In the gold-standard (and refereed) New England Journal of Medicine, Robert A. Levine does the arithmetic, and then explains how we can change the game:

However, great savings could be achievable in two areas: administrative costs and unnecessary care. In the current health care system, administrative costs are generally estimated to account for 15 to 25% of total expenditures; if we settled on an estimate of 20%, that would amount to $500 billion annually. The complexity of the present system, with multiple sources of coverage, is the main cause of such high administrative costs.

Which is why making the system more complex, with HR3200s HEXes (Health Exchanges) is, well, doing the same thing and expecting a different result.

Unnecessary care is believed to be responsible for as much as 30% of health care spending, or up to $830 billion* this year alone. This problem results largely from the perverse incentives built into the health care system, in which there is a clear conflict of interest. Physician remuneration depends on the volume of patients seen, particularly on the number and intensity of the procedures performed. The need for these services is determined by the very physicians who then arrange for or perform the procedures.

And then there's fraud:

The dollars lost to fraud are difficult to quantify but may be considerable; one estimate puts the cost at 3% of annual health care expenditures — a conservative estimate that would translate into $75 billion this year. Costs for the use of technology that has not been proved effective are also difficult to estimate but are believed to be substantial.

Levine's conclusion:

To reduce administrative costs and simplify the system, I believe that a single-payer system that provides universal coverage is mandatory.

And he surveys the political landscape:

I believe that neither the government nor individual Americans would have to spend a penny more to reform health care, including provision of universal coverage, if administrative costs and unnecessary care could be substantially reduced. Enough money is available in the current system to completely fund reform; it simply has to be redirected. Although overcoming opposition from the insurance industry, organized medicine, and other stakeholders to produce a sensible reform plan may seem impossible, the recent financial meltdown has changed the political landscape. Initiatives that were previously unthinkable might now have a chance if properly presented, particularly given the public concern about the ballooning federal deficit. But to ensure that cost constraints become the guiding principle of health care reform, Americans must comprehend the gravity of the situation and force their legislators to act accordingly. If Congress passes reform that does not tackle the problems of excessive administrative spending and unnecessary care, major revisions will be required in the future. Unfortunately, such revisions would come only after Americans had suffered additional economic pain.

Now, the latest talking point from Versailles is that it's 1970 all over again, and so, just as Kennedy could have compromised with Nixon and could have gotten a plan that could have been incrementally improved (debatable, debatable, and debatable), so today's advocates should settle for less and seek incremental improvements as well.**

However, "events, dear boy, events." I hate to break it to Versailles and the usual suspects, but -- work with me here -- 2009 is not 1970!

In the 1970s, the era of Conservative dominance was just beginning; and in 2009, we can be hopeful that it's ending, as Teddy's era-spanning death reminds us. So, we can, with Doctor Levine, be hopeful that the Banksterdammerung of the financial meltdown has changed the political landscape enough so that real reform is possible, whether it comes from people demanding their own bailout, or whether it comes from the realization that we really can't piss away $500 + $800 + $75 billino = $1.375 trillion a year. It's not fiscally responsible, we can't afford it, and we're not getting anything for it.

And if the Dems squander this opportunity, as it looks like they will, then boo hoo. Nobody said that parties live forever, and if the Dems blow this and go the way of the Whigs, then I couldn't be more pleased, because they will deserve to die as a party.

NOTE * This number comes from Orszag (footnote 2 in the original), and I'd want to make sure that Orszag's real agenda, "entitlement reform," didn't affect his numbers -- as they may well have affected the Dartmouth Study [genuflects] which purports to address variations in cost across regions without controlling for the sickness of the population within region. However, given the conflict of interest, which is structural, I can agree that there are significant savings to be had.

NOTE ** Never mind that the same "little" advocates who are being told to STFU and today are the very same ones who are expected to push the incremental improvements tomorrow. And never mind that Kennedy would probably have conducted his negotiations with considerably more acumen than our pre-compromising "progressives." And never mind that since the idea that we're repeating the 1990s with HillaryCare hasn't taken, Versailles has to reach even further into the past for their cries for toujours compromise, instead of looking at the political landscape today! Not content to fight the last war, they seek to refight the war before that...