Americans spend half as many days in hospital as do persons living in other high-income countries. We take fewer pills per person. We log fewer office visits and have fewer doctors per capita. Yet we spend 2-3 times as much as other countries on health care and have poorer health outcomes. In 2017, we spent $3.5 trillion. Why? Because we overpay.
If spending equals utilization times price, then we can reduce the amount we spend by reducing either utilization or price. In a delivery care system that is already quite lean, utilization is hard to ratchet down much further. Sure, we can better coordinate care when an ill person transitions between facilities. Yes, we can cut back on unnecessary or repetitive testing.
But, if there is ever to be any real prospect of reducing our spending as a country, the real action has to be on price. Yet when any policymaker mentions price control, everyone looks away, and the conversation swings back to utilization, about reducing the number of “superutilizers,” or it turns to “value,” the newest buzzword.
Talking about overspending suggests that certain partners in the health system are charging more than they should. Since about one third of our health care spending is related to hospitals (equipment, supplies) and another 20% is paid to health care providers, these are the obvious culprits. Fifteen years ago Anderson et al. noted that the difference in health care spending here compared to other countries “is caused mostly by higher prices for health care goods and services in the United States.” This was reinforced in a recent paper that concluded much the same thing.
Not news, but still notable. Health care spending is expected to rise more than 5 percent annually through the next decade, or about 1 percentage point faster than economic growth. Because we overpay for goods and services, it will become more and more difficult to pay for programs like Medicare and Medicaid, and for employers to keep financing medical coverage for workers and their families.
But there will be a massive fallout if we spend less. Workers (employed by hospitals and medical device companies and pharmaceutical firms and doctor groups) will lose jobs if prices (hence payments) go down, and these medical jobs now drive the economies of large cities and small rural towns alike.
But are we getting our money’s worth in the current system? Our health outcomes are inferior to those citizens of Canada and European nations enjoy. If our national health spending is a zero sum, if we spend less on hospitals and clinicians who care for us we could spend more on the social services required to prevent or reduce illness, to make our entire population healthier. Would that be worth the price of taking a long, hard look at our spending?
Warmly,
Michael Stein & Sandro Galea