Administrative costs, provider salaries, and pharmaceutical prices drive higher healthcare spending in the United States

1. Administrative costs, physician and nurse salaries, and pharmaceutical prices are higher in the U.S. compared to other highly developed countries.

2. The US had similar rates of social services spending and health care utilization compared to other highly developed nations.

Evidence Rating Level: 2 (Good)

Study Rundown: The United States spends more per capita on health care than any other country but consistently performs poorly in health-related outcomes when compared to other highly developed countries. Though previous studies have suggested that increased rates of outpatient spending and remuneration of clinicians contribute to the cost difference between the US and other countries, there is still uncertainty in understanding the discrepancy between spending and performance. This study sought to identify the unique areas of increased spending the US has compared to 10 other highly developed countries. Though the US was found to have the lowest coverage rate, the US spent considerably more on administrative costs, nurse and physician salaries, and pharmaceutical costs. In contrast to previous hypotheses, however, the US had a similar social services spending, rates of health care utilization, and ratios of primary care physicians to specialists. As found in previous analyses, the US were among the poorest performers in terms of common population health outcomes and had the highest degree of inequity.

Though the results of this study are limited by difficulties in standardizing different health care indicators across countries for comparison, the results strongly suggest some key areas where the US spends vastly more than other highly developed countries. One area of future analysis that will be key to reducing spending in the US is to determine how much this increase in spending is due to the US’s multiplayer system versus how much is due to the market’s greater influence on health care costs.

Click to read the study, published in JAMA

Relevant Reading: Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better US Health Care.

In-Depth [retrospective cohort]: In this study, the Organization for Economic Cooperation and Development (OECD) and Commonwealth Fund analyzed performance of the US compared to 10 other highly developed countries (The United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, Denmark, the Netherlands, and Switzerland) in terms healthcare spending and performance. The US population was significantly larger than all comparison countries.

The US spent 17.8% of its GDP on healthcare (other countries ranged 9.6%-12.4% mean 11.5%) but had almost double the health spending per-capita (mean $9403) compared to other countries (mean of all 11 countries, $5419). 90% of US citizens were insured, which as lower than all other countries included (range 99-100%). The US had the poorest life expectancy (78.8 years compared to 81.7 years mean) and the highest infant mortality (5.8 deaths per 1000 live births compared with a mean of 3.6).

The physician workforce in the US (2.6 per 1000 people) was lower than the mean of the 11 countries (3.3 per 1000 population). Mean remuneration rates for generalists ($218,173), specialists ($316,000), and nurses ($74,160) in the US were much higher than all other countries (range $86,607 to $154,126 for generalists; $98,452 to $202,291 for specialists; $42,492 to $65,082). The US has the highest pharmaceutical spending per capita at $1443 compared to a mean of $749 for the 11 included countries (second highest $939). Despite having a high rate of generic drug prescriptions, the US spends a similar amount on generics compared other countries.

Image: PD

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