Healthcare spending in the United States is the highest per capita and as a percentage of GDP in the world. Spending depends primarily on two factors: the prices of goods and services and the utilization of those goods and services.
For decades, the mantra in the United States has been that people are using or want to use too many goods and services. That has been the rationale for all sorts of mechanisms to control utilization such as managed care and shifting more of the cost of care onto health professionals though bundling and values-based payment schemes and onto patients through out-of-pocket costs such as co-pays and deductibles. They have all failed to have an effect.
In reality, people in the United States use fewer healthcare services than our counterparts in other wealthy countries. We see the doctor less and spend less time in the hospital. And we have fewer healthcare resources than other wealthy countries in terms of hospital beds, equipment and providers.
One of the biggest problems in the United States is the costs. We pay the most for pharmaceuticals and services compared to other wealthy nations. This updated report on healthcare spending in Health Affairs finds that the cost of care is escalating when it comes to pharmaceuticals and services in the private sector.
Why is that?
1. The United States fails to negotiate for fair prices for pharmaceuticals.
2. The healthcare system in the United States is highly fragmented, preventing any mechanism to standardize the costs of care.
3. The consolidation of insurance companies and providers in the private sector has driven a price war that is causing prices to rise.
Another important factor in US healthcare spending is the administrative costs, which are significantly lower in the public sector than in the private sector.
A national improved Medicare for All healthcare system that is universal, public and comprehensive would create a system, as other nations have, for negotiating fair prices for goods and services and for reducing administrative costs.