Better Solutions for Healthcare

Health System Tracker: What drives health spending in the U.S. compared to other countries

By Nisha Kurani and Cynthia Cox

September 25, 2020

The United States spends significantly more on healthcare than comparable countries, and yet has worse health outcomes. Much of the national conversation has focused on spending on prescription drugs and administrative costs as the primary drivers of health spending in the U.S. President Donald Trump has signed executive orders with broad directives to lower prescription drug costs primarily in the Medicare program, and Democratic Presidential candidate Joe Biden’s healthcare plan also aims to lower prescription drug costs by giving the federal government authority to negotiate prices for all purchasers. While it is true that many brand-name prescription drugs are priced higher in the U.S. than in peer countries, health spending data indicates that other spending categories – particularly hospital and physician payments – are greater drivers of health spending.

This brief examines the drivers of health spending and differences between the U.S. and other nations in Organisation for Economic Co-operation and Development (OECD) that are similarly large and wealthy (identified based on median gross domestic product (GDP) and median GDP per capita, for countries that have available data). In 2018, the U.S. spent nearly twice as much per capita on health as comparable countries. Most of the additional dollars the U.S. spends on health compared to peer nations goes to providers for inpatient and outpatient care. The U.S. also spends more on administrative costs, but perhaps not as much as people think, and spends significantly less on long-term care.