Do you want to understand what drives healthcare spending in the US?
Then this study published in JAMA (March 2018) by Papinocolas, Woskie, and Jha is a must-read.
If you would prefer a simplified summary of the study, then you must read the entire 78-page pdf of a presentation done by Dr. Jha. You can listen to his accompanying talk while reading the deck on part 1 & part 2 of the relevant AMA Moving Medicine podcast.
In the study, the authors first clearly outline that healthcare spending is a function of both the quantity and the price of healthcare. Then they compare US healthcare use and spending with that in other high-income countries. They test the following theories as a way to explain our high cost:
- We use too much healthcare
- We are too quick to go to the doctor
- We don’t do enough preventive healthcare, leading to too many hospitalizations
- We use too many tests and procedures.
- We have too much specialist-driven and not enough primary care.
- We spend too much on administration
- We have high prices
They find that hypotheses 1 and 2 are mostly false, and hypotheses 3 and 4 are correct.
We have fewer doctor visits and far fewer days in the hospital than the mean for all high-income countries in this study. We do more of some tests and procedures and less of others.
Administration accounts for 8% of our healthcare spending compared to the 3% mean for all countries examined in this study.
But the most significant contributor appears to be our prices. Our annual per capita drug costs are 100% higher than the mean (about $1400 vs. $700). We pay our doctors and nurses more than the mean. Procedures and tests in the US often cost way more than the mean for all countries examined. The authors point out that we may get more top-quality healthcare professionals for the high price, albeit with higher-priced education and more debt. We also do get significantly greater pharmaceutical innovation.
Nevertheless, this has not resulted in better-than-average healthcare outcomes. Our life expectancy is lower than the average for the countries in the study. And other studies show that the gap between our life expectancy and that of other high-income countries is growing wider.
Because we have believed hypotheses 1 & 2, our attempts at controlling spending have tried to control the use of healthcare. Congress, Medicare, and large, innovative healthcare systems are all focused on decreasing ‘inappropriate’ use of healthcare.
Instead, we should be looking at how to reduce administrative costs and the price of healthcare. Admittedly, this is easier said than done. Still, as Papinocolas and her co-authors show us, there is no other way.
