Our Broken Health Care System

Our Broken Health Care System December 12, 2019

I have said many times that anyone who thinks we have a good health care system has never experienced it from the inside the way I have. The bureaucratic morass of the insurance companies, the arbitrary decision making, the ridiculous cost of virtually everything. It’s an incredibly bad system and the latest statistics from the OECD confirm that.

To begin with, America spends more than twice as much as other developed nations on health care:

The U.S. devotes more of its national income to healthcare relative to other OECD countries. On average, healthcare spending across these countries has remained in line with overall economic growth in the past decade. Since the financial crisis, health spending across the OECD averaged about 8.8 percent of gross domestic product (GDP) annually. Healthcare spending in the U.S., however, has risen from 16.4 percent of GDP in 2009 to 16.9 percent of GDP in 2018 — the highest among all OECD countries…

In 2018, the U.S. spent about $10,600 per person on healthcare — the highest healthcare costs per capita across the OECD. For comparison, Switzerland was the second highest-spending country with about $7,300 in healthcare costs per capita, while the average for wealthy OECD countries, excluding the United States, was only $5,300 per person. Such comparisons indicate that the U.S. spends a disproportionate amount on healthcare.

And that trend continued in 2019, when we spent 17.1% of GDP on health care. Now, if we got results that were twice as good then it would be worth it. But not only do we not get better health outcomes, we get significantly worse outcomes. Defenders of our current system like to claim that we spend so much because we overuse services — go to the doctor unnecessarily, order unnecessary tests and generally use services that aren’t really needed. The statistics show this to be absolutely false.

Healthcare spending is driven by utilization (the number of services used) and price (the amount charged per service). An increase in either of these factors can result in higher healthcare costs. Despite spending nearly twice as much on healthcare per capita, utilization rates in the U.S. do not differ significantly from other wealthy OECD countries. Prices, therefore, appear to be the main driver of the cost difference between the U.S. and other wealthy countries. In fact, prices in the U.S. tend to be higher regardless of utilization rates. For example, the Peterson-Kaiser Health System Tracker notes that the U.S. has shorter hospital stays, fewer angioplasty surgeries, and more knee replacements than comparable countries, yet the prices for each are higher in the U.S.

So why are the prices so high?

There are many possible factors for why healthcare prices in the U.S. are higher than other countries, ranging from the consolidation of hospitals — leading to a lack of competition — to the inefficiencies and administrative waste that derive from the complexity of the U.S. healthcare system. In fact, the U.S. spends over $800 per person on administrative costs — nearly five times more than the average of other wealthy countries and significantly more than we spend on preventive or long-term healthcare.

And as I said, we get far less while spending more. Our health outcomes are worse than comparable nations that spend far less.

However, despite higher healthcare spending, America’s health outcomes are not any better than those in other developed countries. The U.S. actually performs worse in some common health metrics like life expectancy, infant mortality, and unmanaged diabetes.

The solution is pretty clear. We should move toward the kinds of systems used in the rest of the world. And while there are differences between each of the systems, all have one thing in common — they are single payer systems where everyone is part of the same government-run system (though most do offer private healthcare systems for the wealthy). We must move to a single payer system immediately.

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