Question

Why does the U.S spend twice the money on healthcare per person compared to other countries?

Answer 1

The U.S. is famous for over-spending on health care. The nation spent 17.8 percent of its GDP on health care in 2016. Meanwhile, the average spending of 11 high-income countries — Canada, Germany, Australia, the U.K,. Japan, Sweden, France, the Netherlands, Switzerland, Denmark and the U.S. — was only 11.5 percent. Per capita, the U.S. spent $9,403. That’s nearly double what the others spent.

The study findings, which appear in Health Affairs, show per capita health care spending in the US was $9,892 in 2016, about 25 percent higher than second-place Switzerland’s $7,919. US spending was 108 percent higher than neighboring Canada’s $4,753, and 145 percent higher than the Organization for Economic Cooperation and Development median of $4,033. It was more than double the $4,559 the United States spent per capita on health care in 2000.

The researchers came to the same conclusion as they had their 2003 study of the 2000 data, titled, “It’s the prices, stupid: Why the United States is so different from other countries.” The new analysis is in part a tribute to well-known Princeton University health care economist Uwe Reinhardt, who worked on the earlier study and died in 2017.

In the U.S., they point out, drugs are more expensive. Doctors get paid more. Hospital services and diagnostic tests cost more. And a lot more money goes to planning, regulating and managing medical services at the administrative level. In other areas, despite conventional wisdom, there seems to be less discrepancy between the U.S. and other countries than commonly thought.

Experts have previously suggested high utilization rates could explain high spending in the U.S. But looking at hospital discharge rates for various procedures, such as knee and hip replacements and different types of heart surgeries, the researchers found that use of care services in the U.S. is not so different compared to other countries. Experts have previously suggested high utilization rates could explain high spending in the U.S. But looking at hospital discharge rates for various procedures, such as knee and hip replacements and different types of heart surgeries, the researchers found that use of care services in the U.S. is not so different compared to other countries.

The real difference between the American health care system and systems abroad is pricing. Specialists, nurses and primary care doctors all earn significantly more in the U.S. compared to other countries. General physicians in America made an average of $218,173 in 2016, the report notes, which was double the average of generalists in the other countries, where pay ranged from $86,607 in Sweden to $154,126 in Germany.

Administrative costs, meanwhile, accounted for 8 percent of total national health expenditures in the U.S. For the other countries, they ranged from 1 percent to 3 percent. Health care professionals in America also reported a higher level of “administrative burden.” A survey showed that a significant portion of doctors call the time they lose to issues surrounding insurance claims and reporting clinical data a major problem.

As for the drug market, the U.S. spent $1,443 per capita on pharmaceuticals. The average pharmaceutical spending of all 11 countries came to $749 per capita. Switzerland followed closest behind the U.S. at $939. Individual services cost a lot more, too. In 2013, “the average cost in the U.S. was $75,345 for a coronary artery bypass graft surgery, whereas the costs in the Netherlands and Switzerland were $15,742 and $36,509, respectively,” the report states. “Computed tomography was also much higher in the United States, with an average payment of $896 per scan compared with $97 in Canada, $279 in the Netherlands, $432 in Switzerland and $500 in Australia in 2013. “Similarly, the mean payment for an MRI in the United States was $1,145 compared with $350 in Australia and $461 in the Netherlands.”

Higher spending in some areas could make sense. Investing in pharmaceuticals, for instance, is believed to lead to innovation. Indeed, in 2016 “the U.S. accounted for 57 percent of total global production of new chemical entities,” the report states. Still, they conclude, “whether innovation justifies high levels of spending is not clear.”

During the same period, US gross domestic product per capita increased by only 0.9 percent annually, which means that health care represents an increasing share of GDP. US health care spending in 2016 totaled 17.2 percent of GDP, compared to just 8.9 percent for the OECD median.

The United States not only outspends other OECD countries on a per-person basis, but it also provides less access to many health care resources. In 2015, the most recent year for which data were available, there were only 7.9 practicing nurses and 2.6 practicing physicians per 1,000 Americans, below the OECD medians of 9.9 nurses and 3.2 physicians.

Similarly, the United States in 2015 had only 7.5 new medical school graduates per 100,000 people, compared with the OECD median of 12.1, and just 2.5 acute care hospital beds per 1,000, compared with the OECD median of 3.4.

Although the United States ranked second in the number of MRI machines per capita and third in CT scanners per capita—implying a relatively high use of these expensive resources—Japan ranked first in both categories, yet was among the lowest overall health care spenders in the OECD in 2016.

As for salaries, high income may boost performance, and studies have suggested that some countries don’t pay their health care professionals enough. What’s more, high wages in the U.S. may reflect the time and higher amounts of money American health professionals must invest in their education and training. “Taking this investment into account, however, does not explain the more than $200,000 difference in compensation observed for physicians between countries,” the researchers assert. Overall, the researchers believe prices in these areas should be analyzed and cut where possible. As the U.S. continues to struggle with high health-care spending, it is critical that we make progress on curtailing these costs.