The Washington PostDemocracy Dies in Darkness

The real reason the U.S. spends twice as much on health care as other wealthy countries

(Richard Drew/AP)

A sweeping new study of health-care expenditures found that the United States spends almost twice as much on health care as 10 other wealthy countries, a difference driven by high prices — including doctors' and nurses' salaries, hospital charges, pharmaceuticals and administrative overhead.

For years, it has been clear that Americans are not getting a good bang for their buck on health care. The United States spends more than any other country and gets much less, at least as measured by life expectancy or infant mortality. Policy fixes have tended to focus on the idea that medicine is being overused. The thinking goes that the American health care system is uniquely set up to incentivize wasteful imaging scans, oodles of unnecessary prescriptions and procedures that could have been prevented.

The new study, published in the Journal of the American Medical Association, suggests instead that Americans are using health care at similar rates to other rich countries, and the real difference is the prices of procedures and treatments. The finding doesn't mean Americans aren't overusing health care; it just means that we aren't alone in doing so.

“The narrative that has come up, that has developed, is that America spends so much more because Americans demand more health care,” said Ashish Jha, a professor of health policy at the Harvard T.H. Chan School of Public Health. “We have done, through the Affordable Care Act and other policy efforts, almost nothing about prices. To me, that has been the big missed opportunity.”

The study compared the United States with the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland and Denmark from 2013 to 2016 on nearly 100 different measures of care. It found that the United States spent about twice as much per person on health care, an investment that produced the shortest life spans and the highest rate of infant deaths. The United States used more imaging scans than most countries but spent much less on inpatient hospital care. Its utilization patterns were overall similar to other wealthy countries — leading the researchers to focus on other drivers of difference.

Nonspecialist doctors in the United States are paid on average $220,000 per year — double the average salary in the other countries. Nurses and specialists were also compensated better. Defenders of doctors' higher salaries often point to the burden of medical school debt in the United States, but one study found that taking into account tuition cost didn't explain the difference in earnings.

Administrative costs were 8 percent of health care spending in the United States, vs. an average of 3 percent among wealthy countries.

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Pharmaceutical spending was $1,443 per person in the United States, followed by Switzerland at $939 per person. But the United States also had access to the most new, brand-name drugs, with 111 vs. 26 in Switzerland.

The notion that high prices are driving health-care spending isn't new. In 2003, a Health Affairs paper called “It's the Prices, Stupid” made a similar argument, with less comprehensive data.

But prices can be difficult to curb, because one person's high price is another person's profit margin or salary. Hospitals are often among the biggest employers in a region. Pharmaceutical companies offer American consumers big innovation but big price tags — and the debate about how or whether something needs to be done about drug costs has typically fallen apart under the weight of extensive lobbying by the industry. There are two main ways to lower prices, which fall along partisan lines: price-setting or  increasing competition.

“I feel like America has figured out how to do the worst of both,” Jha said. “We have, in Medicare, a price-setter that is very weak, and whenever Medicare tries to negotiate or get aggressive on prices, Congress intervenes and holds them back. Most markets are pretty inefficient with a lot of power with providers. Combine a weak price-setter with inefficient markets, and you have the American health care system.”

Jha told a story about a recent trip to Paris, where his briefcase was stolen. A generic beta-blocker that he takes daily, at a cost of about $1 a pill, was in his luggage. He needed a few more pills to hold him over during his trip. He went to a pharmacy to ask if it would be possible to get four pills.

The pharmacist dispensed the medication — the brand name version of the drug — at only 10 cents a pill.

“It was crazy. I thought, 'What is going on? This is Paris, which we don't think of as some cheap city,'” Jha said. “One thing that is undoubtedly clear to me from all the data I have looked at is, whether it's hip replacement or an MRI, we spend much more [in the U.S.] per procedure than we do in these really expensive places like Switzerland or the U.K. — in ways that really don't make any sense.”

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Correction: A previous version of this story incorrectly described administrative costs in health care, due to incorrect information in a JAMA report. Administrative costs are 8 percent of health care spending in the U.S. and 3 percent, on average among wealthy countries.