Why is American healthcare so expensive?

 America spends twice as much on healthcare as any country.

In 2017, the United States spent $3.5 trillion on healthcare, or 18% of our GDP.  As a percentage of GDP, Switzerland ranked second at 12% of GDP.  Most other Western European countries fall between 9% and 11% of GDP.  But, worst of all, health outcomes in the United States are generally not in the top 30 countries.

There are many reasons American healthcare is so expensive.  But, put simply—prices for healthcare services in America are that much higher.  Interestingly, Americans do not use more healthcare that our neighbors in Europe. 

Answering the question of why American healthcare is so much more expensive is a complicated and hotly debated topic.  Most European countries have socialized medicine.  This can be in the form of a single-payer, nationalized healthcare system, or rate-setting standards written into that nation’s laws.  Clearly, having one payer of healthcare services provides the leverage for that payer to drive down healthcare costs.  The impacts of this on healthcare are debatable.  Some point to wait times at hospitals in countries like Canada and the United Kingdom, but others point to the fact these countries can cover their entire populations for a fraction of the cost of America.

Here are some key facts in understanding some factors driving up healthcare costs in the US:

·        America pays more for prescription drugs than any other country and bans government health plans from bargaining for these drugs.  In 2018, drug spending totaled $360 billion.

·        America sees some of the highest rates of high-cost surgeries like spinal surgery, hip replacements, and knee replacements.

·        American doctors are paid more than doctors in any other part of the world.  According to Politico, Americans pay an extra $100 billion per year above the average for doctors’ compensation.

·        The American healthcare system is the most administratively complex system in the world.  According to the Center for America Progress, the U.S. spent $496 billion in 2018 on billing and insurance –related costs.

·        End-of-Life Care in the U.S. is uniquely American and staggeringly expensive.  America has rejected any sort of rationing of healthcare, regardless of age and circumstance.  According to the Seattle Times, America wastes $810 billion per year in unnecessary, unbeneficial, or wasteful care to Medicare beneficiaries who spend most of their Medicare dollars in the last year of life.