Does the United States spend too much on healthcare?
A look at the lower levels of healthcare spending in peer countries like Canada and the United Kingdom would seem to indicate as much.
But a closer look at those numbers reveals a far more complex story.
Take the matter of healthcare prices.
It’s commonly thought that America’s are the highest globally.
However, according to a recent analysis conducted by the Organization for Economic Co-operation and Development (OECD), a group representing developed countries, U.S. healthcare prices aren’t even in the top five.
People in Switzerland, Iceland, Norway, Sweden, and Israel all pay higher prices than those in the United States do.
Prices in Ireland, meanwhile, are almost equal to those in the United States.
To the extent Americans overpay, it’s largely because foreign governments impose price controls on things like prescription drugs. Drug companies understandably respond by raising prices in less regulated markets like the United States.
That situation is, indeed, unfair.
Americans disproportionately underwrite pharmaceutical research and development that benefits the entire world. Bringing U.S. drug prices down via price controls would undermine those research and development efforts — to the detriment of everyone.
Another common criticism of America’s healthcare system is that our nation spends more on healthcare as a percentage of GDP than any other country; but that’s largely a function of Americans’ preferences and behaviors.
Americans suffer from uniquely higher rates of lifestyle-related illness compared to patients elsewhere globally. More than four in ten Americans are obese, according to the Centers for Disease Control and Prevention (CDC).
The United States also has the highest adult chronic disease burden in the developed world, reflecting high rates of everything from diabetes to heart disease and hypertension.
As a result, U.S. patients tend to consume more healthcare than those in other developed countries — everything from MRI scans to hip replacements.
Some of that is by necessity. But some is because Americans have more money to spend, period. America’s per-capita GDP is more than 50% higher than that of the United Kingdom and more than 40% higher than Canada’s.
In other words, we can afford to devote more money to modern medicine.
Britons and Canadians, by contrast, may not have a choice about when they receive care.
In Canada, for example, the median wait to receive treatment from a specialist following referral by a general practitioner was over 25 weeks last year. People awaiting a hip replacement faced a median wait of over 34 weeks. That’s about five months longer than physicians deem reasonable.
The layers of bureaucracy and administrative excess endemic to America’s healthcare system are another reason our nation pays so much for care. By some estimates, administrative costs account for 30% of U.S. healthcare spending.
Much of this spending is the result of needlessly complex billing systems. In fact, each year, America’s physician offices spend $30 billion on billing.
Yet there’s little to suggest that transitioning to a single-payer system would make this problem better. On the contrary, a government-run system would likely add to the complexity of the nation’s healthcare bureaucracy, leading to yet more administrative waste and inefficiency.
Consider a recent analysis in the journal Health Affairs, which found that Medicaid had the highest levels of billing complexity among any payers examined in the study. Private insurers had among the lowest levels.
And as I mentioned in my column last week, more than one-fifth of the money Medicaid spends each year is improper payments. That’s yet more evidence that government-run healthcare systems are uniquely prone to wasteful spending.
If we invite government to determine just how much of the economy we should devote to healthcare, then American patients can expect long waits, rationed care, and shortages of physicians and other healthcare professionals.
Those subject to government-dominated systems in Canada and the United Kingdom painfully experience these realities — daily — firsthand.
A single-minded focus on America’s level of healthcare spending mistakes cost for value. We should find ways to extract more value from medicine at lower cost. The way to do so is not via heavy-handed government intervention — but by introducing more competition into the healthcare marketplace.