Why the U.S. Spends So Much More Than Other Nations on Health Care

Studies point to a simple reason, the prices, not to the amount of care. And lowering prices would upset a lot of people in the health industry.


The United States spends almost twice as much on health care, as a percentage of its economy, as other advanced industrialized countries — totaling $3.3 trillion, or 17.9 percent of gross domestic product in 2016.

But a few decades ago American health care spending was much closer to that of peer nations.

What happened?

A large part of the answer can be found in the title of a 2003 paper in Health Affairs by the Princeton University health economist Uwe Reinhardt: “It’s the prices, stupid.

The study, also written by Gerard Anderson, Peter Hussey and Varduhi Petrosyan, found that people in the United States typically use about the same amount of health care as people in other wealthy countries do, but pay a lot more for it.

Ashish Jha, a physician with the Harvard T.H. Chan School of Public Health and the director of the Harvard Global Health Institute, studies how health systems from various countries compare in terms of prices and health care use. “What was true in 2003 remains so today,” he said. “The U.S. just isn’t that different from other developed countries in how much health care we use. It is very different in how much we pay for it.”


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A recent study in JAMA by scholars from the Institute for Health Metrics and Evaluation in Seattle and the U.C.L.A. David Geffen School of Medicine also points to prices as a likely culprit. Their study spanned 1996 to 2013 and analyzed U.S. personal health spending by the size of the population; its age; and the amount of disease present in it.

They also examined how much health care we use in terms of such things as doctor visits, days in the hospital and prescriptions. They looked at what happens during those visits and hospital stays (called care intensity), combined with the price of that care.

The researchers looked at the breakdown for 155 different health conditions separately. Since their data included only personal health care spending, it did not account for spending in the health sector not directly attributed to care of patients, like hospital construction and administrative costs connected to running Medicaid and Medicare.

Over all, the researchers found that American personal health spending grew by about $930 billion between 1996 and 2013, from $1.2 trillion to $2.1 trillion (amounts adjusted for inflation). This was a huge increase, far outpacing overall economic growth. The health sector grew at a 4 percent annual rate, while the overall economy grew at a 2.4 percent rate.

You’d expect some growth in health care spending over this span from the increase in population size and the aging of the population. But that explains less than half of the spending growth. After accounting for those kinds of demographic factors, which we can do very little about, health spending still grew by about $574 billion from 1996 to 2013.

Did the increasing sickness in the American population explain much of the rest of the growth in spending? Nope. Measured by how much we spend, we’ve actually gotten a bit healthier. Change in health status was associated with a decrease in health spending — 2.4 percent — not an increase. A great deal of this decrease can be attributed to factors related to cardiovascular diseases, which were associated with about a 20 percent reduction in spending.

This could be a result of greater use of statins for cholesterol or reduced smoking rates, though the study didn’t point to specific causes. On the other hand, increases in diabetes and low back and neck pain were associated with spending growth, but not enough to offset the decrease from cardiovascular and other diseases.

Did we spend more time in the hospital? No, though we did have more doctor visits and used more prescription drugs. These tend to be less costly than hospital stays, so, on balance, changes in health care use were associated with a minor reduction (2.5 percent) in health care spending.

That leaves what happens during health care visits and hospital stays (care intensity) and the price of those services and procedures.

Did we do more for patients in each health visit or inpatient stay? Did we charge more? The JAMA study found that, together, these accounted for 63 percent of the increase in spending from 1996 to 2013. In other words, most of the explanation for American health spending growth — and why it has pulled away from health spending in other countries — is that more is done for patients during hospital stays and doctor visits, they’re charged more per service, or both.

Though the JAMA study could not separate care intensity and price, other research blames prices more. For example, one study found that the spending growth for treating patients between 2003 and 2007 is almost entirely because of a growth in prices, with little contribution from growth in the quantity of treatment services provided. Another study found that U.S. hospital prices are 60 percent higher than those in Europe. Other studies also point to prices as a major factor in American health care spending growth.

There are ways to combat high health care prices. One is an all-payer system, like that seen in Maryland. This regulates prices so that all insurers and public programs pay the same amount. A single-payer system could also regulate prices. If attempted nationally, or even in a state, either of these would be met with resistance from all those who directly benefit from high prices, including physicians, hospitals, pharmaceutical companies — and pretty much every other provider of health care in the United States.

Higher prices aren’t all bad for consumers. They probably lead to some increased innovation, which confers benefits to patients globally. Though it’s reasonable to push back on high health care prices, there may be a limit to how far we should.



‘Fukushima lessons: Any notion that nuclear power is clean is obsolete’.

The unit No.1 (L) and No. 2 reactor building of the tsunami-crippled Fukushima Daiichi nuclear power plant (Reuters / Itsuo Inouye)

The unit No.1 (L) and No. 2 reactor building of the tsunami-crippled Fukushima Daiichi nuclear power plant (Reuters / Itsuo Inouye)

The world must phase out nuclear power because it is absolutely not clean from the mining processing of uranium to the generation of high-level radioactive waste, Kevin Kamps for the radioactive waste watchdog Beyond Nuclear, told RT.

It’s been four years since the most powerful earthquake in Japan’s history struck the Fukushima nuclear power plant. All of Japan’s 43 operable reactors have been shut down since 2013, because of safety checks required after the accident. The operator of the nuclear plant has sent a second robot inside the Fukushima reactor to collect data from it. The first robot became immovable after recording some footage from inside the reactor.

RT: Since the disaster, Japan has allocated more than $15 billion to an unprecedented project to lower radiation in towns near the power plant. However few locals believe Tokyo’s assurances that the site will eventually be cleaned up. Do you think their fears are reasonable?

Kevin Kamps: Yes, it is an unprecedented catastrophe. Of course there was Chernobyl, but in this area of Japan – it is so densely populated all over. So when they are trying to clear the landscape down to a certain depth, it is going to be more and more expensive. When you add all of the projects from decommissioning of the nuclear power plant to trying to clean up the landscape to loss of economic activity – we’re talking hundreds of billions of dollars all together. It is going to be very difficult for anything like normal life ever to return there.

RT: In addition to massive radioactive remains, Japan’s greenhouse gas emissions are on the rise following the increase in coal-fired power. Should environmentalists sound the alarm here?

KK: Just in recent days there have been the admissions by high-ranking Tokyo Electric officials that the decommissioning of the nuclear power plant could take more like 200 years because of the lack of technology to do the job. They are going to have to invent all of these robotic systems and engineering processes to try to remove the melted cores at Fukushima Daiichi because that is their current plan unlike Chernobyl with the sarcophagus. The current plan in Japan is to remove those melted cores to somewhere else – perhaps to geologic disposal, they haven’t said. But it is going to be very challenging.

RT: How has the country been handling the shortage of nuclear energy so far?

KK: It is high time for Japan, but I should also say the US and many other countries, to do what Germany is doing – which is to make the transition in its energy sector to efficiency and renewables. Germany will phase out the nuclear power by 2022. This is a direct response to Fukushima. And it will also largely phase out fossil fuel by the middle of the century, by 2050. Germany is the fourth largest economy in the world. So if Germany can do it, so can other developed countries in the world. It is high time that we do this so that dangerous nuclear power plants can be shot down, and we don’t have to turn to polluting fossil fuels.

RT: What is the main importance of nuclear power phase-out in your opinion?

KK: I think it’s very important that world turned from the nuclear power. It is absolutely not clean from the mining and processing of uranium to the generation of high-level radioactive waste. Then the routine radiation releases is even from normally operating nuclear power plants. But then certainly you have the disasters like Three Mile Island, Chernobyl, and Fukushima. Any notion that nuclear power is clean is obsolete at this point.

Japan's Prime Minister Shinzo Abe (Reuters / Kyodo)

Japan’s Prime Minister Shinzo Abe

RT: On Tuesday, a Japanese court halted the restart of two reactors at the Takahama plant in Fukui prefecture citing safety concerns. Why did the judges issue such a ruling?

KK: They are having a very difficult time. Just in recent days again a judge in Fukui prefecture ruled for the second time against the restart of atomic reactors in their prefecture, this time at Takahama. Two reactor units were blocked by this judge’s ruling from restarting. And last year he ruled against two reactors at the Oi nuclear power plant. So the local population, the local governors of prefectures, and local elected officials like mayors have put a stop to these plants restarting reactors in Japan.

RT: Do you think this latest move by the court is a major blow to the Prime Minister’s attempts to return to atomic energy?

KK: Yes, and in this particular case in the last couple days the judge in Fukui prefecture ruled that the new regulations – supposedly based on lessons learned from Fukushima by the Japanese Nuclear Regulation Authority – are irrational and do not guarantee protection of public health and safety and the environment. So it is a big blow to Prime minister, [Shinzo] Abe’s plans to restart reactors.

RT: All 40 reactors in Japan are shot down at the moment, aren’t they?

KK: That’s right; all 40 reactors in Japan are currently shot down. And this has been the case largely since the Fukushima catastrophe began. There have been a few exceptions but for very short periods of time.

RT: If the court comes up with further restrictions that would eventually extend the countrywide shutdown of the reactors. What are the consequences likely to be for Japan’s economy?

KK: It has made it. There have been challenges and difficulties; there has been a crash course in energy efficiency and also in energy conservation… And … there have been imports of fossil fuels, natural gas and coal. That is why I said [that] it is important for Japan to as quickly as possible transition to a renewable energy economy. In fact, that prime minister who served during the beginning of the catastrophe, Naoto Kan, implemented laws that would make that renewable transition happen more efficiently.

RT: Are there any achievement that have been made by the Japanese government trying to tackle the problem? Any good news?

KK: The good news is that renewables, especially efficiency, are very quickly deployable. You can establish a large scale solar photovoltaic facility in a matter of months, the same with wind turbines and efficiency is even faster than that. You have companies in Japan that are poised to do this kind of work…So there is a real promise in renewables; Japan has tremendous resourcesboth domestically, but also for the export and the installation of renewables around the world. And you have to always remember that the devastation caused by Fukushima Daiichi is a very negative thing for the Japanese economy. So you could have 40 good years at a nuclear power plant like Fukushima Daiichi, and you can have one bad day that is now tuned into four bad years, and there is no end and sight- this will go on for very long time.

RT: Everyone in Japan and all over the world understands that it is very dangerous industry and something should be done to prevent future catastrophes. So why are Japanese authorities slowing down all these processes?

KK: It is a form of addiction; it is a form of political power that is very deeply ingrained. The Japanese nuclear power industry dates back to the 1950’s. The Liberal Democratic Party of Prime Minister Abe, one of its founding planks and its platform was pro-nuclear power. Apparently, it is very difficult for these powerful elites to learn lessons and to change their ways. But I think the Japanese people are showing that they have had enough of these risks to their country: first suffering the atomic bombings of 1945 and now also suffering the worst that nuclear power can deliver as well.