The U.S. medical system is absurdly expensive. You knew that already. But you probably didn't realize just how absurdly expensive it is compared to other countries.
These 21 graphs (one of them you'll see above) from the International Federation of Health Plans, via Ezra Klein, start to paint the picture. The average routine office visit in the U.S. is three-times more expensive than in Canada. The average CT scan is five-times more expensive than in Canada. And as a share of GDP, our health care costs are an ignominious colossus towering over the rest of the world:
In the U.S. health care system, everything costs more. Being in a hospital cost more. Because our drugs cost more (prescription drug prices can be 10X the rate in the UK or Germany). And our doctors cost more (a US family physician makes 3X her German counterpart). Because their education costs more (the education for a German physician's education is nearly free). And on it goes.
The Reason Why American Healthcare Is So Expensive
Been written about this topic. In The Healing of America, T. D. Reid explored why American medicine falls behind other countries in quality while it races far ahead in cost of care.
Near the end of the book, Reid expands on two big reasons why U.S. health care is so expensive: (1) Unlike other countries, the U.S. government doesn't manage prices; and (2) the complications created by our for-profit system adds tremendous costs.
First, it really starts with the prices. While some developed countries have one health care insurance plan for everybody -- where the government either sets prices or oversees price negotiations -- the U.S. is unique in our reliance on for-profit insurance companies to pay for both essential and elective care. Twenty cents from every $1 goes, not to health care, but to marketing, underwriting, administration, and profit, he says. In a system where government doesn't negotiate prices down, prices will be higher. In a system where for-profit companies need profit margins and advertising, prices will be higher.
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Second, the absurd complexity of U.S. health care creates its own costs. There is a separate health care system for seniors, veterans, military personnel, Native Americans, end-stage renal failure, under 16 in a poor family, over 16 in a poor family, and working for the federal government, Reid writes. That's on top of hundreds of private plans:
All these systems require another inefficiency -- the existence of compilers, middlemen who compile the bills doctors submit and shuttle them thru the payment system. The US Government Accountability Office concluded that if we could get administrative costs of our medical system down to the Canadian level, the money saved would be enough to pay for health care for all the Americans who are uninsured.
. Complexity creates jobs, for high- and low-skilled workers alike. American health care is the world's envy in some categories, especially in cancer care, wait times, and access to new technologies for affluent and insured families. We have the highest share of adults (90 percent) who report being in good health. The OECD average is 69 percent. But in terms of coverage and cost, we rank embarrassingly low among developed countries. It would be nice to say this is a bug of the American medical system. But it's a feature. It's a choice we've made. In some countries, government sets a lower price and doesn't charge patients for marketing and margins. To this model, we've essentially said: No, thanks.It often strains the budget of families and businesses alike. In 2019, U.S. health care spending grew 4.6 percent, rising to $11, 582 per person
Infographic: America's High Health Care Costs
At Blue Cross and Blue Shield of North Carolina, we believe that health care should be accessible and affordable for not only our members, but for all North Carolinians. We also know that for health care to be affordable, we first must address the underlying costs. Because of that, we’re dedicated to understanding the
Addressing health care cost in our country is no small feat. It requires significant action, including setting the right health care policies at both the federal and state level.
Let’s talk about four key factors that impact cost, then look at how policy can be used to address health care cost.
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Prescription drugs play a critical, and often lifesaving, role in preventing and managing care for Americans. But the price tag attached directly impacts overall health care cost.
The U.S. has significantly higher drug prices than other countries — averaging 2.56 times higher than 32 other countries, and that number only continues to grow
. In 2019, retail prescription drug spending reached $369.7 billion, a 5.7 percent increase compared to the 3.8 percent increase in 2018
Why Do Americans Spend So Much More On Healthcare Than Europeans? • Healthcare In Europe.com
One reason for high costs is the price of brand-name versus generic prescription drugs. While generic medications make up 84% of prescriptions filled per year, they only account for 12% of the total spend. By increasing access to generic prescription drugs, we can positively impact the overall cost of health care. As a matter of fact, generic drugs saved consumers $253 billion in 2017 and more than $1 trillion over the past decade
It may go without saying, but the cost of medical care itself also plays a significant role in the overall cost of health care. That’s everything from x-rays to hospital stays.
In 2019, spending on hospital care services reached $1.2 trillion. Physician and clinical services spending surpassed $770 billion. The increased use and intensity of these services contributes to the cost. We also see impact from new technology and therapies, provider consolidation, and the location where services are performed.
Why Is Healthcare So Expensive?
Treating chronic diseases and conditions also leads to high cost of care. While the U.S. spends much more than other countries on health care, we still achieve worse population health outcomes.
According to Blue Cross and Blue Shield Association, chronic diseases and conditions—such as arthritis, obesity, cancer and heart disease—are among the most common, costly and sometimes preventable of all U.S. health problems.
By preventing diseases before they occur, we can begin to chip away at the overall expense of health care in the U.S.
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Additionally, drivers of health can impact the overall cost of care. These factors include socioeconomic status, food security, education, community environment, access to health care and more
There is a significant amount of unnecessary complexity within the U.S. health care system. A lack of coordination of care can result in duplicative services, something many of us have likely experienced. For example, you may have had to fill out the same intake forms many times or transfer medical records between doctors’ offices. This leads to significant waste in U.S. health care spending.
. It’s estimated that waste in the U.S. health care system ranges from $760 to $935 billion — that’s 25% of total health care spending
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Reducing administrative burden and waste in our health care system could make a big difference in the overall cost of care. Implementing and using health information technology (Health IT) is one way to help streamline care, ease provider burden and positively impact health care cost.
Health care policy has a major impact on the U.S. health care system and how it operates. In recent years, it has a great impact on the cost of care. Health policy defines a vision for the future and set goals and standards through both state and federal laws and regulations.
This final rule aims to improve patient and doctor access to health data. A recent analysis found that medical device interoperability – when medical devices and health care systems communicate and exchange information – could save the health care system more than $30 billion a year
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Biosimilars are approved, highly similar versions of original biological products that can be manufactured when the original product’s patent expires. Increasing patient and provider education and awareness on biosimilars can lead to increased competition among prescription drugs, and as a result – lower prices. They can help save lives and lower health care costs, but currently many providers and patients are unaware about the option. That’s why education is important. The Advancing Education on Biosimilars Act of 2021 grants the federal government the authority to create and maintain a website to provide educational materials for health care providers, patients and caregivers. It is estimated that biosimilars can reduce direct spending on drugs by $54 billion from 2017 to 2026.
Medicare is testing value-based care models nationwide to find out if they can reduce health care costs for people with Medicare coverage. Value-based care means that providers are paid for the quality of care they provide and their efficiency and effectiveness, instead of the traditional fee-for-service model, which pays providers for the number of services delivered.
The federal government recently issued guidance to encourage state health officials to adopt strategies that address drivers of health in Medicaid and CHIP. Such strategies are expected to improve health outcomes, reduce health disparities, and lower overall costs.
Reasons U.s. Health Care Is So Expensive: Why Do We Pay More For Less?
Gabrielle Decker is a communications specialist associate in Legal & Administrative Affairs and Health Policy for Blue Cross NC. Through her job, Gabrielle enjoys taking complex policy topics and making them easier for employees to understand and relate to.Staying healthy in the United
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