The Ripon Forum

Volume 53, No. 4

September 2019

What Every American Should Know about Our Health Care System

By on September 17, 2019

by GAIL R. WILENSKY

Most Americans know that the United States spends a lot on health care.  But in all likelihood, they do not know how much we spend and how that amount compares to other countries around the world.

So, here are a few facts that might be helpful in that regard…

First, what we spend.  The latest estimate is that we spent $3.5 trillion on health care in 2017.  This figure is up 3.9% from 2016, and represents more than 17% of our GDP.  It also represents more than $10,700 for each person living in the United States.

Second, how that compares.  The next highest-spending country among the 32 countries in the OECD is Switzerland, which spends about 12.3% of its GDP on health care.  Switzerland is followed by France, which spends 11.3% of its GDP in this regard.  (It should be noted that reliable data on health care is time-consuming to collect; therefore, that data usually lags a year or two behind in this regard.)

We spent $3.5 trillion on health care in 2017. This figure is up 3.9% from 2016, and represents more than 17% of our GDP.

Beyond these two basic benchmarks, Americans should also know that health care spending in the United States has grown substantially over the last 60 years.  In 1960, the U.S. spent $146 per person on health care, which at the time represented about 5% of our GDP. The growth in health care spending was not substantially different from that of other countries until around 1980, but has grown more rapidly in the U.S. most years since then.

There are a variety of reasons that have been given as to why this divergence in spending rates occurred between the U.S. and other countries since that time.  For example, other countries tend to use direct limits on spending, whereas the U.S. does not.  In addition, the period since the 1970s has been a fertile time for expensive health care innovations.

To that end, it is worth noting that health care spending in the U.S. reflects the aggregate demand for health services from a wealthy and aging society – a society that has available to it many new technologies along with a large supply of sophisticated, well-trained medical specialists who are generally available to most of our citizenry.  Americans have long been eager to have access to the newest medicines, medical procedures, and technologies as soon as they are deemed safe and effective, and have little patience for waiting or queueing, as is commonplace in many other parts of the world.

Americans also expect to have easy access to physician generalists and specialists without having to wait excessively to see them.  In most parts of the world, the number of specialists to generalists is far smaller than in the U.S.  In most cases, the generalist physician outside of the U.S. is a general practitioner, whereas in the U.S., it is usually an internist, gynecologist or pediatrician — physicians that other countries classify as specialists.

Some have questioned why the U.S. spends so much on health care when at least some of the most basic health metrics in the U.S. are not superior to and frequently not as good as those of other countries which spend far less.  There are several responses to this question.  The most obvious is that mortality statistics have little to do with health care use or health care spending.  Rather, they are much more reflective of environmental factors and safety and life style risks than they are the use of health care, per se.

For example, violence-related deaths – especially from guns – are far more common in the U.S. than elsewhere.  The easy availability of rifles and handguns, as well as rapid-fire and high-powered pistols and assault weapons, is an issue that has divided the country for decades.

Despite these challenges, there have been very substantial gains in life expectancy since 1960.  The deep recession and economic slowdown that began in 2008, along with the effects of the opioid epidemic and the resulting spike in “deaths of despair,” have impacted this progress over the last decade.

In an important and interesting article in the New England Journal of Medicine in 2008, economist David Cutler of Harvard University compared gains in life expectancy with increased lifetime costs over the period 1960-2000.  What he found is that life expectancy for newborns had increased about seven years and that, on average, the cost per lifetime year gained was just under $20,000 — less cost per year gained at age 15 ($31,000) than per year gained at age 65 ($84,700).  Whether that is an acceptable level of cost for each year gained is up to the American public to decide.

If we are going to substantially slow the rate of spending or lower the level of spending on health care, we need to be willing to adopt lower cost ways of providing health care services or wait a little longer to use the newest technologies.

There are many other drivers of higher spending levels in the U.S. – our tax system that encourages employers to provide more compensation as health insurance and other fringe benefits than as wages, our desire for easy access to new pharmaceuticals and the latest technologies, and our aversion to waiting to access specialists or specialty hospitals. However, we could slow spending, if, as a country, we wished to do so.  We could become more efficient in the provision of health care which may mean using more regionalization of specialists and specialty facilities, or we could adopt more responsible lifestyles than we have in the past.  We just need to be more honest with ourselves than we sometimes are.  If we are going to substantially slow the rate of spending or lower the level of spending on health care, we need to be willing to adopt lower cost ways of providing health care services or wait a little longer to use the newest technologies or limit their use to individuals who need them the most.

We can spend less – we just cannot spend less and still have as easy an access to the open-ended, technically-advanced, sophisticated health care delivery system that we have had in the past.  Something will need to change, and the citizens may not thank the politicians who make this happen.

Gail Wilensky, Ph.D. is a Senior Fellow with Project HOPE.  She ran the Medicare and Medicaid programs from 1990-1992, was the White House health advisor to G.H.W. Bush in 1992 and chaired the Medicare Payment Advisory Commission from 1997-2001.

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