If the US is spending 5% more GDP on healthcare than the next highest country, what’s the cause? The findings were fairly conclusive; Administration Costs and Pharmaceuticals are bearing the force.

I have this strange drive to at least comprehend ninety-percent of what I do for a living, so to a data guy toiling away in a healthcare world, it means quite a bit of reading. Less summer reading and more textbook. Where your main character is the hypothesis and the plot curve is more a measurement of standard deviation. Luckily, I really enjoy reading those types of things, so you can imagine my joy when I happened to come across this gem from the JAMA Network.

Health Care Spending in the United States and Other High-Income Countries
While I would encourage you to read the full paper using the link above **, I understand the time you took to come to a blog was not intended to rub your eyes with toast… so I will summarize:

As the paper suggests, three researchers set out to find the culprit for the notably high healthcare costs in the United States, as they contrast with other countries of similar incomes (US population is significantly larger and considered). They looked at 7 domains using a total of 98 indicators: (1) general spending; (2) population health; (3) structural capacity; (4) utilization; (5) pharmaceuticals; (6) access and quality; and (7) equity.


The Raw Data

The raw data alone is sort of staggering. I’ve never thought to seek out these figures, so perhaps this isn’t news to anyone but me.
– In 2016, the US spent 17.8% of its gross domestic product on health care, and spending in the other countries ranged from 9.6% (Australia) to 12.4% (Switzerland).

– Life expectancy in the US was the lowest of the 11 countries at 78.8 years (range for other countries, 80.7-83.9 years; mean of all 11 countries, 81.7 years).

– Administrative costs of care (activities relating to planning, regulating, and managing health systems and services) accounted for 8% in the US vs a range of 1% to 3% in the other countries.

– Pharmaceutical spending per capita was $1443 in the US vs a range of $466 to $939 in other countries.

– The United States had the highest percentage of overweight or obese adults but had relatively low smoking rates.

– The drinking rate and unemployment rate in the United States are both close to the mean values of all 11 countries.

I would keep going because, well, data… but that’s just a small taste. The interesting thing about all of this was how the utilization of health care services per capita was relatively on par with the other countries. USA came in second and first for use of MRI and CT scans, respectively (U-S-A! U-S-A!). Otherwise, annual discharges for America were just below the mean. Common surgeries were somewhat more frequent, but nothing that would be considered outlying.

Where’s the money going then?



“Prices of labor and goods, including pharmaceuticals and devices, and administrative costs appeared to be the main drivers of the differences in spending.”

Is this a Sixth Sense, Kaiser Soze, Darth Vader-type reveal? I don’t know that it is. Worth noting that the Discussion section of the paper takes to task some common conceptions. Ideas that are colloquially accepted, but perhaps shouldn’t be.

Again, quoting:

“The data also suggests that some of the more common explanations about higher health care spending in the United States, such as under-investment in social programs, the low primary care/specialist mix, the fee-for-service system encouraging high volumes of care, or defensive medicine leading to over-utilization, did not appear to be major drivers of the substantially higher US health care spending compared with other high-income countries. Instead, the data suggest that the main driving factors were likely related to prices, including prices of physician and hospital services, pharmaceuticals, and diagnostic tests, which likely also affected access to care. In addition, administrative costs appeared much higher in the United States.”

I found this to be quite paradigm shifting. While the administrative costs are easy to explain as a cost-driver, the fact that the commonly accepted suspects have little-to-no discernible effect (as they relate in like countries) was fairly shocking to me.

It’s very easy to shake your head at something like this but I’m an optimist. This is great news if you think about it. Follow me for a moment: The US health-care environment at such a high-level (social programs, fee-for-service) is generally comparable with countries where costs are lower. Those are enormous factors and too big to change without changing the mind of a nation. The actual problem is far less cumbersome. Administrations can enact change at a local level that would go a long way to bringing down their costs. Assuming your administration is less than 350 million people, that reduction is far more possible than upheaving Congress.

Of course, how do you do that? How do you reduce costs and streamline processes? If you only knew some company who has experience in the industry, doing this exact sort of thing for decades. A company you might possibly consult with.

You can’t see this but I’m pointing to our website really vigorously…

* Quote attributed to Sherry A. Rogers… I am not that clever.

** Note that if you happen to go to the article itself, you can look at all the figures and tables the researchers put together. I happened upon them and was literally bouncing in my chair. Christmas comes early this year.