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Why US health care costs are higher than other countries’

As we look around for “solutions” to the health care cost inflation problem, we often examine other countries to see how they are able to deliver better results in terms of health indicators (infant mortality, life expectancy, etc.) with so much less expense.
The thought is, if we just adopt a single payer, universal coverage system like the Canadians, or use strong controls and multiple insurers like the Germans, or set strict controls on pharmaceutical prices like most other countries, or restrict the acquisition of technology like many EU countries, or make the individual consumer pay much more for their health care like the Swiss, then we’ll solve the problem.
The fact is in the developed world, health care costs are increasing at roughly the same rate, about 2.5 points higher than GDP expansion. While there are years where the rate is higher for some countries than others, and the US’ rate occasionally bounces up for a year or two, over the long term, everyone’s costs are heading north at about the same pace.
The difference between the US and the rest of the developed world is twofold.
First, every other developed nation has universal coverage. The US has universal health care, it just isn’t funded by an insurance program for the so-called uninsured. Americans who do not have health insurance get health care, although it is paid for indirectly through taxes, surcharges on bills to insured patients, providers forgoing income and outright charity.
Second, we started with a higher base rate of inflation, putting our costs as a percentage of GDP significantly higher than other developed nations. In fact, the nation with health care costs nearest our 15.4% of GDP is Switzerland at 11%.
What does this mean?
We have much higher expectations of our health care system than most other nations do. We want the best, the most, the latest, regardless of the cost. Britons, Canadians, Italians, Singaporeans and Australians have more modest expectations. These expectations are perhaps the key drivers of our health care system. When patients are used to demanding, and getting, the best/most/latest, it is terribly hard to ratchet back their expectations. Yet if we don’t, we perpetuate the problem.

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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