coupled with the incentives of a fee-for-service payment system are contributing to greater intensity of outpatient care and helping to fuel this spending. In this essay, Eric Jensen and Lenny Mendonca describe MGI's work to examine all sectors of the American health care system and identify factors responsible for the higher-than-expected spending.

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