March 13, 2018 (Wbur: Why Are U.S. Health Costs The World's Highest? 'It's The Prices, Stupid')
U.S. healthcare spending exceeds $10,000 per capita annually, nearly double that of other developed nations, accounting for approximately 18% of GDP. A Harvard research team has confirmed the assertion made by the late Professor Uwe Reinhardt 15 years ago: "It's the prices, stupid."
The high costs of medical services in the U.S., including physician fees, surgical charges, and drug prices, contribute significantly to the nation's total healthcare expenditure. Factors like unnecessary or excessive use of medical services, and administrative costs, are considered secondary.
The data shows that U.S. pharmaceutical spending, at $1,443 per capita, is the highest in the world. The average cost of a coronary bypass surgery is $75,345, far exceeding the Netherlands ($15,742) and Switzerland ($36,509). CT scans in the U.S. cost $896, much higher than Canada ($97), the Netherlands ($279), and Australia ($500).
Physician incomes in the U.S. are also notably higher. The average annual income for a general practitioner is $218,173, double the 11-country average, while specialists earn $316,000, far surpassing Sweden ($98,452) and Australia ($202,291). Nurse salaries are also significantly higher than in other countries.
The researchers conclude that high service prices, rather than the oft-cited overuse of unnecessary medical services, are the primary driver of rising healthcare costs in the U.S. While the frequencies of certain procedures like coronary artery bypass, angioplasty, knee replacements, and Cesarean sections are high, and the number of MRI and CT scans is also elevated, the overall utilization of medical services by Americans is not particularly high.
Hospital admission rates for conditions like heart attacks, mental illness, pneumonia, and chronic obstructive pulmonary disease are similar to other countries, and the rates of hip replacements and hysterectomies are relatively low. Inpatient stays are generally shorter, and total hospital spending is lower than most other nations, except for Canada.
Contrary to another conventional belief, the ratio of specialists to general practitioners in the U.S. does not significantly differ from other developed nations. The proportion of the elderly population is also the lowest among these countries, making it difficult to attribute rising healthcare costs to an aging population. Factors like medical student debt and malpractice lawsuits also fail to fully explain the high medical prices.
While U.S. administrative costs account for 8% of total healthcare spending, which is higher than most countries (1-3%), this alone does not appear to be the primary driver of rising costs. Ultimately, the crux of the issue lies in the exorbitant prices of medical services.
So, why are medical prices so high in the U.S.? Experts point to the structural problems in the American healthcare system, where market competition principles do not function properly. A few large hospitals have monopolized the market, giving them pricing power, while profit-driven pharmaceutical companies drive up drug prices. The complex insurance system reduces consumer price sensitivity, and with weak government and insurer controls, healthcare providers have incentives to raise fees.
In contrast, most European countries exert strong government control over medical prices. Countries like the U.K. and Sweden employ healthcare professionals as civil servants, while in Germany and Japan, physician associations negotiate fees with the government. Drug price regulations are also stringent. With universal public health insurance and legal price controls, these countries do not experience the astounding medical inflation observed in the U.S.
The U.S. does exert some control over hospital fees through public insurance programs like Medicare and Medicaid, but prices for medical services covered by private insurance are largely unregulated. Although the Affordable Care Act (Obamacare) expanded healthcare coverage, its lack of price controls means the rise in healthcare costs is unlikely to be easily curbed.
The problem is that the astronomical U.S. healthcare spending does not translate into better health outcomes. Life expectancy is lower than the OECD average, and infant mortality rates are higher. In contrast, Germany achieves superior health indicators while spending only half as much as the U.S. on healthcare.
Of course, it is difficult to make simple comparisons between national healthcare systems. However, it is clear that the high-cost American model is not optimal. With rising healthcare costs threatening other vital public expenditures like education, a fundamental solution is urgently needed. Active government intervention should be considered to improve the efficient allocation of healthcare resources and promote health equity.
Above all, there needs to be a recognition that providing adequate healthcare to all citizens is a responsibility of developed nations. If supporting the healthy lives of citizens is a national duty, then medical prices must be reasonably regulated, and access to essential healthcare must be guaranteed. A nationwide effort is required to restore the public nature of healthcare.
Why Are U.S. Health Costs The World's Highest? Study Affirms 'It's The Prices, Stupid'