Anyone working in healthcare policy knows that the US spends far more on healthcare than any other nation. Less known is the fact that the US health outcomes are worse than comparable high-income countries. Combined that means that the US gets exceptionally poor value per healthcare dollar.
A new publication from the Commonwealth Fund, ampoule U.S. Health Care from a Global Perspective: Spending, site Use of Services, online Prices, and Health in 13 Countries, analyzes Organization for Economic Cooperation and Development (OECD) data and other sources to try to explain the unjustifiably high cost of US healthcare. In the process, it also reveals some interesting findings about Canadian healthcare and its ongoing struggles.
Though there are flaws in using percentage of GDP as a measure of healthcare spending (see the tyranny of a bad healthcare metric: Spending as a percentage of GDP), the report unsurprisingly uses that metric as a starting point:
As you can see, US spending stands dramatically apart from the other 12 nations, consuming 17.1% of GDP, which is 50% more than the next highest spending country (France) and double that of the lowest spender (UK). Furthermore, the difference in the portion of GDP spent on healthcare between the US and France is twice as much as the difference and the UK.
The table below shows that the gap between the US and the lowest spending nation is even greater when comparing the dollar cost per citizen corrected for cost of living: the US spends almost triple what the UK does (the difference between the two ways of measuring being due to the higher US per capita GDP).
In contrast, Canada sits about the middle among the 12 non-US nations in spending, both in terms of GDP and in dollars per capita. The US spends double the dollar amount and 60% more of its GDP. Canada’s rate of spending growth is also only 0.2% from 2009-13, among the lowest.
What does the US get for its exorbitant spending? Remarkably little.
Life expectancy at birth is just under 79 years, lowest among the 13 countries, 18 months less than the next lowest (Germany) and almost five fewer years of life than the Japanese. Infant mortality is worst too, 20% higher than the nearest comparator nation. The US also has the highest obesity rates (40% greater than next worst), the highest proportion of seniors with multiple chronic conditions (20% more than second highest) and second highest rates of heart disease deaths.
The only bright spot is cancer death rates, which are third best and show the greatest improvement of all countries between 1995 and 2007.
Other than life expectancy – almost three years higher – and lower rates of heart disease, Canada’s situation is rather similar. We’re third worst in infant mortality and obesity and have the second highest percentage of seniors with two or more conditions (the report has no data for Canadian cancer death rates).
Still, Canada spends far less. Which brings us to the question of why the US gets such low value per healthcare dollar.
Let’s start by dividing total healthcare costs into volume and price. Greater volumes of services and products drive costs up. So do higher prices. The report looks at both.
Physician and hospital services don’t appear to be the cause of the US’s exceptional healthcare costs: physician visits and hospitalizations per person are among the lowest third of the 13 countries. Even if correct those figures to account for the proportion of the US population who is uninsured, the US ranking doesn’t change.
While prices for selected surgery procedures (which are made up of both hospital and physician charges) are 50-90% higher in the US than the next ranked country, those prices multiplied by the relatively low volume of services would place the US’s total costs among the highest-ranked countries but not make it the outlier that it is in overall spending. However, the report doesn’t provide enough price information to be confident in this conclusion.
In contrast, drugs and diagnostic imaging definitely contribute to high aggregate costs because the US is highest for both volume AND price.
In the case of drugs, the US is tied for the largest number of prescription drugs per person and has the highest prices, generally about double the average. For diagnostic imaging, the US performs the largest number of MRI and CT scans and again has prices that are about double the average.
Compared to the US, Canada has fewer hospitalizations per capita (and fewest of all 13 countries), a lower number of drugs per person and half the number of MRI and CT scans. But we don’t just have lower volumes, we also have far lower prices for surgical procedures (unreported but well-known to any Canadian treated in the US), drugs and diagnostic imaging.
Of course, many affluent Americans believe that the average value for healthcare dollar reflected in national figures doesn’t apply to them. That is, they can get better value from their ability to spend more.
However, as an Institute of Medicine (IOM) report from 2013 demonstrates, even the most advantaged Americans are less healthy than their socioeconomic peers in other countries. That may be testimony to possible harms that arise from excessive investigations and treatment and also might be why higher costs are associated with poorer outcomes.
Sticking with socioeconomics, the comparison of countries shows something unexpected in the relationship between social care spending and healthcare spending: though the US spends the least in this area, it’s barely lower than Australia, New Zealand and Canada when measured by percent of GDP and it spends MORE social care dollars per person than these three countries (again the difference is due to the higher US GDP). And yet these three other former British colonies all are in the bottom half of healthcare spending while having top-half life expectancies.
That means that unless the way that the US spends social care money is substantially different than these other countries then its social care spending rates don’t cause its unusual healthcare spending.
Finally, no discussion of high-income nations is complete without considering the aging demographics of these societies. And with age comes higher needs for healthcare.
But that too doesn’t contribute to US spending: the US has the lowest proportion of its population over age 65 among the 13 nations, making it the youngest society examined in the report.
In summary, the report’s analysis points to high prices in all areas and exceptional volumes of investigations and treatments as the reason that US healthcare costs are so high. The data within the report can also be interpreted to show that US spending is not only associated with substandard outcomes, it might actually cause them.
If that’s the case then poor value per healthcare dollar isn’t the real problem with US healthcare spending. Instead, it’s the harm to patients that arises from excess and costly healthcare intervention. That’s something that needs our urgent attention in the form of both research and policy.