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The Critical Factors Driving Up American Healthcare Costs vs. Other Countries

January 7, 2013

Why can’t the US get it right vs. other countries?  It is explained below.  Most of all, our politicians have gotten in the way of actual healthcare.  We need to get rid of them first, although that is not the nature of this article, but the crux of how we got where we are.

Check out the one where other countries deal with their population that smokes way more than the US does….need I say more?

By Samuel Metz

The Bipartisan Policy Report titled “What is Driving US Health Care Spending? America’s Unsustainable Health Care Cost Growth” issued in September lists seven factors increasing American health care costs. The “fiscal cliff” debates include many of these arguments.

While these factors do indeed play roles in American health care, almost all are at work in other industrialized countries, all of whom provide better care to more people for half what we spend. Good intentions aside, the report overlooks critical (and dysfunctional) characteristics of American health care and instead distracts itself with factors never mastered by any country (including ours).

The report was prepared under the direction of former Senate majority leaders Tom Daschle (D-S.D.) and Bill Frist (R-Tenn.), former Senator Pete Domenici (R-N.M.) and former Congressional Budget Office Director Dr. Alice Rivlin. With such participants, the report certainly qualifies as bipartisan, but unfortunately the final product does not qualify as accurate.

Here are the seven factors. They are largely irrelevant in our quest for better care at less cost.

1. Many industrialized countries pay providers on a fee-for-service basis, seemingly rewarding more care rather than better care. Yet their costs are lower and their citizens are healthier.

2. Other countries face aging populations with higher smoking rates and more chronic illnesses than we have. Yet their costs are lower and their citizens are healthier.

3. Other countries face patient demands for the latest therapies. Yet their costs are lower and their citizens are healthier.

4. Other countries do not financially penalize patients seeking care. Yet their costs are lower and their citizens are healthier.

5. Other countries provide patients with no more information about complex health decisions than we do. Yet their costs are lower and their health results are better.

6. Many hospital systems in other countries dominate their markets. Yet their costs are lower and their citizens are healthier.

7. The one exception making us unique is our malpractice costs. Yet defensive medicine costs $55 billion annually, just 0.2% of our $2.6 trillion health care spending.

Thus we face the same challenges every country faces. But American costs are increasing faster and are already twice as high. What are these other countries doing differently? They apply three characteristics missing from American health care:

  • Everyone is included without discrimination against the sick. Unlike other countries, Americans encourage private insurance companies to insure only healthy patients, leaving sicker patients to government programs, charities, or no care at all.
  • Patients can seek care without financial penalty. We are unique in using high deductibles and co-pays to discourage patients from primary care. Although patients in other countries see their physicians more frequently and spend more days in the hospital than we do, their costs are less and their citizens are healthier.
  • Financing is provided exclusively by publicly accountable, transparent, not-for-profit agencies. Although providers make a profit in many countries, we are the only nation in which financing agencies make a profit.

No country, including ours, has ever resolved the Bipartisan Policy Report factors. Yet our health care costs are the world’s highest. Although the report is bipartisan, it misses the critical factors driving up American health care costs. And unfortunately so does the Affordable Care Act, another valiant but futile effort at addressing our health care crisis. If the US wants a health care system that provides better care to more people for less money, we should take our lessons from countries already doing so, not from think tanks speculating on economic theories never applied successfully anywhere.

Successful systems around the world can teach us proven methods of containing costs while providing better care, but if only we choose to learn from them. These policy makers chose to ignore these lessons. The rest of us should not.

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