The recent Journal of the American Medical Association (JAMA) study, Health Care Spending in the United States and Other High-Income Countries, is a confirmation of what U.S. health policymakers know—we spend more on health care than other countries and have consistently poorer outcomes. The new data comparing the U.S. to ten other high-income countries on medical care (Canada, Germany, Australia, the U.K,. Japan, Sweden, France, the Netherlands, Switzerland, and Denmark) found:
- About 18% of the U.S. gross domestic product was spent on health care, much higher than the other countries (ranging from 9.6% in Australia to 12.4% in Switzerland).
- About 90% in the U.S. population has health care insurance—lower than the other countries, where insurance coverage ranges from 99% to 100%.
- The U.S. has the lowest life expectancy at 78.8 years; while other countries range between 80.7 and 83.9 years. The mean life expectancy of the other 11 countries studied at 81.7 years.
- The U.S. has the highest infant mortality at 5.8 deaths per 1,000 live births; compared to 3.6 per 1000 for other countries.
- About 8% of U.S. spending on health care goes to administrative costs related to planning, regulating, and managing health systems and services—while other counties spend between 1% to 3% on administrative costs.
- Per capita spending on pharmaceuticals was $1,443 in the U.S., compared to a range of $466 to $939 per capita in other countries.
- Salaries of physicians and nurses are higher in the U.S. (i.e., in the U.S., physician generalist salaries averaged $218,173, compared to a range of $86,607 to $154,126 in the other countries).
Everyone agrees these metrics need to change, but the agreement ends there. There is a lot of disagreement about what strategies to use to improve the performance of the U.S. health system. In part, this is due to a disagreement about what causes the U.S. health care cost and outcomes numbers to lag.
There is the waste in the system. Merrill Goozner, in the Modern Healthcare editorial Editorial: Waste Isn’t The Cause Of High Healthcare Costs, thinks that there isn’t enough waste to turn the corner on these metrics, writing:
Proponents of the waste theory blame providers. There are too many specialists ordering too many tests and procedures. There aren’t enough primary-care physicians emphasizing prevention and care coordination. Hospitals staff too many beds that need to be filled. In short, the supply side creates its own demand.
Then, there is the price issue. Dr. Ashish Jha, a professor of global health at Harvard, was quoted as saying, “We completely have a price problem. MRIs cost twice as much in Kansas as in London, and that makes no sense” in Why Does The U.S. Spend So Much More On Healthcare? It’s The Prices. And, a look at the comparative metrics show out-sized spending on pharmaceuticals and administrative costs. Eight percent of U.S. health care spending went to administrative costs incurred by private and public insurers, but that figure doesn’t include billing and insurance-related activities by hospitals and physician offices. Including those costs would boost the actual administrative burden in U.S. health care to 14%, according to Dr. Steffie Woolhandler, author of a 2013 Health Affairs study, A Comparison Of Hospital Administrative Costs In Eight Nations: US Costs Exceed All Others By Far.
Then there is the social determinants issue. The U.S. has higher rates of poverty, and related incidences of obesity, diabetes, and other chronic health conditions (see Social Determinants Today, Social Determinants Tomorrow and Addressing Social Determinants-The Measurement Challenge)—all contributing to higher health care costs. At the same time, the U.S. spends far less than Western European countries on social services (see The Social Services Market: Over $331 Billion In Spending In FY2016), which results in poorer health and health outcomes—and higher costs.
At this moment, I would say that we have made the decision to use consumer market forces (like high deductible plans and health savings accounts) and value-based reimbursement as the strategies to improve system performance. Whether or not those strategies will work is a most important question and one that needs constant research and evaluation. In particular, how these strategies affect specific portions of the population—low-income consumers, high-needs consumers, consumers of color, etc.—is an important question to answer sooner rather than later.
For more on the issues around “bending the cost curve” in the U.S. health and human service system, check out:
- Will Clinical Professional Compensation Drive Task Shifting?
- The Innovation Conundrum
- Déjà Vu, Anyone?
- Behavioral Health Evidence-Based Practices As Population Health Management Tools
- Task Shifting To Bend The Cost Curve
- Bend The Cost Curve? We Need Behaviorally-Led Health Systems
- ‘Person-Centered’ Health Care Records Take Center Stage
- I Never Would Have Thought.
- Understanding Health-Care Spending’s Ugly Spike
- Follow The Money: The Golden Rule Of Innovation For Health & Human Service Organizations
For more, join us at The 2018 OPEN MINDS Management Best Practices Institute in Long Beach, California on August 15 for the session “Integration, The End Of The Carve-Out & The Importance Of Financing – The Health Plan Role In Facilitating ‘Whole Person’ Care,” featuring Devan J. Cross, President, MHN, A Subsidiary of Centene. And, be sure to join John F. Talbot, Ph.D., Chief Strategy Officer at Jefferson Center for Mental Health, and OPEN MINDS Advisory Board Member, on September 19 at The 2018 OPEN MINDS Executive Leadership Retreat for his session, “The New Leadership Challenge: Culture & Change Management In A Value Based Market.”