U.S. Spends More on Health Care Than Any Other Country But Not Getting More Care

It's the prices, stupid

May 12, 2003
A study finds that although the United States spends more on health care than any other country, Americans are not necessarily receiving more care.

The study, released in the May/June issue of the journal Health Affairs, suggests that the difference in spending is caused mostly by higher prices for health care goods and services in the United States - not increased use in those services.

"As a country, we need to ask whether increased spending means more resources for patients, or simply higher incomes for health care providers," says lead study author Gerard Anderson, of the Johns Hopkins Bloomberg School of Public Health. "Policymakers should assess exactly what Americans are getting for their greater health care spending. In economics these are known as opportunity costs because you can spend the money in different ways."

Supported by the Commonwealth Fund, the study found that in 2000, U.S. per capita health spending was $4,631, an increase of 6.3 percent over 1999. In addition to being 44 percent higher than Switzerland's per capita spending, the U.S. level was 83 percent higher than neighboring Canada and 134 percent higher than the median of $1,983 for the 30 industrialized countries in the Organization for Economic Cooperation and Development (OECD).

Despite efforts to control health spending with managed care in the 1990s, the spending gap between the United States and other industrialized countries in the OECD actually widened slightly between 1990 and 2000, according to the study.

Measured in terms of share of gross domestic product (GDP), the United States spent 13 percent on health care in 2000, Switzerland spent 10.7 percent, and Canada spent 9.1 percent. The OECD median was 8 percent. U.S. private spending per capita on health care was $2,580, more than five times the OECD median of $451. In addition, the U.S. financed 56 percent of its health care from private sources - the highest of the OECD countries, along with Korea.

According to the study, the absolute amount of money financed from public sources - primarily Medicare and Medicaid -- is similar to other countries. For example, public sources in the United States accounted for spending of 5.8 percent of GDP in 2000, close to the OECD median of 5.9 percent. However, public sources spent per person in the U.S. was $2,051 in 2000, far higher than the OECD median of $1,502. In most of the other OECD countries the public expenditures cover everyone.

There were also striking differences in many other areas of health care spending. For example:

• Spending per capita on pharmaceuticals varied from $93 in Mexico to $556 in the U.S. Despite being the highest, the U.S. is actually closer to other countries on pharmaceutical spending than spending for other health services and goods.
• The U.S. had fewer physicians per 1,000 population in 2000 and fewer physician visits per capita than the OECD median. There were 2.8 physicians per capita in the U.S., compared to an OECD median of 3.1 physicians.
• Germany and Switzerland have much higher hospital admissions per capita, average length-of-stay, and acute care beds per capita than the United States. Yet both countries spend far less than the U.S. per capita and as a percentage of GDP on hospital care than the U.S.
• The average U.S. expenditure per hospital day was $1,850 in 1999 - three times the OECD median.

According to the study, U.S. hospital expenditures are likely so much higher because:

• Health care workers' salaries, medical equipment, and pharmaceutical and other supplies are more expensive in the U.S.
• The average U.S. hospital stay could be more service-intensive than elsewhere.
• The U.S. health care system could be less efficient, especially the payment system, which is highly fragmented and complex.

The study, which uses the latest data (for year 2000) to compare the health systems of the 30 OECD member countries, was conducted by Anderson, Uwe Reinhardt of Princeton University, and Peter S. Hussey and Varduhi Petrosyan, both doctoral candidates at Johns Hopkins University. The authors examined the factors contributing to higher health care prices in the United States. In addition, they compared pharmaceutical spending, health system capacity, and use of medical services.

More information on the study can be found at www.healthaffairs.org.