The United States spends trillions of taxpayer dollars each year on health care. Yet Americans have some of the worst health and life expectancy rates of any developed country. So why is health care in the United States so expensive? Let’s find out.
The United States healthcare system – features
The main thing that distinguishes the U.S. health care system is the high cost per capita, far exceeding healthcare expenditures in high-income countries. At the same time, the return on investment is relatively low. For example, according to 2020 statistics, the average life expectancy of U.S. citizens was 77 years, while in other developed countries, it is 80-84 years.
A 2003 study proved that higher health care costs in the U.S. are due not so much to the quantity and quality of health care services as to their higher prices. Research by health economist Johns Hopkins, published in 2019, led to the same conclusion. So let’s take a closer look at what influences the high cost of health care in the states.
Why the United States health care prices are so high
The main reasons for expensive medical care in the U.S. are:
- A complex health care system, which includes reimbursement from the government, employer insurance, and private insurance. Each sector contains several levels of coverage, managed care plans, a list of medications that are covered by insurance, and different payment systems for services. As a consequence, when billing, providers must comply with many rules, keep track of application deadlines, and do a lot of other complicated administrative work. This work costs about 8% of the total price tag for medical care. By comparison, in other high-income countries, payment for it is a maximum of 3%.
- High cost of medical drugs. On average, drug prices in America are twice as high as in Europe. Americans also overpay for procedures and tests required for diagnosis. For example, an MRI in Great Britain costs about $500, while in America, you have to pay $1,420 for the same procedure.
- High salaries for doctors and nurses
- Hospitals in the U.S. are for-profit organizations. Accordingly, each service or analysis is paid for separately. In addition, “protective” medicine is practised in the states. To prevent lawsuits that patients can file against the hospital or treating physician at the end of treatment, they are often prescribed additional tests or tests that are not mandatory. This significantly increases the amount of the price tag.
- Weak state regulation of prices for services and products of companies whose activities are related to the sphere of health care (manufacturers of medicines, insurance companies, medical institutions).
Why expensive health care is bad for everyone, and what can be done about it
High prices for health care affect everyone, regardless of health status. This has been felt especially strongly in the last decade when increases in the price of health insurance have begun to outpace increases in wages for American workers significantly. As a consequence, one can observe:
- a decline in the individual purchasing power of the population;
- the financial crisis of many hospital institutions;
- a decrease in the number of surgical procedures performed and a decrease in the number of visits to physicians has a negative effect on the economy as a whole.
Today the main task of the state in the sphere of health care is to reduce the cost of medical care. Economic modelling is an essential tool for its solution, including cost-effectiveness modelling and budget impact modelling (https://digitalho.com/budget-impact-model/). The creation of simulation models makes it possible to estimate the cost ratio to the real benefit of a drug or procedure. They also allow you to count the burden on the budget, which will impose a reassessment of the cost of medical services or changes in treatment protocols. Thus, using economic models is an opportunity to determine the best treatment and its optimal price.