Labor, administrative costs drive US healthcare spending far beyond other nations
Despite efforts to control healthcare costs, the U.S. is still spending about twice as much as other high-income countries on medical care, according to a new JAMA report.
These costs are despite similar utilization rates for the U.S. compared to the other nations.
The study found that labor and goods, including pharmaceuticals, and administrative costs are the major differences driving U.S. healthcare costs.
The study compared potential spending drivers, including structural capacity and utilization, in the U.S. and 10 high-income countries (the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland and Denmark).
The researchers looked at data from 2013-2016 and found nearly 18% of the U.S. gross domestic product was spent on healthcare. The other countries ranged from 9.6% (Australia) to 12.4% (Switzerland). The U.S. insured population of 90% was also well below the other countries that ranged from 99% to 100%. The U.S. also had the highest percentage of private health insurance (55.3%).
One positive — the U.S. ranked second lowest for smokers — was offset by the country having the highest percentage of adults who were either overweight or obese, the lowest life expectancy and highest infant mortality.
The American numbers for physician and nursing workforce and number of hospital beds were similar to the other nations. The U.S. was also similar concerning utilization rates for acute myocardial infarction, pneumonia, chronic obstructive pulmonary disease, hip replacement, knee replacement and coronary artery bypass graft surgery.
However, the U.S. had higher utilization of magnetic resonance imaging and CT scans compared to the others.
Though utilization in many areas mirrored other nations, administrative costs in the U.S. system dwarfed other countries. These costs, which include planning, regulating and managing health systems and services, accounted for 8% of costs in the U.S. compared to between 1% and 3% in the other countries.
The U.S. is also spending much more on pharmaceutical costs. The U.S. spending on pharmaceuticals per capita was $1,443 compared to $466-$939 for the others.
Salaries for physicians and nurses were also higher in the U.S. Generalist physician salaries were $218,173 in the U.S., compared to a range of $86,607 to $154,126 in other countries.
Everyone agrees U.S. healthcare costs are a problem, and this report helps show the magnitude. U.S. healthcare spending is projected to rise another 5.5% annually on average between 2017 and 2026, the Office of the Actuary at CMS recently reported. The data, published in Health Affairs, forecast healthcare will represent almost 20% of the economy by 2026, up from 17.9% in 2016.
That report said the average growth in prices for medical goods and services (2.5%) and use and intensity (1.7%) are expected to account for roughly three-fourths of the healthcare spending growth in the next decade.
Another recent JAMA report explored how administrative costs like billing and insurance processes are driving healthcare costs. The report found billing costs represented 14.5% of professional revenue for primary care visits, 25.2% for ED visits, 8% for general medicine inpatient stays, 13.4% for ambulatory surgical procedures and 3.1% for inpatient surgical procedures.
The Trump administration has been targeting one area that can ramp up costs with efforts to roll back regulatory burdens. HHS released a report in January that said 70 healthcare regulatory actions were withdrawn in 2017. HHS said more than $3 billion was recovered through cutting waste, fraud and abuse.
Another area that contributes to costs is caring for the chronically ill. A recent report by the Health Care Cost Institute in the New England Journal of Medicine found that the highest healthcare spenders accounted for 53% of healthcare spending in 2015. However, it’s not easy to predict which individuals will be big spenders in a given year.
The report found that three out of five top spenders in any given year were not top spenders the previous year. That makes it difficult for healthcare organizations to get ahead of tackling costs associated with the highest spenders.
- Healthcare Dive Healthcare spending to reach 19.7% of GDP within a decade