Health Care Reform

Why does U.S. health care cost so much?

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Americans spent an estimated $8000 per person on health care in 2011.

Here's what that looked like in 2009, the most recent year available.

NOTE: 93 cents of every health care dollar paid for medical goods and services.

What do other countries spend?

Wealthy countries spend more on health care. But even among high-income, economically developed countries, the U.S. spends far more than the next highest country.

  • For 2009, The U.S. spent $7960 per person, compared to the next highest-spending country, Norway, at $5352 per person. Our neighbor to the north, Canada, spent $4363.

Why does U.S. health care cost more?

It's the prices: There are two primary factors to consider: unit cost of medical goods and services and the amount of care delivered. According to the 2011 Milliman Medical Index, unit costs for medical goods and services are the biggest driver of overall health care cost.

  • Even though number of in-hospital days was nearly the same from 2009 to 2010, the cost of those days went up more than 10 percent.

It's the waste: The Institute of Medicine calculates that in 2009 alone, the most recent figures available, the U.S. wasted more than one-third of the $2.5 trillion dollars we spent on health care. The IOM identifies $765 billion wasted through:

  • Unnecessary services
    • Frequency
    • Defensive medicine
    • Unnecessary use of high-cost services
  • Administrative waste
    • Duplicative costs of administering different plans
    • Unproductive documentation
  • Inefficiently delivered services
    • Medical errors
    • Uncoordinated care
    • Inefficient operations
  • Too-high prices
    • Prices higher than competitive levels
    • Excessive variation in service prices
  • Fraud
    • Medicare/Medicaid fraud
    • Insufficient investment to detect fraud
  • Missed prevention opportunities
    • Poor delivery of clinical prevention services

It's where we live: The Dartmouth Atlas of Health Care has documented more than two decades of regional variation in Medicare patients, both for standards of care received and cost of care delivered.

  • Costs vary from $5,200 to more than $17,000 per person depending on region.
  • Diabetes management: Not everyone gets equally effective care, ranging from 66.6 percent of the time in Albuquerque, N.M to 86.5 percent in Burlington, Vt. This can lead to inequitable outcomes, severe long-term health consequences and higher costs.

Solutions

Each of us has a role in helping health care become more efficient, affordable and effective.

  • Improve health. Our public and private sector health organizations should help us be healthier. According to the World Health Organization, Americans lead high-income countries in:
  • Improve quality. Adopting different delivery and payment models can better coordinate care, improve patient outcomes, reward quality and promote wellness
  • Reduce waste. The Institute of Medicine's Health Care Imperative identifies $463 billion in savings through best practices for providers and insurers
  • Expand access. Federal health reform has already extended coverage to those under 26 and high-risk individuals. In 2014, subsidies will help those with lower incomes to get publicly funded coverage, and private insurers must accept everyone who applies
  • Increase awareness. Consumer awareness about how to compare treatment effectiveness and costs can influence quality and affordability. Visit Regence's consumer education site, WhatsTheRealCost.org

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