Why the US has the highest health care costs in the world

Americans spend significantly more on health care than any other country.

According to the 2022 Medical Expense Index (CHI), recently released by Bridge Patient Portal and Medical Web Experts, the US spends $10,921 per capita, ahead of Switzerland ($9,666) and Norway ($8,007).

The disparity in how much the US spends compared to the 60 countries included in the CHI is even greater for prescription drugs. Notably, the cost of treatment is 1309.48% more expensive in the United States than the median of the sample countries, followed by Mexico (+153.92%) and Switzerland (+143.00%). In contrast, Turkey has prescription drug prices 70.21% below the sample median.

However, according to former FDA Deputy Commissioner Peter J. Pitts, prescription drug costs are not the most important driver of US health care costs.

“In the United States, hospital care ranks first at 31.4%, followed by physicians and services at 14.9%, “other” personal health care at 15.5%, followed by prescription drugs at 9.7%. He told the Times:

A good indicator of how expensive health care is in the United States is the average overnight cost of treating COVID-19 patients, including labor, equipment, tests, and medications. It was followed by the United States ($20,939), Norway ($11,590) and Switzerland ($9,297).

Healthcare is an expensive social good worldwide due to its “third party” payment system. Health care providers pay by third-party, private, or government insurance, not directly by the patients they receive services. And this leads to inefficiencies on both the supply and demand side of the healthcare market. For example, patients may visit providers excessively because they do not have to pay the full cost for services. Similarly, health care providers may bill the insurance company rather than the patient, which has an incentive to provide tremendous service to patients.

However, the ultimate cost of health care will depend on the nature of the health care market. In countries where the insurance market is monopolized, i.e. dominated by a single large insurer, health care is expected to be cheaper than in countries where the insurance market is made up of several small insurers, which are highly competitive. The explanation is simple. Large insurance companies can negotiate more discounts from health care providers than smaller insurance companies.

The US healthcare market falls into the second category, according to Nicholas Creel, assistant professor of business law at Georgia College and State University.

“The main reason why health care in the US is so expensive compared to other countries is that we use private insurance more than the public universal option,” he told the International Business Times. “Each private insurance has to negotiate with health care providers individually, so a single public agency has far less negotiating power than a country representing the entire population. So you can pay much less than we do for the same services.”

According to the 2022 CHI, US citizens contributed the most to health care through tax and compulsory health insurance (700.62% higher than the median data set), followed by Norway (+509.22%) and Switzerland (+472.16%). Conversely, Nigerian citizens contribute 98.85% less than the median data set.

Meanwhile, Creel sees an extreme lack of preventive care, another factor driving up health care costs in the United States.

“As many Americans avoid routine check-ups, visits to doctors that can lead to early diagnosis and treatment of many conditions such as high blood pressure or cancer, these problems are not identified until they manifest as many problems. Treating the condition is more difficult and costly. It costs a lot,” he explains. “Although the old adage, “An ounce of prevention is worth a pound of cure,” speaks to this logic, America is still focusing on the latter rather than the former.”

However, the gap between what Americans pay and the average of the national sample included in CHI is too large to account for just a few factors.

Limelight’s Dr. Mahmoud Manzoor adds to America’s high cost of physician education.

“The cost of educating doctors in the United States is astronomical,” Dr Manzoor told International Business Times. “They graduate with hundreds of thousands of dollars in debt and have to pay it back at private practice or hospitals. Then the costs will come down. There is talk of reducing it, but as long as colleges can make big bucks, putting money into these programs will change that. I’m not inclined to.”

According to Dr. Manzoor, the decline in charitable and not-for-profit hospitals over the past 60 years and the replacement of for-profit hospitals have added to the high cost of health care in the United States.

“At the time, many hospitals started as churches or community nonprofits. As the cost and the need for technology grew, many hospitals were sold to for-profit companies,” he says. “They are starting to offer more professional care at a higher cost. Hospitals, doctors, and health care generally have a “insurance pays” mindset because they have health insurance in place. They do much more than that. They charge a lot. It must be because they know they have to offer a certain percentage discount or some under the insurance contract. Out of pocket or over the insurance deductible.”

Clearly, the debate over high medical costs is “on hold and suffocating as Pitts said. He thinks it’s time to add material and science to the conversation.

“It’s time for President Biden to form a Blue Ribbon Commission to study serious proposals for institutional change,” he said. “If we can’t learn anything else from our COVID-19 experience, it’s that we can… when the entire healthcare ecosystem works together to solve a seemingly intractable problem—in this case, broad access to innovative prescription drugs. U.S. Healthcare are at risk.”

The CVS Health Foundation website states, “Our approach to social responsibility is directly linked to our purpose of bringing our hearts to every moment of health.” Photo: ipopba / iStock

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