Health care spending is rising around the world
As far back as we've been measuring this, health care spending has always risen.
Overall spending on health care has doubled over the past two decades, reaching $8.5 trillion
in 2019, which comes out to 9.8% of global GDP.
The U.S. spends about twice as much on health care than other large and wealthy
countries do.
The U.S. health care system is not as effective when it comes to controlling costs compared to
systems in other countries.
The way the system is structured now, it is cure driven
system, not prevention driven system.
There is not one access model here in the United States, and so for preventive
services or treatment, it really depends on people's insurance
status, where they're located, and the provider network near them.
It is extremely frustrating for not just patients, but physicians also
The way we do it, by definition, makes things much more expensive for
us.
So why are U.S. health care costs rising more than anywhere else and can it be
stopped?
Health care spending made up 5% of total U.S.
GDP in 1960.
In 2020, spending hit almost 20% of total GDP.
So what that means is that for every dollar that people spend in the
U.S., about 20 cents is going towards health care.
This rise in spending can't be attributed to inflation alone.
Health care almost always outpaces inflation, and so health care costs
grows faster than the economy.
That's why it's representing a larger and larger share of the economy.
The United States spends more per person on health care than other high income countries, but still
has a lower life expectancy.
We have poor outcomes relative to other countries.
We pay twice as much as any other country.
We pay more and get less.
We see the people in the U.S.
use a similar amount of health care to people in other wealthy and large
countries, but we pay more for each interaction.
The money's in hospitals and doctors.
That's what makes it the big difference between what we spend on health care in the U.S.
and what other countries spend.
Hospitals, physicians and clinical care made up more than half of total health care spending in
2019.
When we talk about ways to reduce spending, you can either look at ways to reduce the amount of care that
people are getting or to reduce the price the people are paying for their
care. And in the U.S., it seems that there needs to be more
of a focus on the prices of care because that's where the real difference is
between what we spend in the U.S.
and what other people spend in other countries.
Drivers of the rise in health care spending has focused mostly
on the symptoms of the rising health care spending.
So when we are talking about hospitals, prices are very high or
drug prices as very high.
These are not the causes of the high spending.
These are the symptoms of high spending.
One of the causes of high spending is the fragmented nature of the U.S.
system. Some Americans have incredibly comprehensive and affordable health insurance coverage, while
others have little to no coverage.
For some people, they might spend a very small share of their income on health care, and
that's usually because they're healthier.
People who are sicker will spend a very large share of their income on health
care, especially if they're in private insurance coverage with a high deductible plan.
Over 11% of the U.S.
population was uninsured in 2020, with a large disparity when it comes to race.
51% of Americans said they have delayed or skipped medical care due to
cost. That number jumps to 63% among those living in a household with an
income of less than $40,000 per year.
Even those covered by insurance say they've experienced financial trouble.
About 46% of insured adults reported difficulty affording out-of-pocket medical
costs. The WHO argues in a 2021 report that universal coverage
would limit catastrophic health spending.
This lack of universal coverage can make costs rise, while also leading to worse health care outcomes,
specifically when it comes to preventative care.
When cost become prohibitive for patients to seek care is
that, number one, preventative care and preventing diseases
from getting worse is always going to cost less, and the cost meaning to the overall system
is always going to cost less.
Let's say somebody has no insurance or very little insurance, and she feels a
vague pain on the right side of her abdomen.
You know, it would cost her $120 to go to the doctor.
She's not going to do that. She's going to work through it.
And three months later, she's in the emergency room with a burst appendix.
It costs $60,000 and we'll treat her.
We'll treat her. But if she could have gone to the doctor when she felt that first pain, the
doc could have treated the infection, it would have cost a hundred bucks.
There is a phenomenon in health care called the cost shifting, cost
shifting happens when health care organizations shift the cost to those
who cannot pay the bill to others who are covered by insurance
providers by increasing the prices somehow.
You also have to take into consideration the concept that you know,
maybe 30% of these bills will go unpaid, which can be thousands of dollars.
So at some point, if you want to keep your practice afloat, those have to
be recouped in a different way.
This is a factor of the U.S.
health care system where, like how much people end up paying is going to depend on your
insurance. A lack of universal coverage and a fragmented health care system also mean that people
don't have the same insurer for their whole lives, which means that insurers have less of an incentive
to provide preventive services or to insure that you don't get sick later.
The majority of Americans don't have much of a choice when it comes to their insurance plan.
More than 54% get health insurance through their employer.
Capitalistic view works when the market is free.
Health care is never a free market.
Instead, we have insurance companies bidding on patients behalf, which limits patients ability
to bargain with their health care providers.
We have what the insurance companies call narrow networks, where they dictate which doctors you can
go to.
Patients also can't bargain because they usually don't know how much care actually
costs.
One key requirement in a free market is to be informed about the price
of the product or goods you are purchasing.
But in health care, patients are in the dark about what would the
cost be when they see their care.
Insurance makes prices even more opaque, not just for patients, but also for
doctors.
Sometimes it is difficult to know up front what a patient's costs are going to
be for whatever services that they're getting.
At the end of the day, we are actually not the ones controlling the rate for each
different company.
And even if we have a whole list of every single possible
charge, we don't know if people have met their deductibles yet.
We don't know where they are with respect to out-of-pocket maximums.
We don't know what their co-pay might exactly be if it's a percentage.
A lot of care is delivered through what's called fee-for-service.
That means for every service that your doctor delivers to
you, that doctor is billing for each individual thing, and that can
create an incentive called provider induced demand, which
is basically that your doctor has an incentive to do more things to you.
But it's more complicated than just greed.
America's litigious culture can play a role in excessive testing.
I do think that in the United States, we do order more tests simply
because one, there's this fear of missing something.
Of course, that comes from a human aspect where you don't ever want to misdiagnose a patient.
But then there's also the malpractice side of things where if you do miss something,
what are the consequences?
Since there isn't true free market competition, insurance companies will try to rein in the spending
by either denying claims or requiring pre-authorization.
Most physicians are doing the right thing and choosing the right treatments for their
patients. But sometimes there are instances where the procedure that's
being requested may not always be the most effective treatment for
their particular patient, and sometimes the prior process also serves
as kind of a gatekeeper, so to speak of whether whether that
physician has tried everything that could potentially help the patient.
There are proponents for completely overhauling the heavily commercialized system.
You have to make the commitment to provide health care for everybody, that's the destination.
It turns out there are many different routes to that destination.
One of the more popular policy proposals is Medicare for All, which would replace for profit
insurance companies with government funded health insurance.
I am a strong supporter of Medicare for All because it is
our principle goal in this country to give everyone coverage
at the lowest possible cost, and Medicare is the best way to do
that.
President Joe Biden is instead focusing on expanding the Affordable Care Act to enable more
people to get insurance.
There's also been a bipartisan push for increased price transparency.
Congress passed the No Surprises Act, which went into effect in January 2022.
The goal of the legislation is to help Americans avoid surprise medical bills.
Now, people who inadvertently go to an out-of-network provider,
for example, by going to an in-network hospital but being seen by an out-of-network doctor, that
patient is held harmless.
And then it's up to the insurance company, the doctor to kind of work out how much gets paid to
them.
Researchers and economists are still debating what exactly is driving these costs in the U.S.
It's very hard for people to know how much health care is going to cost them before they get it.
Some of that can be addressed through price transparency efforts by basically posting prices
on hospital or Doctors' offices websites.
The search has to be intensified in this area to clearly
identify the root causes of the high spending
and the interrelationship between the different routes.
There's a lot of moving pieces here, and there's probably not going to be one single
solution to health care costs and access and quality of care and insurance
coverage. But there's a lot of different directions that policy is starting to
go in terms of actually addressing the health care costs in the U.S.