We Pay for What We Value. Guess What We Value in the U.S. Health Care System?

People often ask what the difference is between the United States and other health care systems. Health Affairs recently published a helpful piece focused on comparing costs entitled “It’s Still The Prices, Stupid: Why The US Spends So Much On Health Care, And A Tribute To Uwe Reinhardt” by Gerard F. Anderson of Johns Hopkins Bloomberg School of Public Health, Peter Hussey, a VP at RAND Corporation in Boston, and Varduhi Petrosyan, a professor and dean in the Turpanjian School of Public Health, American University of Armenia, in Yerevan. The article is an update of a similar one they published back in 2003, along with Uwe E. Reinhardt, who was the James Madison Professor of Political Economy at the Woodrow Wilson School of Public and International Affairs, Princeton University, until his death in November 2017. The authors compare the health care costs, accessibility, spending growth rates, and other fees in OECD countries.

Notably, there is no concise chart in the article, showing the side-by-side of this information – so we made one! We also calculated a multiple, to see how much more (or less, but usually more) the U.S. spends compared to the median of the OECD countries.

In the chart below, we tried to focus on the main categories of health care costs – health insurance administrative costs, hospital care, physician salaries, nurse salaries and pharmaceutical spending. Interestingly, the information needed for a comparison across countries and categories was not always available in the Health Affairs article. This highlights a pretty big problem with health care data – researchers often say that it’s hard to compare inputs across countries because of their different systems and economies, so they just don’t. This means we don’t actually know for sure how these costs compare to each other.

You may notice the huge difference in per capita health insurance administrative costs. The fact that the U.S. spends almost 8 times as much as the median of OECD countries on health insurance administrative costs (and not actual health care) is rarely a focus of health system policy change, though it is well-known:

“The next-highest-spending country after the US (Switzerland) had administrative costs of only $280. In 2017 Steffie Woolhandler and David Himmelstein [Commonwealth Fund] estimated that the US would save about $617 billion (about 20% of its total health spending) if it moved to a single-payer system.”

We have written about standardizing a set of forms before. Maybe this is a good place to start addressing health care costs in the U.S.?

Another area of high cost in the U.S. compared to other countries is hospital and health care providers. According to the Health Affairs article, all of the inputs for hospital care – including “health care workers’ salaries, medical equipment, and pharmaceutical and other supplies – are much more expensive than in other countries.”

Why are health care provider costs higher in the U.S.? In part because the allocation of physicians in the U.S. is different from other OECD countries, and skews to more expensive care: the U.S. has the lowest percentage of general physicians relative to specialists of OECD countries.

Making changes seems as easy as the U.S. looking to a country that seems to have lower health care costs and “copying” what they do. But these researchers did this same analysis in 2003 based on 2000 data and now, nearly 20 years later, they found the relative rankings of the countries to be about the same for most indicators. Health care costs are different across countries because health care systems are different across countries. And of course, systems are different across countries because values are different.

Based on what the U.S. spends in different health care categories compared to other countries, we seem to really value health insurance administrative costs. Now we know.