Are we getting the value for our healthcare dollar?
Aug 30
4 min read
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KEY TAKEAWAYS
The United States (U.S.) spends more on healthcare than any other wealthy nation
Yet other countries produce better healthcare outcomes than the U.S.
Healthcare reform, independant on political ideology, should be about ensuring access, managing costs and improving healthcare outcomes simultaneously
The U.S. healthcare debate often focuses on "access" versus "outcomes" due to the unique structure of the American healthcare system and the interplay of various political, economic, and social factors. It is a lot easier to explain and understand "access" vs. all of the complexity and nuance associated with "outcomes". While both are important far too often is access to health the only topic to dominate the healthcare debate.
HOW MUCH DOES THE U.S. SPEND ON HEALTHCARE?
How has spending on healthcare changed in the U.S.?
Hospital spending, which constitutes the largest share of total expenditures, grew steadily, driven by rising costs of services and increased demand. From 2020 to 2022, prescription drug spending grew at an average annual rate of 7.6%. Costs by private insurers has grown faster than Medicare and Medicaid, with private insurance per enrollee spending increasing by over 60% from 2008 to 2022. There are several factors that have led to the increase in healthcare spend over the last 22 years. They include (in no particular order):
Chronic Disease Management
Aging Population
Medical Technology
High Administrative Costs
High Cost of Drugs and Procedures
Policy and the pandemic have played a role in the spikes and management of healthcare costs. Sometimes referred to as ObamaCare, the implementation of the Affordable Care Act (ACA) in 2010 led to an initial surge in spending as more Americans gained coverage. However, it also contributed to a slowdown in the rate of spending growth in subsequent years. Economic recessions, such as the one during the COVID-19 pandemic, have had significant impacts on healthcare spending patterns, often leading to temporary spikes followed by periods of slower growth.
HIGHER SPENDING DOES NOT TRANSLATE TO BETTER OUTCOMES
Despite the significantly higher spending, the US does not necessarily achieve better health outcomes compared to these other countries. In fact, the US often lags behind in key health metrics such as life expectancy and infant mortality rates. The disparity in spending is largely due to higher prices for medical services, pharmaceuticals, and administrative costs in the U.S.
Healthcare Spend vs. Life Expectancy In Wealthy Countries
Looking at other key health outcome measures the U.S. has an infant mortality rate of about 5.4 deaths per 1,000 live births, significantly higher than countries like Norway, Sweden, and Japan, where the rate is below 3. This difference highlights challenges in prenatal and postnatal care in the U.S., particularly among underserved populations. Another driver of that gap is due to a higher prevalence of chronic diseases compared to other developed nations. For instance, obesity rates in the U.S. are around 42%, compared to 24% in Canada and 10% in Japan. The high prevalence of obesity in the U.S. is a significant risk factor for other chronic conditions, such as diabetes and cardiovascular diseases which incur significant patient treatment costs over prolonged periods of time.
Access and Outcomes not Access or Outcomes
It’s easier to measure and communicate statistics on access, such as the percentage of the population with health insurance, than it is to measure outcomes, which can be more complex and influenced by numerous factors beyond healthcare alone. Health outcomes are influenced by a variety of factors, including genetics, lifestyle, and social determinants of health (e.g., income, education, environment). This complexity can make it difficult to attribute changes in health outcomes directly to healthcare policy changes, leading to a focus on access as a more straightforward policy goal.
The U.S. healthcare debate focus on "access" versus "outcomes" stems from the structure of its healthcare system, the political and ideological landscape, economic considerations, and the nature of how these issues are measured and perceived. While improving health outcomes is ultimately the goal, ensuring broad and equitable access to healthcare is often seen as the necessary first step in a country where access is not guaranteed. Therefore, much of the policy debate centers on how to achieve that access, with outcomes being a more complex and secondary discussion.
Acts like reducing the cost of insulin to $35 is not going to fix it alone
With pharmaceutical products only accounting for 9% of all healthcare spend we may provide relief to a patient's wallet but not the overall challenges to the population as a whole. Larger scale initiatives like the Inflation Reduction Act will save over $1.5 billion on prescription medications starting in 2026 for patients on Medicare. Programs like the Affordable Care Act and the Inflation Reduction Act do a great job at increasing access and managing costs but do not address the underlying problems amplifying costs. Despite high healthcare spending, the U.S. struggles with lower life expectancy, higher infant mortality, and a greater prevalence of chronic diseases. Addressing these issues requires a multifaceted approach, including reforms in healthcare delivery, addressing social determinants of health, and promoting healthier lifestyles.
It is important to note that there are advantages and disadvantages to healthcare around the world. No one country has the perfect system. By learning from the successes of other nations, the U.S. has the potential to improve its health outcomes and create a more equitable and efficient healthcare system.
WAYS TO MEASURE CHANGES ON THE U.S. HEALTHCARE SYSTEM
Health Outcomes: Life Expectancy, Infant & Maternal Mortality Rates & Disease Burden
Access to Care: Healthcare Coverage, Availability of HCPs and Waiting Times
Quality of Care: Effectiveness of Care, Patient Safety and Patient Satisfaction
Efficiency: Percent of GDP, Cost-Effectiveness and Administrative Costs
Equity: Disparities in Health Outcomes & Access for Vulnerable Populations
Preventive Care: Reducing chronic conditions like diabetes, high blood pressure, etc.
Sources: Centers for Medicare & Medicaid Services (CMS), National Health Expenditure Accounts (NHEA), Kaiser Family Foundation (KFF), Peterson-KFF Health System Tracker & Health Affairs