"It's the prices, stupid" Why does the U. S. spend so much on health care?
As noted in a recent article in the New York Times (NY Times), the United States spends about twice as much for health care as a percentage of the economy as people in other wealthy countries. It totaled $3.3 trillion, or 17.9% of GDP in 2016. Several decades ago, US spending was near to what it was in other similar countries. The question is, what went wrong? In 2003, Anderson et al in a paper entitled “It’s the prices , stupid” (Health Affairs;22 (3):89-104) found that the U.S. typically uses about the same amount of health care as people in wealthy countries, but pay a lot more for it.
In a more recent and definitive study published in JAMA from the Institute of Health Metrics and Evaluation in Seattle, 155 separate health conditions were studied (JAMA). The study extended from 1996-2013. During this time, personal health spending grew at a rate of 4% while the economy grew at 2.4%. Interestingly, this occurred at the same time as a 2.4% improvement in health status. With a decrease in smoking and the use of statins, about 20% of the improvement in health status was attributed to treatment and prevention of cardiovascular disease. Patients also, as expected, spent less time in the hospital. The culprits of increased cost were found to be health care visits and hospital stays and the price of those services. We spent more on prescriptions and doctor visits, balancing out a decrease in hospital stays. This study found that inpatient stays and health visits accounted for 63% of the increase. We either do more for patients during these visits, charge more or both. Though this paper couldn’t make that determination other studies have found that the health care spending increase was almost entirely based on growth in prices.
Addendum: Since this piece was posted just a few weeks ago, an editorial was published in the Journal of Clinical Oncology (jco.2017.76.0488) addressing this very issue with a focus on chemotherapy drugs, particularly biologics.