Cost of Healthcare: US vs the rest of the world
The cost of healthcare in most countries is expensive and differs substantially from one country to the next, as one would expect. However, one country exceeds others by a considerable margin: the US spends (far) more on healthcare per capita than all of its other member countries, according to the OECD. Why is there such a huge disparity in costs?
US with the highest healthcare cost without better results said OECD report
Organisation for Economic Co-operation and Development (OECD) was established in 1961 to collaborate on economic and social issues. It consists of members from both industrialised and emerging markets. The international organisation represents and collaborates with its members in matters that concern the economy and the social welfare of people globally.
Member countries include, amongst others: Australia, Canada, Columbia, France, Germany, Greece, Italy, Japan, Korea, Mexico, Turkiye, the US and UK.
The organisation's mission is to convene the member countries to promote aspects that improve the global market economy and uphold the principles of democracy. Key points are:
- Maintain global financial stability
- Promote growth in global trade
- Support economic development where required
- Raise employment rates
- Improve standard of living
- Boost economic growth that is sustainable.
According to the OECD, the top ten countries that spend the most on healthcare per person are:
- United States ($10,586)
- Switzerland ($7,317)
- Norway ($6,187)
- Germany ($5,986)
- Sweden ($5,447)
- Austria ($5,395)
- Denmark ($5,299)
- Netherlands ($5,288)
- Luxembourg ($5,070)
- Australia ($5,005)
Even though the US spends the most on healthcare compared with other countries on the list, health outcomes are not any better than in countries that spend less. The high cost is due to exorbitant administrative costs, amongst others, which make up about 25% of all healthcare costs together with the rising cost of drugs.
Until the arrival of President Reagan, the champion of economic liberalism, 40 years ago, health spending in the US was similar to other OECD countries where the US spent 6% of its GDP on health in 1970 (other countries spent about 5% in 1970). From the 1980s, the US began to rapidly outpace other countries in terms of healthcare spending, widening the gap every year.
More recently, the covid pandemic also played a big role in increasing spending and shrinking the GDP in almost all countries. In 2020 US healthcare spending accounted for 19% of Gross Domestic Product, up 2% from the year before whereas the UK spent 13% of its GDP on healthcare, increasing by 3% from 2019.
On average, Switzerland and a few other high income OECD countries like Germany, Norway and Sweden spend only close to half what the US spends.
Countries like Turkiye, Mexico and Columbia, which are the lowest per capita healthcare spenders, allocate only 25% of the OECD average, which is $4000, to healthcare costs. China is reported to spend only one-fifth of the average healthcare spend. India and Indonesia spend 6% and 8%, respectively.
Comparative health costs in the US vs UK
Several videos on YouTube highlight the discrepancy in healthcare costs in the US and the UK for common procedures like childbirth. There is a shocking difference between the two countries by a monumental margin.
Evan Edinger, an American living in London, has published a discussion with a junior doctor friend about some American medical bills and how much similar services cost with the UK National Health Service.
According to the doctor interviewed in the series, an uncomplicated natural birth in the US could set you back about $42K if you had no private health insurance in comparison with the UK where a similar experience would only cost in reality £1.5k (entirely paid by the British State) The average cost of an overnight hospital stay in the US is about $7.5K compared with £274-£548. A normal saline IV bag which forms the basis of most intravenous treatments costs $700 in the US versus £5 in the UK... etc.
In terms of global healthcare spending, the US is the worst performer and accounts for about 40% of total global health spending.
Why is the US healthcare cost so high?
According to a report by the US Alliance for Health Reform, the main reasons are:
- In the US, the fee-for-payment system encourages volume rather than encouraging better healthcare delivery management.
- Price of healthcare is increasing annually due to inflation and costs outpace inflation by a big margin.
- The number of people requiring healthcare is also increasing exponentially as new technologies and treatment innovations increase the average lifespan of the population.
- With an increase in average lifespan, more people are requiring chronic treatment for conditions like hypertension, diabetes, arthritis, and cancer.
- High incidence of waste.
- The fractured nature of the US health system means that some people have affordable health insurance that is comprehensive whilst others have inadequate coverage. In 2019, hospitals, doctors and clinical care comprised over half of total spending for healthcare. The structure presently is focussed on cure rather than prevention which will cost substantially less.
The report also included some points to improve the US healthcare situation longterm, which would require the commitment and collaboration of all stakeholders:
- Improvement in the management of chronic diseases. More importance should be placed on prevention of common chronic diseases.
- Decreasing costs by minimising waste of resources by focussing on quality and value.
- Improving patient involvement in treatment plans. Patients should be educated and involved more in their health care decisions. Patient preferences should be taken into account.
- Changing incentives for the payment and delivery systems.
These are only some of the numerous steps that can be taken to reform the current US healthcare problems.
Government funded health insurance much more efficient
On the other hand, countries like France and the UK have government funded health insurance with immense budgets but and they navigate the management of healthcare fairly successfully, proving that the public sector can be managed efficiently. For better results on the overall population, the OECD figures show that they spend half of the US healthcare spending.
The UK has the National Health Service (NHS), established in 1948, where healthcare is paid for by the government through the taxpayer for all people categorised as resident in the UK. All medical appointments are free for the patient and most prescription medicines are also covered.
In France, residents can receive quality healthcare regardless of age or socioeconomic circumstances. A large share of healthcare services are charged directly to the government rather than from the patient (and the vast majority has got also affordable provate insurance that can cover most of the remaining). The government covers over three-quarters of the total health budget, the rest being paid by the patients' private insurance contributions. Employees and employers contribute to this budget.
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Author: KashGoExpat Mum in the Desert and content writer for EasyExpat.com