Sorry to resuscitate this thread. I've been away for a few days and generally post in topics I am somewhat knowledgeable about.
Concerning healthcare, its very weird and studies like this are extremely difficult to intepret. I will make a few points about what I've perceived goes on in healthcare that most people are unaware of
1) Doctors are really really good with medicine. Certainly there are occasional mistakes that make the papers, difficult cases that are tough to solve, and so on, but when you consider overall the millions of cases doctors deal with, they generally get to the bottom of it and offer some sort of treatment that actually helps the patient.
2) Doctors are trained not to consider costs. This is slowly changing, but for the most part doctors first try to get the information they need to treat their patient properly and think about cost second. There is some degree of over reliance on testing for information that just is marginally helpful, but for the most part since most tests have adverse effects and downsides (fall positives/false negatives from lab tests, bleeding and organ punctures from biopsies, radiation from scans and renal failure from contrasts dyes used in scans, etc), docs are pretty good about making sure each test is generally worthwhile.
3) Both the healthy and the sick need to see doctors, and in this economic climate probably the healthy need to see doctors more.
4) 80 percent of the healthcare dollars spent on a person and by a person will be spent in the last 6 months of their life. Critical care in this country, for many reasons, allows for massive amounts of money to be spent on essentially futile cases. A week in the ICU can easily wrack up a bill of 500K USD on a patient with a <10 percent survival chance.
5) Hospitals cannot discharge patients to unsafe places and must arrange for follow up of some sort. If there is no one to take them or followup cannot be arranged, the patients sit in expensive hospital beds ($2000 to $10000k a day is the cost of just lying in a hospital bed without any IVs, meds, etc etc) for very very long periods of time. Social issues are a very large reason why costs at discharge are high, simply because a lot of patients who come into hospitals are uninsured and have unstable social backgrounds, and cannot be sent home until certain social issues have been taken care of (usually by social workers finding assisted living, subsidized health insurance, etc etc).
6) For much of what people actually need, doctors cannot prescribe (ie exercise, smoking cessation, drug cessation, dietary changes, etc). A paper was recently released saying that that for the management of heart disease, if a person were to simply quit smoking, they would achieve the equivalent benefits of all the best medical management a doctor can offer combined (ie quitting smoking = the effect of statins, ace inhibitors, beta blockers, aspirin, and nitrates combined).
Again, these are just observations. Take from them what you will. My general feeling is if you want to control the rising costs of healthcare, start rationing healthcare and making people take more accountability for their health.