Health Care Spending in the United States and Other High-Income Countries March 19, 2018, 11:08

Key Points

Question  Why is health care spending in the United States so much greater than in other high-income countries?

Findings  In 2016, the United States spent nearly twice as much as 10 high-income countries on medical care and performed less well on many population health outcomes. Contrary to some explanations for high spending, social spending and health care utilization in the United States did not differ substantially from other high-income nations. Prices of labor and goods, including pharmaceuticals and devices, and administrative costs appeared to be the main drivers of the differences in spending.

Meaning  Efforts targeting utilization alone are unlikely to reduce the growth in health care spending in the United States; a more concerted effort to reduce prices and administrative costs is likely needed.

Abstract

Importance  Health care spending in the United States is a major concern and is higher than in other high-income countries, but there is little evidence that efforts to reform US health care delivery have had a meaningful influence on controlling health care spending and costs.

Objective  To compare potential drivers of spending, such as structural capacity and utilization, in the United States with those of 10 of the highest-income countries (United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland, and Denmark) to gain insight into what the United States can learn from these nations.

Evidence  Analysis of data primarily from 2013-2016 from key international organizations including the Organisation for Economic Co-operation and Development (OECD), comparing underlying differences in structural features, types of health care and social spending, and performance between the United States and 10 high-income countries. When data were not available for a given country or more accurate country-level estimates were available from sources other than the OECD, country-specific data sources were used.

Findings  In 2016, the US spent 17.8% of its gross domestic product on health care, and spending in the other countries ranged from 9.6% (Australia) to 12.4% (Switzerland). The proportion of the population with health insurance was 90% in the US, lower than the other countries (range, 99%-100%), and the US had the highest proportion of private health insurance (55.3%). For some determinants of health such as smoking, the US ranked second lowest of the countries (11.4% of the US population ≥15 years smokes daily; mean of all 11 countries, 16.6%), but the US had the highest percentage of adults who were overweight or obese at 70.1% (range for other countries, 23.8%-63.4%; mean of all 11 countries, 55.6%). Life expectancy in the US was the lowest of the 11 countries at 78.8 years (range for other countries, 80.7-83.9 years; mean of all 11 countries, 81.7 years), and infant mortality was the highest (5.8 deaths per 1000 live births in the US; 3.6 per 1000 for all 11 countries). The US did not differ substantially from the other countries in physician workforce (2.6 physicians per 1000; 43% primary care physicians), or nursing workforce (11.1 nurses per 1000). The US had comparable numbers of hospital beds (2.8 per 1000) but higher utilization of magnetic resonance imaging (118 per 1000) and computed tomography (245 per 1000) vs other countries. The US had similar rates of utilization (US discharges per 100 000 were 192 for acute myocardial infarction, 365 for pneumonia, 230 for chronic obstructive pulmonary disease; procedures per 100 000 were 204 for hip replacement, 226 for knee replacement, and 79 for coronary artery bypass graft surgery). Administrative costs of care (activities relating to planning, regulating, and managing health systems and services) accounted for 8% in the US vs a range of 1% to 3% in the other countries. For pharmaceutical costs, spending per capita was $1443 in the US vs a range of $466 to $939 in other countries. Salaries of physicians and nurses were higher in the US; for example, generalist physicians salaries were $218 173 in the US compared with a range of $86 607 to $154 126 in the other countries.

Conclusions and Relevance  The United States spent approximately twice as much as other high-income countries on medical care, yet utilization rates in the United States were largely similar to those in other nations. Prices of labor and goods, including pharmaceuticals, and administrative costs appeared to be the major drivers of the difference in overall cost between the United States and other high-income countries. As patients, physicians, policy makers, and legislators actively debate the future of the US health system, data such as these are needed to inform policy decisions.

Introduction

The United States spends more per capita on health care than any other nation, substantially outpacing even other very high-income countries.1,2 However, despite its higher spending, the United States performs poorly in areas such as health care coverage and health outcomes.3-5 Higher spending without commensurate improved health outcomes at the population level has been a strong impetus for health care reform in the United States.6

Although it is well known that the United States spends more on health care than other countries, less is known about what explains these differences. The consensus has been that the US fee-for-service system is a primary factor,7 leading to fragmentation, overuse, and an underinvestment in social determinants of health,8-10 driving high utilization of health care services and poor outcomes. Older studies have found that the United States may underinvest in social services,11 although other data suggest that higher prices in the United States, especially for pharmaceuticals, may be a contributor to spending differences.12,13 One study suggested that increasing rates of outpatient spending and remuneration of clinicians is a major contributor to the cost difference between the United States and other countries.14 Given that other high-income countries are able to spend less and achieve better health outcomes, a more nuanced, data-driven understanding of all aspects of health care cost are needed to assist in reform of the US health care system.

The Organisation for Economic Co-operation and Development (OECD) and the Commonwealth Fund have recently collected and made available increasingly comparable data on inputs and performance of the health care systems across high-income countries. Using these and related data, we compared performance of the United States with 10 other high-income countries on key metrics that underpin health care spending. By examining granular data, we sought to understand why US health care costs are so much higher and where policy makers might target their efforts to encourage a more efficient system.

Methods

Selection of Comparison Countries

Ten high-income countries were selected for comparison. These countries were chosen because they were among the highest-income countries in the world, had relatively high health care spending, and had populations with similar demographic characteristics that have similar burdens of illness.3,15 Based on these criteria, the United Kingdom (consisting of England, Scotland, Wales, and Northern Ireland), Canada, Germany, Australia, Japan, Sweden, France, Denmark, the Netherlands, and Switzerland were chosen for comparison. These 10 selected countries represent different geographic areas and diverse health system structures.

Conceptual Framework and Indicator Selection

To better understand the higher US health care costs relative to other high-income countries, a range of outcomes were explored. We first analyzed comparative data on general health system spending, including spending by function. Next, comparative inputs, including labor costs and structural capacity (which, aside from contributing to direct costs, may also influence maintenance costs or influence the price to use equipment) were examined. Because many of the leading explanations relating to higher health care costs involve the transformation of health care dollars to health care outcomes,16 we extended the analysis to examine a range of intermediate outputs—namely, access, utilization (inpatient, outpatient, major procedures), pharmaceutical spending and utilization, patient experience, and quality of care—as well as valued health system outcomes, such as population health. To provide a broader context of overall factors that can contribute to differences in health care spending, we also examined social spending, as well as demographic differences, risk factors, and prevalence of disease. In line with previous international comparisons, the health care system included all groups whose primary intent is to improve health.5,17

This approach resulted in the presentation of a total of 98 indicators across 7 domains: (1) general spending; (2) population health; (3) structural capacity; (4) utilization; (5) pharmaceuticals; (6) access and quality; and (7) equity. In each domain, measures were selected that were available across the majority of the countries in the analysis. We were unable to find comparable pricing data for most areas, such as for diagnostic procedures and treatments, except for workforce remuneration and pharmaceuticals. In the area of quality, the focus was on indicators that captured quality of prevention, primary care, and inpatient care across the areas of appropriateness, effectiveness, experience, and safety. In the area of access to care, variations related to financial costs as well as waiting times were explored. In addition, reflecting equity, variations related to service availability, quality of care, and cost were assessed.

Data Sources

Data were extracted from a range of databases compiled by international organizations, with the majority coming from the OECD. Data on structural equipment, workforce, utilization, pharmaceutical spending, access, and quality were accessed from OECD.stat and the OECD 2015 Health Care at a Glance report. Additional data on health spending, health system, and country characteristics were obtained from the World Bank International Bank for Reconstruction and Development–International Development Association database and the 2016 OECD Health Systems Characteristics Survey.

Data on retail pharmaceutical spending per capita were obtained from the OECD for all countries. Data on total pharmaceutical spending per capita were obtained from Intercontinental Marketing Services or the International Federation of Pharmaceutical Manufacturers and Associations. Pharmaceutical data on country-level output of new chemical entities was taken from Daemmrich.18 Population perceptions of the health system and select access measures were obtained from the 2016 Commonwealth Fund Survey of Consumers.15

All data on per capita spending, gross domestic product (GDP), and remuneration were translated into US dollar equivalents, with exchange rates based on purchasing power parities of national currencies. Remuneration data were then converted to 2017 dollars using the US Consumer Price Index in line with Laugesen and Glied.19 Data on health spending are presented by function of care as a percentage of the country’s total spending on health consistent with System of Health Accounts categorization, with adaptations for outpatient spending to address issues of comparability with the United States’ National Health Expenditure Accounts (eTable 2 in Supplement 1). When OECD data were not available for a given country or more accurate country-level estimates were available, country-specific data sources were used. The focus was on indicators from 2013 onward with an occasional exception. For example, for the United States, data for the horizontal index, neonatal mortality by low birth weight, and antibiotic prescribing were from 2009, 2004, and 2004, respectively.

Supplement 1 includes tables that provide a breakdown of sources and methods for the data reported herein. In these tables, we note issues of comparability and timeliness for each indicator, such as workforce. In figures describing data for each of the 7 domains, a simple mean of the data for each indicator across all 11 countries is presented in the final column. Throughout the Results section in the text, all comparative findings are presented descriptively.

https://jamanetwork.com/journals/jama/fullarticle/2674671