US Spends Twice as Much on Health Care as Its Peers
Despite many efforts to rein in US health care costs in recent years, spending is still on the rise.
Americans spend more than twice as much on health care per person as their peers in developed nations, according to a new analysis from Johns Hopkins Bloomberg School of Public Health.
It’s not because people in the US use more medical services. Instead, it’s because drugs cost more, doctors and nurses are paid better, hospital administration is more expensive and many medical services have higher price tags, the study found.
The new analysis — an update of a well-known 2003 report by Princeton health care economist Uwe Reinhardt titled “It’s the prices, stupid” — found that the US remains an outlier when it comes to spending, which was $9,892 per person in 2016. That compares to a median of $4,033 for Organization for Economic Cooperation and Development countries in 2016 and to the $4,559 the US spent per person in 2000, adjusted for inflation.
Spending increased at an average rate of 2.8% annually in the US between 2000 and 2016, compared to the OECD median of 2.6%. This was driven in part by how much Americans shell out on drugs, which increased 3.8% per year, compared to a median of 1.1% for OECD nations.
“In spite of all the efforts in the US to control health spending over the past 25 years, the story remains the same,” said lead author Gerard Anderson, a Johns Hopkins professor. “The US remains the most expensive because of the prices the US pays for health services.”
One reason for the jump in spending increase is the widening gap between what the federal government reimburses for Medicare and what private insurers and employers pay for those with job-based coverage, Anderson said. In 2000, the difference was roughly 10%. Now, studies have shown it has widened to 50% or more.
Anderson attributes this to consolidation among hospitals and doctors’ practices, which allows them to demand higher prices.
Despite paying higher prices, Americans actually have less access to doctors, nurses and hospital beds. There are only 2.6 practicing doctors per 1,000 people in the US, compared to a median of 3.2 active physicians in the OECD, for instance.
“It’s not that we’re getting more. It’s that we’re paying much more,” Anderson said.
Politicians, policy experts, health care industry executives and employers have wrestled with the nation’s high health care costs for decades. The efforts include raising deductibles to give consumers more incentive to shop around for health care services and paying doctors and hospitals based on patients’ health outcomes rather than for every service rendered.
Currently in the spotlight are high drug prices, which are expected to be a major focus of both Congress and the Trump administration this year.