With healthcare, it’s not what you spend but how you spend it
It’s no secret that the United States spends far more on healthcare than the world’s other wealthy nations, yet we get far less bang for our bucks.
By many measures, we Americans are in worse health than our global peers. Infant mortality here (at 5.8 deaths per 1,000 live births) is far above the average for a group of 11 rich countries that includes the U.S. (3.6 deaths per 1,000 live births). More than 70% of Americans are either overweight or obese; among all 11 countries, the average is 56%. And our life expectancy of 78.8 years is the lowest of any of the 11 countries, whose combined average is 81.7 years.
How can this be when America spends 17.8% of its GDP on health — nearly 55% more than the group as a whole?
Newly available data from the Organisation for Economic Co-operation and Development and the Commonwealth Fund help answer this perennial question.
Researchers from Harvard University and the London School of Economics and Political Science combed through the data to see whether common perceptions about the U.S. health system were indeed true.
They focused on how well we stacked up against 10 countries with high incomes, high health spending, and “populations with similar demographic characteristics that have similar burdens of illness,” they explained. The countries in this group were Australia, Canada, Denmark, France, Germany, Japan, the Netherlands, Sweden, Switzerland and the United Kingdom.
The results of the analysis were published Tuesday in the Journal of the American Medical Assn.
Here’s a look at which items of conventional wisdom appear to be true and which are not supported by the data.
Americans spend more on healthcare because they use more health services.
Americans did rank at or near the top in several categories of healthcare utilization. For instance, they ranked first in coronary artery bypass graft surgeries (79 per 100,000 people; the average for all countries was 54 per 100,000) and total knee replacements (226 per 100,000 people; the average for all countries was 163 per 100,000). They also got the most CT scans (245 per 1,000 people; the average was 151 per 1,000) and the second-most MRIs (118 per 1,000 people; the average was 82 per 1,000).
But overall healthcare use was “relatively similar to other high-income nations,” the researchers found. Even in the areas where the U.S. was at or near the top, “this utilization did not appear to explain a large part of the higher spending in the U.S.”
Americans spend more on health care because they don’t spend enough on social programs.
Among all 11 countries, public spending on health amounted to 8.3% of GDP — and the United States was just below that average. The U.K., Switzerland, Canada and Australia all spent even less.
The difference was that public spending made up most of the health spending in the other 10 countries, but it accounted for less than half of total health spending here. In other words, the United States was the only country where the private sector outspent the public sector.
Even when the researchers looked at other forms of public spending that might have downstream effects on health — including education, unemployment benefits and pensions for senior citizens — the U.S. was on the low side, but not by much.
Americans spend more on healthcare because they have too many expensive specialists and not enough primary care doctors.
Primary care doctors made up 43% of the physician workforce in the U.S., the same as the average for all 11 countries.
There’s no sign that we have a glut of doctors in the U.S. The researchers tallied 2.6 physicians per 1,000 people here, compared with 3.3 physicians per 1,000 people in the 11 countries overall.
The difference was that American doctors were paid far more than their international counterparts.
For instance, a “generalist” who made $86,607 in Sweden or $108,564 in Australia earned $218,173 in the United States. (The average salary for generalists in all 11 countries was $133,723.)
Likewise, a “specialist” who brought home $140,505 in Denmark or $153,180 in France made $316,000 here. (The average salary for specialists in all 11 countries was $182,657.)
Nurses, too, were paid more in the U.S. ($74,160) than in the countries as a whole ($51,795).
The researchers noted that the ratio of (cheaper) nurses to (more expensive) doctors was higher in the other 10 countries than it is here.
Americans spend too much on healthcare because the fee-for-service system encourages doctors to order too many tests, procedures and check-ups.
The OECD and Commonwealth Fund data did not back this up, the researchers said. Nor did they support the idea that defensive medicine — that is, ordering services that are medically unnecessary in order to protect themselves against future lawsuits — added substantially to the country’s overall healthcare bills.
Americans spend too much on healthcare because prescription drugs are more expensive here.
And it’s not even close. Overall, “U.S. spending on pharmaceuticals was almost double the spending in comparison countries,” the study authors wrote.
They considered four drugs that are used to treat common conditions: Crestor (which lowers cholesterol), Lantus (a synthetic form of insulin), Advair (which can prevent an asthma attack or a flare-up of chronic obstructive pulmonary disease) and Humira (which treats rheumatoid arthritis, plaque psoriasis and other autoimmune diseases). All four medicines were more expensive in the U.S. than anywhere else. In three cases, the American price was more than twice as high as the next-highest price.
Americans purchase the most generic drugs — they account for 84% of all medications used in the U.S. But brand-name drugs add up to more than 70% of the country’s total medication bill.
High drug prices “have been viewed as critical to innovation,” the authors noted. “Whether innovation justifies high levels of spending is not clear.”
Americans spend too much on healthcare because our administrative costs are through the roof.
The costs of “planning, regulating, and managing health systems and services” ate up 8% of total health spending in the U.S. For the sake of comparison, the average for all 11 countries was 3%.
That might be related to our unique health insurance system, which depends on people being insured through their employers or by purchasing individual policies for themselves and their families. Overall, 55% of Americans had private insurance as their primary policy. Germany was a distant second, at 11%. In every other country in the study, the number was either 0% or the question of private-versus-public insurance was “not applicable.”
The U.S. was also alone in having a voluntary enrollment system — in all other countries, enrollment in a health plan was either “compulsory” or “automatic.” As a result, the percentage of people with health insurance in those countries ranged from 99.8% to 100%. In the U.S., it’s 90%.
Americans spend too much on healthcare because healthcare is just more expensive.
This is not a very satisfying conclusion, and there were big gaps in the data that prevented the study authors from being as specific about this as they’d have liked to be. But if Americans aren’t using more healthcare services than their counterparts, they must be paying more for the services they’re using.
Head-to-head pricing data was only available for certain procedures, and it suggests this logic was correct.
According to the International Federation of Health Plans, the average cost of a coronary artery bypass graft surgery in 2013 was $75,345 in the U.S. but only $36,509 in Switzerland and $15,742 in the Netherlands. Likewise, a CT scan cost $896 in the U.S. compared with $500 in Australia and $97 in Canada.
Americans can bring their spending in line other countries by cutting back on wasteful healthcare use.
“Efforts targeting utilization alone are unlikely to reduce the gap in spending between the United States and other high-income countries,” the study authors concluded. Instead, “a more concerted effort to reduce prices and administrative costs is likely needed.”
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