U.S. health spending vs. outcomes: What’s the issue?

In the most recent installment on the Lewis & Ellis blog, the issue of what Americans spend on their health care each year was examined at length. The expenditure on everything from insurance to care itself is astronomical, making up a huge portion of the U.S. gross domestic product and spending issues are expected to become more significant as time goes on and the national population of baby boomers ages.

It's worth noting, however, that plenty of data suggests Americans young and old largely aren't getting what they pay for when it comes to health care. Almost every other highly industrialized nation spends far less – both in real dollars and as a portion of their GDP – on health-related expenditures and gets far more bang for their buck.

A closer look
The Peter G. Peterson foundation recently found that the U.S. ranks near the bottom of dozens of similar nations in the 36-member Organisation for Economic Co-operation and Development in terms of life expectancy at birth, infant mortality and safety during childbirth. Similarly low scores came for people suffering from serious health issues; unmanaged chronic issues like asthma and diabetes are also rampant in comparison with other nations, while the likelihood of dying from a heart attack is more or less in the middle.

The U.S. also has the single highest rate of being overweight and obese among people age 15 and up. Its rate of diabetes is also in the top 10 among this group.

Overall, the U.S. has the single largest GDP of any nation on earth, and spends 16.9% of that on its health care. The average OECD nation comes in at only a little more than half that number, at 8.8%.

Other comparisons
Similar nations in the OECD have largely seen mortality rates decline since 1980, further data from the Kaiser Family Foundation showed. As recently as the early 2000s, the United States had a higher life expectancy than a number of other member nations, but since the mid-1980s, it's held steady above the OECD average. Since 2005, however, all other countries in the organization surpassed the U.S. by this measure, and the gap seems to be broadening on an annual basis at this point, though the most recent data set ends in 2015.

As of 2016, the amount of access to high-quality care in the U.S. ranks well below the average for similar OECD nations on the Peterson-Kaiser Health System Tracker's index. The U.S. came in at a reading of 88.7, well below the comparable-country average of 93.7, and far behind the top three of the Netherlands, Australia and Sweden, all with rankings of 95.5 or better.

What's the cause?
One big driver of higher health care costs in the U.S. can be attributed, in part, to a small fraction of people who face significant expenses, amounting to tens of thousands of dollars. In any given year, about 5% of all patients nationwide account for roughly half of health care spending, with only a little more than 1% – those with chronic issues they need to deal with every year – contributing to nearly a fifth of outlay.

Beyond that, a study from the Harvard T.H. Chan School of Public Health, the Harvard Global Health Institute and the London School of Economics found other factors at play. For instance, because the U.S. largely relies on privatized organizations to handle care and insurance, administrative costs made up 8% of all health spending in the U.S. in 2016, versus the global range of between 1% and 3%.

Furthermore, the average person in the U.S. spends more than $1,400 per year on pharmaceuticals, versus the maximum of slightly more than $900 in other nations. Moreover, the average American general practitioner earns a salary of more than $218,000 here, compared with a maximum of just over $154,000 elsewhere.

Uneven distribution
It should come as little surprise to those in the U.S. that some states have health outcomes far better than the national average, and others where they are significantly worse. A study published in the Journal of the American Medical Association found that while health outcomes have certainly improved nationwide between 1990 and 2016, and those improvements were seen for some types of mortality risks at every part of the country, 21 states nonetheless saw their overall mortality risk increase at least somewhat.

In addition, while most states had at least one category (out of 20 examined) in which their health risks were better than the national average, there were 10 in which averages were at or below U.S. norms in all categories. By contrast, just seven states were at or above the average in all 20.

These disparities can be explained by some states spending significantly more on health care because they have higher rates of insurance, more insurance options, a larger number of available care providers and so on, according to the Commonwealth Fund. A strong correlation exists between states where little to no action has been taken to expand access to health insurance and poorer health outcomes.

With that in mind, those in the health insurance and services industries may need to do more to ensure the average American has access to comprehensive, low-cost coverage and care.