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March 14, 2018

Why the US spends so much on health care (it's not what you think)

Daily Briefing

    The United States spends nearly twice as much on health care as 10 other wealthy nations, and the primary reason is high prices, not overuse, according to a study published Tuesday in JAMA.  

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    Study details

    For the study, researchers from Harvard T. H. Chan School of Public Health and Harvard Global Health Institute analyzed data from 2013 to 2016 on nearly 100 different measures of care to compare the United States' health care system with those of 10 other wealthy developed nations: Australia, Denmark, Canada, France, Germany, Japan, the Netherlands, Sweden, Switzerland, and the United Kingdom.

    According to the New York Times' "The Upshot," the nations included take a wide variety of approaches to health care, with some, including Britain and Canada, operating single-payer health care systems, and others, including Switzerland and the Netherlands, offering competitive private insurance markets.


    The researchers found that U.S. health care spending accounted for nearly 18% of the gross domestic product (GDP) in 2016. Health care spending accounted for about 10% to 12% of GDP in the other nations. 

    Despite the high spending, the United States had the lowest life expectancy, at 78.8 years, and the highest infant mortality rate, at 5.8 deaths per 1,000 live births.

    And while many analysts have argued that the United States' high health care spending is driven by overuse of services and a larger specialized provider workforce, the researchers found the United States' utilization patterns were largely similar to the other nations. For instance, they found that while the United States used more imaging scans and performed more of certain surgical procedures than most countries, it was below average on doctor visits, inpatient care spending, and length of hospital stays. It also has a similar share of specialist physicians as other nations.

    However, the researchers found the prices for medical services and labor and administrative costs were generally higher in the United States.

    For instance, the study found the United States spent the most on pharmaceuticals, at $1,443 per person. Switzerland spent the second-highest, at $939 per person, but the United States had more new, brand-name drugs, with 111 available on the U.S. market compared with 26 in Switzerland.

    The study also found U.S. providers—including generalists, specialists, and nurses—had higher salaries than those in other countries. For example, the researchers found nonspecialist physicians were paid on average $218,173 per year, while average salaries in the other nations ranged from $86,607 to $154,126. According to Washington Post's "Wonkblog," some experts cite the high cost of U.S. medical school as a reason U.S. providers have higher salaries, but a separate 2011 Health Affairs study found that tuition cost alone did not explain the difference in international provider salaries.


    Ashish Jha, lead study author and director of the Harvard Global Health Institute, said, "The narrative that has come up, that has developed, is that America spends so much more because Americans demand more health care," and policy fixes have largely focused on curtailing overuse and removing provider incentives to order more costly tests.

    That said, Jha and his team cautioned that the findings do not mean there is not room to reduce spending on unnecessary care. As Jha explained, "It's not that we're buying more pizzas, we're just paying more for each pie. But that doesn't mean that you can't still buy fewer pizzas."

    But in an accompanying editorial, Katherine Baicker, of the Harris School of Public Policy at the University of Chicago, and Amitabh Chandra, of the Harvard Kennedy School and Harvard Business School, argue that the study's focus on price versus quantity leaves out the value and quality of care provided in each country.

    They wrote, "For instance, patients in the United States may see specialists just as often as patients in Australia but may be more likely to see board-certified radiation oncologists relative to general oncologists, receive new immunotherapies instead of an angiogenesis inhibitor, and receive drug-eluting stents instead of bare-metal stents" (Johnson, "Wonkblog," Washington Post, 3/13; LaVito, CNBC, 3/13; Sanger-Katz, "The Upshot," New York Times, 3/13; Frellick, Medscape, 3/13; Jha et al., JAMA, 3/13).

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