Why is American health care so expensive?

The Food and Drug Administration (FDA) has made two bold steps in the last month. They have asked the manufacturers of pain medications containing the mild opiate propoxyphene (Darvon) to voluntarily take these products off the market, and they have removed from the market all generic forms of the drug colchicine that is used to treat gout. Initially, this all seems ridiculous. Both of these drugs are nearly ancient, with a track record of successes, failures and side effects that goes back decades.  On further examination, it still seems pretty stupid, though quite a bit more complex.

Since Medicare, the single payer health insurance program for citizens age 65 and over, was signed into law in 1965, medical care for seniors has become more universally available and increasingly expensive. Since Medicare insurance looked to doctors and senior citizens like a blank check, services offered to older Americans rapidly expanded as did their unit cost and consumption of those services. The American government has tried various schemes for reining in spending, none of which have been popular or effective. In 1998, we decided to try the "sustainable growth rate" formula to control costs. Under that law, Medicare expenses were allowed to rise a certain amount, that which was considered to be a sustainable amount, based on inflation and other costs, and if those costs rose by more than the target, reimbursement for services under medicare would be reduced for the next year to an extent that the target of reasonable cost increases could be reached. In 2002, Medicare...

A year ago I decided to shed my company health plan and buy an individual plan with a high deductible for my family. The cost of my employer plan had reached nearly $900 for my family of 4 who never use health insurance, and the deductible was $1000, which meant that any care we have received in the last 10 years would have been unreimbursed. I found a plan with a deductible of $7000, which I could combine with a Health Savings Account for $481 a month. How clever, I thought. I have really bucked this system! I just got my bill for the health insurance plan that Premera Blue Cross decided to provide for me in place of the plan that I signed up for a year ago. A few weeks ago I had received a glossy color sheet describing how my plan was changing, due to health care reform. My new plan would cover all health maintenance with no charge to me out of pocket, but would no longer have any coverage for various alternative medical services or eye care services. The overal...