Most Americans agree that the U.S. spends too much on health care and Carolyn Long Engelhard, MPA, offers commentary on why a fix is so elusive. Ms. Engelhard is an Associate Professor and Health Policy Analyst, Department of Public Health Sciences at the University of Virginia School of Medicine.
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The United States spends almost twice as much on health care as other advanced industrialized countries. Over 3 trillion dollars annually goes toward paying for medical services. This represents 18% of our gross domestic product, compared to around 10% in other countries. And yet we get worse outcomes compared with many other prosperous countries on health measures like life expectancy, infant mortality, and rates of obesity.
We’ve heard these statistics before. Knowing that the U.S. doesn’t get much “bang for the buck” in health care spending is not news. However, what may be different now is a deeper understanding of what actually drives the cost.
The usual narrative about why the U.S. spends so much on health care is that we use too much of it. We believe that fee-for-service medicine, insistent patient demands, and a desire for profits leads to unnecessary care and higher spending. It is a typical American storyline: we love spending large amounts of money on acquiring more and more expensive goods like new smart phones or electric cars. Why should consumption of medical care be any different?
Well, it turns out that the reason for excessive health care spending may have more to do with price than volume. A 2018 study comparing U.S. health care spending to other countries found that Americans actually do not use more health care. We go to the doctor less often than the Dutch or the Japanese, and our hospital utilization is about the same as other peer nations. This doesn’t necessarily mean that Americans aren’t using too much care, it just means we’re not alone in doing so.
The biggest difference between the U.S. and other countries’ health care spending is the price of medical services. Virtually every visit, test, drug, and medical procedure costs substantially more in the United States. An MRI here costs five times more than what it does in Australia and double what it costs in Switzerland, a country with a private system more like ours. Hospital prices are 60 percent higher than those in Europe, and prescription drugs cost half as much in other high-income countries.
Sometimes higher prices yield positive benefits, like when they foster innovation. Medical breakthroughs can be attributed to robust research and development efforts in the U.S., which help account for the higher prices. But there has to be a limit in what we agree to pay to foster new medical advances. By all accounts, the cost has become too dear: In no other wealthy country do we see people organize bake sales to help pay for a neighbor’s cancer care.
The Affordable Care Act made health care more affordable because more Americans had someone else paying the majority of medical bills. But it didn’t make health care less expensive because the unit price remained the same and the size of medical bills didn’t decrease.
This is the reason a fix for our expensive health care system continues to be so elusive. When you’re paying the highest prices in the world for not only highly technical scans and blockbuster drugs but for basic services as well, you just can’t afford to provide all citizens with health care.