Why Americans Spend So Much on Healthcare – In 12 Charts
The Wall Street Journal
July 31, 2018
The U.S. spends more per capita on health care than any other developed nation. It will soon spend close to 20% of its GDP on health—significantly more than the percentage spent by major Organization for Economic Cooperation and Development nations.
What is driving costs so high? As this series of charts shows, Americans aren’t buying more health care overall than other countries. But what they are buying is increasingly expensive. Among the reasons is the troubling fact that few people in health care, from consumers to doctors to hospitals to insurers, know the true cost of what they are buying and selling.
Providers, manufacturers and middlemen operate in an opaque market that can mask their role and their cut of the revenue. Mergers give some players more heft to enlarge their piece of the pie.
Consumers, meanwhile, buoyed by insurance and tax breaks, have little idea how much they are really spending and little incentive to know underlying costs.
Despite the higher spending, the U.S. fares worse than the OECD on most major measures of health. The pace of improvement by other advanced nations has been faster on most measures since 1970.
A big part of the problem in analyzing health spending is the opacity of the industry.
The bulk of consumers’ health spending now goes to paying for health insurance, a shift from when patients paid directly for health services. Since insurers negotiate prices with providers, it is hard for individuals to judge health costs and make more informed choices.
Contributions to employer-sponsored health coverage aren’t taxed, which makes it less expensive for companies to pay workers with health benefits than wages. Generous benefits lead to higher spending, according to many economists, because employees can consume as much health care as they want without having to pay significantly more out of their own pockets.
The prices of many medicines are hidden because pharmacy-benefit managers—the companies that administer drug benefits for employers and health insurers—negotiate confidential discounts and rebates with drugmakers.