Cost of US Healthcare

A really distressing aspect of chronic illness is the financial cost to the patient.  Even with decent, employer-paid coverage, the total yearly out-of-pocket expenses can be astronomical.  This is especially true with rare diseases, which are often treated off label with drugs designed for other conditions.  If a drug is not indicated for a particular diagnosis, the insurance company will often not pay for it.  Even if it is indicated for a diagnosis, the insurance company will often expect the patient to try and fail other (often worse) options before approving the medication.

It is well known that the US spends more on health care than other comparably developed countries.  In 2010, the US spent an average of $8,233 per patient for the year.  This accounts for 17.6% of GDP, which means that for every $1 the US spends, $0.17 is spent on health care.  Among comparably developed nations, the average is 9.5% GDP.  The next highest spender is Norway, which spends $5,388 per patient.  The average among comparably developed countries is $3,269.

So why do we spend so much more in the US?  There are several reasons.

The first is that we have fewer practicing physicians, 2.4 per 1000 people, compared to an average of 3.1.  We also have fewer hospital beds, 2.6 per 1000 people, compared to 3.4.  So we actually see doctors less on average than our counterparts in places like the Netherlands and France. 

The primary care establishment is underdeveloped in the US.  We spend about 2.5X more on ambulatory care.  Having too few PCP’s means that people often go to hospitals to manage chronic conditions like diabetes and asthma.  However, hospital stays in the US are almost half as short as the average, meaning that the issue may not be adequately resolved prior to discharge.

France is often used as a model of health care delivery when discussing the shortcomings of the US system.  There are several key differences between the US healthcare model and the French healthcare model.  In France, hospitals, doctors and other providers are paid similar fees for most of their patients, regardless of where care is rendered.  In the US, payment is determined by which insurance the patient has.  In France, a surveillance organization tracks medical spending for all services and can lower the fee for any service that is growing faster than expected. 

In many European countries, prices are set by the government or by providers and insurers together.  In the US, service fees are largely inflexible.  Medicare and Medicaid fees are negotiated by the government and prices are much lower than for the privately or uninsured. 

Administrative cost per patient is much higher in the US than in other countries.  This is due in large part to the lack of electronic records in many establishments.  If doctors cannot determine exactly how a patient was diagnosed, they are more likely to repeat tests that have already been run.   Lack of centralized records can also encourage “doctor shopping,” in which a patient receives duplicated care in order to yield a desired result.

Some procedures are also much more common in the US than in other countries.  We perform 97.7 MRI exams per 1000 patients, compared with the average of 46.3 per 1000 patients.  We also perform more CT exams, tonsillectomies, coronary bypasses and knee replacements.  In addition to performing them more, they are also more expensive, by about 20% for knee surgery and 50% for a normal vaginal birth.  Hospital spending in the US is over 60% higher than the average in comparably developed countries.

Pharmaceutical and medical goods cost higher than in other countries, although they account for a smaller portion of spending in the US. 50 top selling meds were priced an average of 60% higher in US.  The US has the highest drug utilization rate, with 61% of adults taking at least one prescription medication and 25% taking at least four.

There are parts of the US health care system that work well.  In particular, cancer care performs well.  Five year survival rates for many cancers are the best in the US.  Access to newer medications and treatments is more readily available in the US due in large part to its close relationship with researchers.