July 22, 2019

The cost and quality of the U.S. healthcare system is one of the most prominent issues facing everyday Americans. It is a top policy concern for voters, a key indicator of economic efficiency, and a significant driver of the national debt. The recent release of the Organisation for Economic Co-operation and Development’s (OECD) 2019 Health Statistics — a comprehensive source of comparable statistics on healthcare systems across OECD member countries — provides policymakers and the public with some insight on how America’s healthcare system compares to others.

The United States is an Outlier in Healthcare Spending

The U.S. devotes more of its national income to healthcare relative to other OECD countries. On average, healthcare spending across these countries has remained in line with overall economic growth in the past decade. Since the financial crisis, health spending across the OECD averaged about 8.8 percent of gross domestic product (GDP) annually. Healthcare spending in the U.S., however, has risen from 16.4 percent of GDP in 2009 to 16.9 percent of GDP in 2018 — the highest among all OECD countries.

Healthcare expenditures in the U.S. are significantly higher than those of other developed countries

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The United States Spends More on Healthcare per Person than Other Wealthy Countries

The amount of resources a country allocates for healthcare varies as each country has its own political, economic, and social attributes that help determine how much it will spend. Generally, wealthier countries — such as the United States — will spend more on healthcare than countries that are less affluent. As such, it helps to compare healthcare spending in the U.S. to spending in other comparatively wealthy countries — those with GDP and per capita GDP above the median.

In 2018, the U.S. spent about $10,600 per person on healthcare — the highest healthcare costs per capita across the OECD. For comparison, Switzerland was the second highest-spending country with about $7,300 in healthcare costs per capita, while the average for wealthy OECD countries, excluding the United States, was only $5,300 per person. Such comparisons indicate that the U.S. spends a disproportionate amount on healthcare.

Per capita healthcare spending in the U.S. is almost twice the average of other wealthy, developed countries

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Why Is the United States Spending More on Healthcare?

Healthcare spending is driven by utilization (the number of services used) and price (the amount charged per service). An increase in either of these factors can result in higher healthcare costs. Despite spending nearly twice as much on healthcare per capita, utilization rates in the U.S. do not differ significantly from other wealthy OECD countries. Prices, therefore, appear to be the main driver of the cost difference between the U.S. and other wealthy countries. In fact, prices in the U.S. tend to be higher regardless of utilization rates. For example, the Peterson-Kaiser Health System Tracker notes that the U.S. has shorter hospital stays, fewer angioplasty surgeries, and more knee replacements than comparable countries, yet the prices for each are higher in the U.S.

There are many possible factors for why healthcare prices in the U.S. are higher than other countries, ranging from the consolidation of hospitals — leading to a lack of competition — to the inefficiencies and administrative waste that derive from the complexity of the U.S. healthcare system. In fact, the U.S. spends over $800 per person on administrative costs — nearly five times more than the average of other wealthy countries and significantly more than we spend on preventive or long-term healthcare.

The U.S. spends significantly more on administration costs, but less on long-term healthcare, than other wealthy countries

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Does this Higher Spending Lead to Better Outcomes?

Higher healthcare spending can be beneficial if it results in better health outcomes. However, despite higher healthcare spending, America’s health outcomes are not any better than those in other developed countries. The U.S. actually performs worse in some common health metrics like life expectancy, infant mortality, and unmanaged diabetes.

Although the United States spends more on healthcare than other developed countries, its health outcomes are generally not any better

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A healthcare system with high costs and poor outcomes undermines our economy and threatens our long-term fiscal and economic well-being. Fortunately, there are opportunities to transform our healthcare system into one that produces higher quality care at a lower cost. For more information on potential reforms, visit our solutions page and the Peterson Center on Healthcare.


Related: Healthcare Costs for Americans Projected to Grow at an Alarmingly High Rate


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