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Life Health > Health Insurance > Health Insurance

Analyst: Obesity, Unit Costs Drive U.S. Health Spending

By Allison Bell

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The United States has fewer physicians, specialists and hospital beds per 1,000 residents than other developed countries that have much less expensive health care systems.

David Squires, an analyst at the Commonwealth Fund, New York, includes those observations in a paper in which he suggests that high obesity rates might play some role in driving up U.S. health care costs but that the very high cost of U.S. medical services may play an even bigger role.

Squires conducted the analysis using data from the Organization for Economic Cooperation and Development (OECD), Paris, and other sources. He compared health care spending, supply, utilization, prices, and quality in Australia, Canada, Denmark, France, Germany, Japan, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States.

High spending in the United States “cannot be attributed to higher income, an older population, or greater supply or utilization of hospitals and doctors,” Squires says.

The populations in many other OECD countries are older than the U.S. population, and some have higher per-capita incomes, Squires says.

The United States has just 2.4 practicing physicians per 1,000 residents and just 2.7 acute care hospital beds per 1,000 residents. The median figures for all OECD countries are 3 physicians and 3.2 hospital beds per 1,000 residents.

But, even after adjusting for differences in the cost of living, U.S. hospital spending per discharge is about 50% higher than the spending per discharge in the countries with the next biggest hospital spending amounts, Canada and the Netherlands, Squires says.

U.S. hospital spending per discharge is more than twice as high as spending per discharge in Australia, New Zealand, France and Germany.

The cost of 30 common generic drugs is half as much in the United States as in the rest of the OECD countries, but the brand-name versions cost 2.5 times as much in the United States as the OECD median. Because of the high expense of brand-name drugs in the United States, the overall cost of the drugs studied appears to be about twice as high in the United States as the OECD median, Squires says.

The amounts primary care physicians get from public and private payers for office visits are in line with the payment rates in other OECD countries, but the amounts U.S. orthopedic physicians get from private insurers for hip replacements are about twice as high as the amounts private insurers would pay in other OECD countries, Squires says.

Squires also looked at physician incomes.

Adjusted for differences in the cost of living, a U.S. primary care doctor makes about $187,000, compared with an average of $159,000 for U.K. primary care doctors, $132,000 for German primary care doctors and $125,000 for Canadian primary care doctors.

The gaps are bigger for orthopedic surgeons.

The surgeons average $442,000 in annual income in the United States and $324,000 in annual income in the United Kingdom. The average was less than $210,000 in all of the other countries studied.

U.S. residents were much more likely to get knee replacement surgery than other OECD country residents were in 2009, but they were somewhat less likely than other OECD country residents to get hip replacement surgery. 

The Japanese system was the least expensive health care system included in the study.

“Notably, the Japanese do not restrain spending by restricting access; rather, they do so by aggressively regulating health care prices,” Squires says. “Every two years, a panel of experts uses volume projections to revise the national fee schedule, which determines the maximum prices for nearly all health services, to keep total health spending growth within a target set by the central government. Providers’ profitability is also monitored, and when certain categories of providers (e.g., acute care hospitals or ambulatory specialists) demonstrate significantly greater profitability than the average, prices for their services are reduced.”

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