Transcript U.S. Health Care Spending in an International Context

U.S. Health Care Spending In An
International Context
Uwe E. Reinhardt, Peter S. Hussey and Gerard F.
Anderson
Journal of Health Affairs
Volume 23 , Issue 3, 10-25
link to article
Presented by George Manev
September 22, 2005
The authors suggest several reasons as to why U.S. health spending
continues to soar out of control:
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GDP per capita (the ability to pay) – “About 90% of the observed cross
national variation in health spending across OECD countries in 2001 can
be explained by GDP per capita.”
Administrative costs – A study by Woolhandler, Campbell, and
Himmelstein estimated that about 24% of total U.S. health spending
($294.3 billion) is attributed to administrative costs to insurers,
employees, and the providers of healthcare. (vs. 17% in Canada)
Competition for limited talent - Health professionals’ salaries are
increasing to allow the field to compete with other industries relying on
the same talent pool, such as law and finance.
Market power - The supply side of the health system has greater market
power than the demand side, allowing prices to soar above the levels of
other countries with single-payer or multipayer systems.
(i.e: The strong “single-buyer” market power of the Canadian
provincial health plans or the multipayer system in Germany, which
bargains collectively with the providers of healthcare sometimes within
government-set overall health budgets)
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Unwillingness to ration
health care – “A
country’s health care
system – especially its
research and
development (R&D)
infrastructure –
continually gives
society the option of
purchasing, through
healthcare, additional
quality adjusted life
years (QALYs) at
increasingly higher
prices.
Question: What should be
the cutoff price for
QALY, if any?
Health Care in the Macro Level and Conclusions
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Actuaries at the Centers for Medicare and Medicaid Services (CMS)
report that the United States spent an estimated $1.5 trillion on health
care in 2003 (or 14.9 percent of GDP). They project that by 2013 the
U.S. will spent about 3.36 trillion on health care (or 18.4% of GDP)
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The U.S. could easily allow spending to continue to grow more rapidly
than GDP for a while. However, the authors are concerned that a trend
such as this could price low-income Americans out of health care. If
premiums grew at the rate of 10 percent per year for the next decade, as
they have been for the past couple of years, Reinhardt and colleagues
predict that typical family health coverage would absorb 42% of an
annual wage of $50,000.
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Two potential outcomes are given by the authors to this problem. One is
to develop a new method of financing health care that would spread
costs more evenly across society. A second is to adhere to the multi-tier
system now in place, in which a person’s health care experience would
vary based on their income level. Under such a system, the authors note
that affluent families would have a much better health care experience
than those with less income.