Health at a Glance 2011: OECD Indicators

WHY IS HEALTH SPENDING IN THE UNITED STATES SO HIGH?

1.

Health spending in the United States is much higher than in other OECD countries

The United States spends two-and-a-half times more than the OECD average health expenditure per person (Chart 1). It even spends twice as much as France, for example, a country which is generally accepted as having very good health services. At 17.4% of GDP in 2009, US health spending is half as much again as any other country, and nearly twice the average. Chart 1: Health expenditure per capita, public and private, 2009 (or nearest year)
USD PPP 8000
7960

Public expenditure on health

5352 5144

Private expenditure on health

4914

4808

6000

4363

4348

4289

4218

3978

3946

3781

3722

3538

3487

3445

3233

3137

3067

2983

2878

4000

3226

2724

2579

2508

2165

2108

2084

1879

1511

1394

1393

1036

2000

1186

943

918

902

862 308 132

1. In the Netherlands, it is not possible to clearly distinguish the public and private share related to investments. 2. Health expenditure is for the insured population rather than the resident population. 3. Total expenditure excluding investments. Note: Information on data for Israel: http://dx.doi.org/10.1787/888932315602. Source: OECD Health Data 2011.

United States Norway Switzerland Netherlands Luxembourg Canada Denmark Austria Germany France Belgium Ireland Sweden Iceland United Kingdom Australia OECD Finland Italy Spain New Zealand Japan Greece Slovenia Portugal Israel Czech Republic Slovak Republic Korea Hungary Poland Estonia Chile Russian Fed. Brazil Mexico Turkey South Africa China India Indonesia

99

Health at a Glance 2011: OECD Indicators

Chart 2: Total health expenditure as a share of GDP, 2009 (or nearest year)
17.4

% of GDP 20 18 16 14 12 10 8 6 4 2

Public

Private

12.0 11.8 11.6 11.5 11.4 11.4 11.0 10.9 10.3 10.1 10.0 9.8 9.7 9.6 9.6 9.6 9.5 9.5 9.5 9.3 9.2 9.1 9.0 8.7 8.5 8.5 8.4 8.2 7.9 7.8 7.4 7.4 7.0 6.9 6.4 6.1 5.4 4.6 4.2
United States Netherlands France Germany Denmark Canada Switzerland Austria Belgium New Zealand Portugal Sweden United Kingdom Iceland Greece Norway OECD Ireland Italy Spain Slovenia Finland Slovak Rep. Brazil Australia Japan South Africa Chile Czech Rep. Israel Luxembourg Hungary Poland Estonia Korea Mexico Turkey Russian Fed. China India Indonesia
Health spending per capita (USD PPP)
8000 R = 0.71
USA

1. In the Netherlands, it is not possible to clearly distinguish the public and private share related to investments. 2. Total expenditure excluding investments. 3. Health expenditure is for the insured population rather than the resident population. Note: Information on data for Israel: http://dx.doi.org/10.1787/888932315602. Source: OECD Health Data 2011.

Rich countries spend more than poor countries. Chart 3 shows that for nearly every country, if you know how rich they are, you can predict their health spending per person per year to within a few hundred dollars. The United States is an exception Americans spend nearly $3000 per person per year more than Swiss people, even though Swiss people have about the same level of income. Chart 3: Total health expenditure per capita and GDP per capita, 2009 (or nearest year)

7000

6000
NOR

5000

CHE NLD
DNK CAN AUT DEU FRA BEL IRL SWE

LUX

4000

3000

2000
CHL POL

GBR AUS ITA ISL NZL ESP FIN GRC JPN PRT SVN CZE SVK ISR
HUN KOR

EST RUS

1000
IND

BRA TUR ZAF MEX

CHN
IDN

0 0

15000

30000

45000

60000

75000

90000

GDP per capita (USD PPP)

Source: OECD Health Data 2011.

2.4

Health at a Glance 2011: OECD Indicators

2.

Where does the money go?

Health expenditure can be broken down into different categories of spending by type of care, that is, inpatient care, out-patient care, pharmaceuticals, public health and administration, etc. Chart 4 shows how the US compares to other OECD countries that spend a lot on health, including countries with a lot of private insurance (Switzerland, France and Germany). Chart 4: Health spending per capita by category of care, US and selected OECD countries, 2009
USD PPP $8,000

$7,598
(189%)

Other

Public health & administration Pharmaceuticals and medical goods Ambulatory (Physicians, specialists, dentists, etc.) Hospitals/Nursing homes

$7,000

$803
(274%)

$1,070
$6,000

(152%)

$5,144
$5,000

$339 $463 $2,803 $4,139 $434

$1,626 $860

$4,072 $271 $887

$4,000

(238%)

$3,872

$298 $842 $2,832 $121 $466

$787

$3,000

$1,171
$2,000

$1,254

$1,062

$2,922
$1,000

(163%)

$2,716 $1,643 $1,518 $1,639 $1,458

$UNITED STATES Switzerland Canada Germany France Japan (2008)

Note: Health spending excludes investments. The percentages in the US bar indicate how much more the US spends per category compared with the average of the five other OECD countries. Source: OECD Health Data 2011.

Hospital spending is higher than in the five other OECD countries, by over 60%. Spending on Ambulatory care providers that is, physicians and specialists as well as dentists, is much higher than in the other OECD countries almost two-and-a-half times the average of the other five countries. One of the explanations for this is the growth of same-day surgery in the US. Such services are an important innovation in health care delivery, often being preferred, when possible, by patients to staying overnight in a hospital. Estimates of spending on same-day surgery performed by independent physicians for 2003 and 2006 suggest that this has been the fastest growing area of health care over this period (Mckinsey Global Institute, 2008). Spending on Pharmaceuticals and medical goods is higher in the US than in any other country, but overall accounts for a smaller share of total health spending than in the other countries. Spending on Public Health and Administration is particularly high more than two-and-a-half times the average. Administration of the US health system alone accounts for about 7% share of total spending. This is on a par with other systems such as France and Germany which also have multipayer systems (even if in some of them there is no or little competition across payers). In comparison, Canada and Japan devote around 4% of health spending on administration. 3

Health at a Glance 2011: OECD Indicators

Leaving aside spending on administration, the high level of spending in the United States may be due to: The cost (or price) of health care being higher in the United States than elsewhere The United States providing more health care more doctors appointments, more surgery, more drugs, more diagnostic tests, longer stays in hospital than in other countries Some combination of the two.

Evidence suggests that prices are high (see next section) and some (but not all) quantities of services provided are high.

3.

Are US health prices high?

A 2010 OECD study (Koechlin et al., 2010) found the US price level of hospital services to be over 60% higher than the average of 12 other OECD countries in 2007.1 Looking at specific interventions, Table 1 shows that the price of a normal delivery in the United States was estimated to be more than 50% higher than in France or Canada, while the price of a caesarean section was 30% higher than in France and more than 50% higher than in Canada. The price of a knee replacement was about 20% higher in the United States than in France and 50% higher than in Canada, while a hip replacement costed 45% more in the United States than in these two countries. Table 1: Average unit quasi-prices of certain hospital procedures, in US dollars, US and selected OECD countries, 2007
Procedures Appendectomy Normal delivery Caesarean section Percutaneaous transluminal coronary angioplasty (PTCA) Coronary artery bypass graft Hip replacement Knee replacement Source: Koechlin et al. (2010). AUS 5 044 2 984 7 092 7 131 21 698 15 918 14 608 CAN 5 004 2 800 4 820 9 277 22 694 11 983 9 910 DEU 2 943 1 789 3 732 3 347 14 067 8 899 10 011 FIN 3 739 1 521 4 808 5 574 23 468 10 834 9 931 FRA 4 558 2 894 5 820 7 027 23 126 11 162 12 424 SWE 4 961 2 591 6 375 9 296 21 218 11 568 10 348 USA 7 962 4 451 7 449 14 378 34 358 17 406 14 946

Pharmaceutical prices are also higher in the United States than in other OECD countries. A recent study of the 50 top-selling prescription drugs found that US pharmaceutical prices were at least 60% higher than those in five large European countries in 2007.2 Overall, the evidence suggests that prices for health services and goods are substantially higher in the United States than elsewhere. This is an important cause of higher health spending in the United States.

Koechlin, F., L. Lorenzoni and P. Schreyer (2010), Comparing Price Levels of Hospital Services across Countries: Results of a Pilot Study, OECD Health Working Paper, No. 53, OECD Publishing, Paris. Kanavos, P. and S. Vandoros (2011), Drugs US: are prices too high?, Significance, The Royal Statistical Society, March 2011, pp.15-18.

Health at a Glance 2011: OECD Indicators

4.

Does the US provide too much health care?

More health care is not always better health care sometimes treatments are provided which are unnecessary, or even undesirable. There are enormous differences in how much health care different health systems supply. However, it is very difficult to say whether a country does too much, or too little. But what can be done is to indicate whether the United States does more or less than other countries. Table 2 shows where it does less. It does not have many physicians relative to its population; it does not have a lot of doctor consultations; it does not have a lot of hospital beds, or hospitals stays, when compared with other countries, and when people go to hospital, they do not stay for long. All these data on health care activities suggest that US health spending should be low compared with other countries. Table 2. Where the United States health system does LESS than other countries
United States Practising physicians 2.4 per 1 000 population Doctor consultations 3.9 per capita Hospital beds 3.1 per 1 000 population Hospital discharges 130.9 per 1 000 population Average length of stay in 4.9 days hospitals Source: OECD Health Data 2011. Rank compared with OECD countries 26th 29th 29th 26th 29th OECD average 3.1 per 1 000 population 6.5 per capita 4.9 per 1 000 population 158.1 per 1 000 population 7.2 days

On the other hand, the US health system does do a lot of interventions. Table 3 shows that it has a lot of expensive diagnostic equipment, which it uses a lot. And it does a lot of elective surgery the sort of activities where it is not always clearcut about whether a particular intervention is necessary or not. Table 3. Where the United States health system does MORE than other countries
United States MRI units 25.9 per million population MRI exams 91.2 per 1 000 population CT scanners 34.3 per million population CT exams 227.9 per 1 000 population Tonsillectomy 254.4 per 100 000 population Coronary angioplasty 377.2 per 100 000 population Knee replacements 212.5 per 100 000 population Caesarean sections 32.3 per 100 live births Source: OECD Health Data 2011. Rank compared with OECD countries 2nd 2nd 5th 2nd 2nd 3rd 1st 8th OECD average 12.2 per million population 46.6 per 1 000 population 22.8 per million population 131.8 per 1 000 population 133.8 per 100 000 population 187.6 per 100 000 population 118.4 per 100 000 population 25.8 per 100 live births

Hence overall the picture about whether the US spends more than other countries because its system does more than other countries is mixed. It does more of some activities, but less of others. Overall, it seems that high prices are probably a more important cause of high spending than high provision of services.

Health at a Glance 2011: OECD Indicators

Box: Is the quality of US health care better than in other countries?

Life expectancy in the United States is below the OECD average (78.2; average is 79.5), despite the high level of health spending. The United States is also below average on other measures, including infant mortality and potential years of life lost. However, these aggregate measures are not good measures of the effects of health spending on outcomes, as many other factors beyond health care affect mortality. Health at a Glance 2011 presents a set of indicators related more specifically to the quality of health care. The United States performs well in some subsystems such as cancer care and treating acute conditions in hospitals, but does not perform well in primary care and in preventing costly hospital admissions for chronic conditions. Cancer care system is generally performing very well. This is particularly true for breast cancer with high screening coverage and survival, and also for colorectal cancer (Charts 5 and 6). On the other hand, cervical cancer survival is still low compared with many other OECD countries, despite the high screening coverage. The quality of acute care in hospitals is generally good in the United States, compared with other OECD countries. In-hospital case fatality for AMI and ischemic stroke is lower than the OECD average. However, the primary care sector is still underdeveloped, adding financial burden to the health system. Costly hospital admissions have been high particularly for asthma and chronic obstructive pulmonary disease (COPD), even though such admissions could potentially be avoided if appropriate care is provided in primary care settings (Charts 7 and 8). The shortage of family doctors contributes to the poor primary care performance.

Chart 5: Breast cancer, five-year relative survival rate

United States (2003-08)

Chart 6: Colorectal cancer, five-year relative survival rate

Japan (2000-05) 68.0

89.3
87.3 86.6

Japan (2000-05)
Canada (2002-07) OECD (16 countries)

United States (2003-08)

Canada (2002-07) Germany (2003-08)

64.5
63.4 60.4 59.9 57.0

83.5
83.3 82.8 81.3 60 70 80 90 100 Age-standardised rates (%)

Germany (2003-08)
France (1997-2002) United Kingdom (2004-09)

OECD (16 countries)

France (1997-2002) United Kingdom (2004-09) 40

53.3
50 60 70 80 Age-standardised rates (%)

Chart 7: Asthma hospital admission rates, population aged 15 and over

Canada (2009)

Chart 8: COPD hospital admission rates, population aged 15 and over

France (2007)
Italy (2009) Canada (2009) 79 126

15.7
19.2 20.8

Italy (2009)
Germany (2009) France (2007) OECD (28 countries) United Kingdom (2009)

183
198 201 213 230 0 100 200 300 Age-sex standardised rates per 100 000 population

43.4
51.8 73.7 120.6

OECD (28 countries)

Germany (2009) United Kingdom (2009)

United States (2008)

United States (2008)

0 50 100 150 Age-sex standardised rates per 100 000 population

Note: 95% confidence intervals are represented by H. Source: OECD Health Data 2011.