The Real Reason Health Care Costs So Much More in the US

By Yoni Blumberg, Money.
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 assessed in a new report published in the Journal of the American Medical Association — 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.

This finding offers a new explanation as to why America’s spending is so excessive. According to the researchers at the Harvard Chan School, what sets the U.S. apart may be inflated prices across the board.

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.

The report challenges popular beliefs about why health care spending is so high

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.

In fact, compared to the average of all the nations, Americans appear to go to the doctor less often and spend fewer days in the hospital after being admitted.

Think tanks such as the Brookings Institute have suggested that low social spending might also partly be to blame, since funding programs to assist low-income families, the elderly and the disabled would mitigate the demand for medical care. But, again, researchers did not find a substantial difference in U.S. spending on social programs. The U.S. spends less than average but not by much.

Another popular argument is that the American system has an unnecessarily high number of specialists, who typically earn more than general physicians, and that ramps up spending. But, according to this report, “the ratio of primary care physicians to specialists was similar between the United States and other high-income countries.”

“These data suggest that many of the policy efforts in the U.S. have not been truly evidence-based,” said author Ashish Jha, a professor of global health and director of the Harvard Global Health Institute, in a press release.

The U.S. has much higher prices across a range of services

The real difference between the American healthcare 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.”

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,” said author Irene Papanicolas, visiting assistant professor in the Department of Health Policy and Management at Harvard Chan School.

Quality of care isn’t that bad, but care still doesn’t reach everyone

One of the more notable findings in this report is that, at least in some areas, the quality of health care in the U.S. fared comparably to other countries. Long wait times for treatment, for example, are not as much of an issue for Americans as they are elsewhere. In treating heart attacks and strokes, the U.S. actually had the best record of any country.

So, contrary to past findings, the quality of care may not be much worse in the U.S. than elsewhere. But the nation’s was still shown to be the least accessible health care system.

An estimated 22 percent of the population has missed a consultation because they could not afford it, found the report, compared to an average of 11 percent between all eleven countries.

Americans also had the lowest rate of coverage. About 10 percent of the population did not have health insurance in 2016. In the other countries studied, nearly everyone was covered.

The percentage of the population with health insurance has increased since the Affordable Care Act was passed, the report states. “Still, a substantial proportion of people would benefit from coverage but remain uninsured in the U.S., and increasing coverage for these individuals remains a policy priority.”

The report sheds new insight on how the U.S. health care system compares to its peers, and the fact that the cost of labor, pharmaceuticals and administrative organization seems to be driving spending. It also points out that, despite that level of spending, too many of its citizens remain uninsured and uncovered.

“As patients, physicians, policy makers, and legislators actively debate the future of the US health system,” the researchers urge, “data such as these are needed to inform policy decisions.”

Editor: Although the publication date of this article may not be current the information is still valid.


Sky-high Prices Make US Healthcare the World’s Most Expensive

America spends twice as much on health as 10 other rich countries, due to the high cost of everything from prescriptions to doctors.

By Jessica Glenza, the Guardian.

The United States spends twice as much on healthcare as 10 other high-income nations, driven by the high price of everything from prescription drugs to doctors’ salaries, a new study in the Journal of the American Medical Association finds.

Recent attempts to reform American healthcare have assigned blame for the high cost of care to nearly every sector – from drug companies to hospitals to health insurers.

However, a co-author of the new study said those arguments ignore the “800-pound gorilla”: sky-high prices everywhere.

“Most countries get to lower prices one of two ways: they either have a very strong price setter, usually a government agency, or more efficient markets,” said Dr Ashish Jha, co-author of the study by researchers at Harvard’s TH Chan School of Public Health. “The US has figured out how to do the worst of both.”

In the study, America was compared to 10 other countries: the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, Denmark, the Netherlands and Switzerland.

Researchers used 98 indicators to compare countries across seven areas: general spending, population health, structural capacity, utilization, pharmaceuticals, access and quality and equity. The majority of the data came from international organizations, such as the Organization for Economic Cooperation and Development. What researchers found was not a single sector with high prices, but that every sector had extraordinary price tags.

For example, the average salary for a general practice physician in the other countries was between $86,607 and $154,126. In the US, the average salary was $218,173.

Per capita spending for prescription drugs in other nations ranged from $466 to $939. In the US, per capita spending was $1,443.

The US also spends more on administrative costs. Other nations spend between 1%-3% to administer their health plans. Administrative costs are 8% of total health spending in the US.

This results in US health costs that, as a percentage of gross domestic product, are nearly double that of other nations. In 2016, the US spent 17.8% of GDP, compared to 9.6%-12.4% in other countries.

At the same time, America often had the worst population health outcomes, and worst overall health coverage.

The US ranked last in life expectancy; had the worst maternal mortality rates(nearly triple that of the United Kingdom); more infant deaths than any other country, and a high rate of low birth weight babies.

Other countries had universal, or near universal, health insurance rates. The US ranked last. Just 90% of Americans have health insurance, leaving about 27 million people without access to healthcare.

Jha said whether the US moves toward more private healthcare, as advocated by Republicans, or to single-payer healthcare, as advocated by liberal Democrats, price tags on all American health services need to be addressed.

“I’m happy to move in either direction that will allow for lower prices, but right now we’re not even having that debate,” said Jha. “We’re fighting over all sorts of other things.”

The study’s possible weaknesses include comparability of data, with different countries having “modest” differences in data collection. []

Mar. 13, 2018

Editor: Although the publication date of this article may not be current the information is still valid.


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