Does the U.S. spend too much on health care?
May 11th, 2009 | by Brian Schwartz |Critics of medical care in the U.S. often claim that it costs too much compared to other countries, which have more government involvement than in the U.S. They use this to justify yet more government involvement in the medical choices U.S. citizens make. But it is true? Consider the following from this NCPA report (co-authored by Linda Gorman), Health Care Reform: Do Other Countries Have the Answers? (see report for citations below)
International statistics show that 2005 United States (US) per capita health care spending was 2.3 times greater than the median Organization for Economic Cooperation and Development (OECD) country ($6,401 vs. $2,759, based on purchasing power parity) and 1.5 times larger than Norway, the country that followed Luxembourg in the spending ranking.
Economists have long known that international health care spending comparisons are fraught with potential error. Even for uncomplicated dental fillings, reimbursement data underestimate total costs by 50% in nine European countries. However, normal market forces have been so suppressed throughout the developed world that purchasers rarely see a real price for any medical service. As a result, summing over all transactions produces aggregate numbers in which one can have little confidence. In addition, other countries more aggressively disguise costs, especially by suppressing provider incomes.3
Countries account for long term care and out-of-pocket spending differently. The accounting treatment of overhead and capital costs also varies.4 An OECD project to harmonize national accounting methods began in 2000, but even when methods are harmonized, the choice of a price adjustment method can alter hospital cost estimates by as much as 400%.5
tags: Linda Gorman, spendingThe US compares more favorably when real resources are measured rather than monetary accounts. Per capita, the US uses fewer physicians, nurses, hospital beds, physician visits, and hospitals days than the median OECD country.6
Even taking the monetary totals at their face value, the US has been neither worse nor better than the rest of the developed world at controlling expenditure growth. The average annual rate of growth of real per capita US health care spending is slightly below OECD average over the last decade (3.7% vs. 3.8%), and over the past four decades (4.4% vs. 4.5%).7
Despite common perceptions, a country’s financing method—public vs. private financing, general revenue vs. payroll taxes, third-party vs. out-of-pocket spending—is unrelated to its ability to control spending.8
For the US, the practical question is, can the adoption of another country’s health care system offer a reasonable chance of improving US private sector methods? An answer in the negative is suggested by a comparison of the British National Health Service and California’s Kaiser Permanente found that Kaiser provided more comprehensive and convenient primary care and more rapid access to specialists for roughly the same cost.9
Finally, international spending comparisons typically ignore costs generated by limits on supply. In 2002-2004, dialysis patients waited 16 days for permanent blood vessel access in the US, 20 days in Europe, and 62 days in Canada.10 Waiting for care has economic costs in terms of sick pay and lost productivity, as well as negative health consequences. In the late 1990s, an estimated 5 to 10% of English waiting list patients were on sick leave. Norway is trying to reduce waiting times for patients “in order to reduce the cost of sickness benefits.” Finland calculates that the cost of waiting (sickness benefits, medicines, and social welfare expenses) can exceed the cost of treatment.11
