Jeremy Laurance: Rising healthcare costs can only end in bankruptcy

The border town of McAllen, Texas, offers America a lesson in the ruinous expense of healthcare. The over-65s who live there ran up medical bills of almost $15,000 a head in 2006, twice the national average. The truly alarming statistic, however, is that this was $3,000 more than the average annual earnings of a McAllen resident.

Ford already spends more on healthcare than on steel. Starbucks spends more on healthcare than on coffee. A US government report last week showed that national health spending grew at its fastest rate for 50 years in 2009, to $2.5 trillion, or 17.3 per cent of the economy, and is projected to rise to $4.5trn, nearly a fifth of the economy, by 2019.

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It is to save the US from medical fee-induced bankruptcy that President Barack Obama has reaffirmed his intention to press on with healthcare reform.

America is the only leading industrial nation that does not guarantee universal healthcare for all its citizens. Yet, when challenged, Republicans respond to those who wonder how they can tolerate such a situation with the David Beckham question – if the England footballer had an ankle injury and was needed for a World Cup game, would we leave him to the mercies of the NHS?

To many Americans this encapsulates what is wrong with alternatives to their entrepreneurial, fee-for-service based system. Socialist medicine, UK-style, may be equitable, universal and cheap, but it cannot be relied on to deliver the right level of care at the right time – ie now. As the columnist Bob Samuelson put it at a recent Washington lunch: "Americans want care when they need it, they want freedom and autonomy to choose, and they don't want it to cost 100 per cent of the economy."

It is possible to have two of these but not all three at the same time. But Americans won't accept it. They are not prepared to compromise on access or quality and they believe they can innovate their way out of the cost problem – despite the lessons of history that show that medical innovation leads, inexorably, to increasing costs.

When the surgeon and writer Atul Gawande investigated McAllen's high medical costs last year he found a key reason was the dramatic overuse of tests, investigations and treatments driven by doctors who owned – and hence benefited financially from – the clinics and hospitals that provided them. Unnecessary medical care is estimated to cost between a quarter and a third of the total US healthcare budget.

Tom Daschle, former Democratic Senate leader and Obama adviser, spelt out the problems of rocketing costs, 50 million uninsured and the poor health of many Americans. "We have a health market, we don't have a health system," he said. But a suggestion that citizens had a right to health was noisily rejected by Republicans in the room who insisted health was neither a right nor a privilege, but "a desirable social good".

So too, is a health budget the country and its citizens can afford. On the basis of progress so far, it remains a distant dream.