U.S. health care costs growing more slowly, but we still spend way more than everyone else – without getting our money’s worth

January 10, 2013 | Alex Stone

U.S. health care costs grew by 3.9% in 2011 (as it did from 2009-10), which looks pretty modest compared to the average 6.8% increases of the last decade. But keep in mind that the total U.S. health care was $2.7 trillion in 2011 — far more than any other country in the world, and equivalent to nearly 18% of our entire economy, or $8,680 for every man, woman and child living here. Here’s how we stack up compared to other nations:

US health care and the world, oced

2010 health expenditures by country per capita. (Data collected by the OCED, an international economic development group.)

Since 2002, American health care premiums have¬†increased 97% — three times faster than either wages or inflation. If Americans had better health outcomes than anywhere else in the world, maybe that could be (partially) justified. But that’s not the case. In fact, the U.S. ranked dead last in a 2010¬†study comparing our health care to Australia, Canada, Germany, the Netherlands, New Zealand, and the United Kingdom.

So why, after a decade of steep increases, is spending slowing down? According to a recent AP story, one possibility is a shift to high-deductible plans that discourage preventive care – meaning fewer people going to the doctor – and another is simply a weak economy. But it seems plausible since Obamacare now requires insurers to publicly justify certain rate increases, it’s become harder to do so:

By requiring insurance companies to further document, submit for review, and publicly justify rate increases above a certain level, consumers are able to better understand their premiums and shop for health insurance.

Obamacare also requires health insurance companies to spend 80% of premium dollars directly on health care delivery – and limits them to 20% for¬†administration, salaries, advertising, etc. These cost controls are also likely having an impact on out-of-control cost growth. Whether that’s sufficient to eventually bring health care costs into alignment with the economy remains to be seen.

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Posted in Health Care

Comments

  1. Winslow P. Kelpfroth says:

    good piece. It’s certainly true that the prices of medical services have grown faster than the economy; that’s one of the features of a theoretical monopsony. The late James Buchanan had a bit to say on this. May he rest in peace.

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