U.S. health care spending in an international context: Why is U.S. spending so high, and can we afford it?

Health Affairs

Volumn 23, Issue 3, 2004, Pages 10-25

  Reinhardt, Uwe E ^a   Hussey, Peter S ^b   Anderson, Gerard F ^b  

^a PRINCETON UNIVERSITY   (United States)

^b JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC HEALTH   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

DRUG COST; ECONOMIC ASPECT; ECONOMIC DEVELOPMENT; HEALTH CARE COST; HEALTH CARE MANAGEMENT; HEALTH CARE ORGANIZATION; HEALTH CARE POLICY; HEALTH CARE SYSTEM; INTERNATIONAL COOPERATION; POPULATION DISTRIBUTION; PRESCRIPTION; PROSPECTIVE PAYMENT; PUBLIC HEALTH SERVICE; REVIEW; SOCIAL MARKETING; UNITED STATES;

DELIVERY OF HEALTH CARE; DRUG COSTS; HEALTH CARE RATIONING; HEALTH EXPENDITURES; INTERNATIONALITY; SOCIOECONOMIC FACTORS; UNITED STATES; WORLD HEALTH;

EID: 2442655448     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.23.3.10     Document Type: Review

References (51)

1. See, for example, H.J. Aaron and W.B. Schwartz, "Managed Competition: Little Cost Containment without Budget Limits," Health Affairs 12 (Supplement 1993): 204-215.
2. Data provided by the Office of the Actuary, Centers for Medicare and Medicaid Services (CMS), show that the breakdown of the average percentage contribution to total growth in U.S. health spending during 1990-2002, not adjusted for inflation, was as follows: population growth, 15 percent; general price inflation, 32 percent; medical care price inflation over and above general price inflation, 23 percent; and use of services (such as physician visits, inpatient days, and so on), intensity of services (including whatever waste there may have been in service use and intensity), and statistical errors, 30 percent. There were, however, considerable year-to-year variations in these percentage contributions around these 1990-2002 averages. Katharine Levit, CMS Office of the Actuary, personal communication, 24 January 2004.
3. Purchasing power parities (PPPs) adjust for cost-of-living differences between countries by comparing the price of an economywide market basket of goods.
4. M.E. Chernew, R.A. Hirth, and D.M. Cutler, "Increased Spending on Health Care: How Much Can the United States Afford?" Health Affairs 22, no. 4 (2003): 15-25, Exhibit 1.
5. S. Heffler et al., "Health Spending Projections through 2013," Exhibit 1, Health Affairs, 11 February 2004, content.healthaffairs.org/cgi/ content/abstract/hlthaff.w4.79 (12 February 2004).
6. G.F. Anderson et al., "It's the Prices, Stupid: Why the United States Is So Different from Other Countries," Health Affairs 22, no. 3 (2003): 89-105; U.E. Reinhardt, P.S. Hussey, and G.F. Anderson, "Cross-National Comparisons of Health Systems Using OECD Data, 1999," Health Affairs 21, no. 3 (2002): 169-181; G.F. Anderson and P.S. Hussey, "Comparing Health System Performance in OECD Countries," Health Affairs 20, no. 3 (2001): 219-232; and G.F. Anderson et al., "Health Spending and Outcomes: Trends in OECD Countries, 1960-1998," Health Affairs 19, no. 3 (2000): 150-157.
7. G.F. Anderson et al., "It's the Prices, Stupid: Why the United States Is So Different from Other Countries," Health Affairs 22, no. 3 (2003): 89-105; U.E. Reinhardt, P.S. Hussey, and G.F. Anderson, "Cross-National Comparisons of Health Systems Using OECD Data, 1999," Health Affairs 21, no. 3 (2002): 169-181; G.F. Anderson and P.S. Hussey, "Comparing Health System Performance in OECD Countries," Health Affairs 20, no. 3 (2001): 219-232; and G.F. Anderson et al., "Health Spending and Outcomes: Trends in OECD Countries, 1960-1998," Health Affairs 19, no. 3 (2000): 150-157.
8. G.F. Anderson et al., "It's the Prices, Stupid: Why the United States Is So Different from Other Countries," Health Affairs 22, no. 3 (2003): 89-105; U.E. Reinhardt, P.S. Hussey, and G.F. Anderson, "Cross-National Comparisons of Health Systems Using OECD Data, 1999," Health Affairs 21, no. 3 (2002): 169-181; G.F. Anderson and P.S. Hussey, "Comparing Health System Performance in OECD Countries," Health Affairs 20, no. 3 (2001): 219-232; and G.F. Anderson et al., "Health Spending and Outcomes: Trends in OECD Countries, 1960-1998," Health Affairs 19, no. 3 (2000): 150-157.
9. G.F. Anderson et al., "It's the Prices, Stupid: Why the United States Is So Different from Other Countries," Health Affairs 22, no. 3 (2003): 89-105; U.E. Reinhardt, P.S. Hussey, and G.F. Anderson, "Cross-National Comparisons of Health Systems Using OECD Data, 1999," Health Affairs 21, no. 3 (2002): 169-181; G.F. Anderson and P.S. Hussey, "Comparing Health System Performance in OECD Countries," Health Affairs 20, no. 3 (2001): 219-232; and G.F. Anderson et al., "Health Spending and Outcomes: Trends in OECD Countries, 1960-1998," Health Affairs 19, no. 3 (2000): 150-157.
10. J.P. Newhouse, "An Iconoclastic View of Cost Containment," Health Affairs (Supplement 1993): 153-171.
11. U.-G. Gerdtham and B. Jönsson, "International Comparisons of Health Expenditure," in Handbook of Health Economics, vol. 1A, ed A.J. Culyer and J.P. Newhouse (New York: Elsevier, 2000), 11-53.
12. The estimated equation is Y = .0022G1.3623, R2 = .94, where Y is predicted health spending per capita and G is GDP per capita, both in PPP$. The underlying regression equation excludes Luxembourg and Norway. Luxembourg's GDP is unusually high from international financial services, and Norway's is unusually high by virtue of its oil revenues.
13. Anderson et al., "It's the Prices, Stupid."
14. Ibid.; and P.S. Hussey and G.F. Anderson, "A Comparison of Single- and Multi-Payer Health Insurance Systems and Options for Reform," Health Policy 66, no. 3 (2003): 215-228.
15. Ibid.; and P.S. Hussey and G.F. Anderson, "A Comparison of Single- and Multi-Payer Health Insurance Systems and Options for Reform," Health Policy 66, no. 3 (2003): 215-228.
16. M.V. Pauly, "U.S. Health Care Costs: The Untold True Story," Health Affairs 12, no. 3 (1993): 152-159.
17. We recognize that these data can be beset by measurement errors - for example, by differences in the definition of "nurses" or "beds," and so on. Even so, we believe that the OECD database in this regard does portray a rough-and-ready index of real resource endowments.
18. Health Resources and Services Administration, Graduate Medical Education and Public Policy: A Primer (Washington: HRSA, December 2000).
19. Anderson et al., "It's the Prices, Stupid"; and E.P. Slade and G.F. Anderson, "The Relationship between Per Capita Income and Diffusion of Medical Technologies," Health Policy 58, no. 1 (2001): 1-14.
20. Anderson et al., "It's the Prices, Stupid"; and E.P. Slade and G.F. Anderson, "The Relationship between Per Capita Income and Diffusion of Medical Technologies," Health Policy 58, no. 1 (2001): 1-14.
21. See, for example, McKinsey Global Institute, Health Care Productivity (Los Angeles: McKinsey and Company, October, 1996), Exhibit 5. The institute concluded that in 1990 the U.S. health system had higher clinical productivity than the German health system but that virtually all of that higher clinical productivity was absorbed by higher administrative costs.
22. H.J. Aaron, "The Cost of Health Care Administration in the United States and Canada - Questionable Answers to a Questionable Question," New England Journal of Medicine 349, no. 8 (2003): 801-303.
23. S. Woolhandler, T. Campbell, and David U. Himmelstein, "Costs of Health Care Administration in the United States and Canada," New England Journal of Medicine 349, no. 8 (2003): 768-775.
24. Karen Davis, president, Commonwealth Fund, "American Health Care: Why So Costly?" (Invited testimony before the Senate Appropriations Subcommittee on Labor, Health and Human Services, Hearing on Health Care Access and Affordability: Cost Containment Strategies, 11 June 2003), 2.
25. J. Le Grand, "Methods of Cost Containment: Some Lessons from Europe" (Paper presented at the Fourth International Health Economics Association World Congress, San Francisco, June 2003), 6.
26. N. Devlin, J. Appleby, and D. Parkin, "Patients' Views of Explicit Rationing: What Are the Implications for Health Service Decision-Making?" Journal of Health Services Research and Policy 8, no. 3 (2003): 183-186.
27. See Institute of Medicine, Care without Coverage: Too Little, Too Late (Washington: National Academies Press, 2002), Executive Summary. For a story on explicit rationing for uninsured Americans, see B. Wysocky Jr., "At One Hospital, a Stark Solution for Allocating Care," Wall Street Journal, 23 September 2003. This is a story about the withholding of life-saving medicines from uninsured patients.
28. See Institute of Medicine, Care without Coverage: Too Little, Too Late (Washington: National Academies Press, 2002), Executive Summary. For a story on explicit rationing for uninsured Americans, see B. Wysocky Jr., "At One Hospital, a Stark Solution for Allocating Care," Wall Street Journal, 23 September 2003. This is a story about the withholding of life-saving medicines from uninsured patients.
29. The sixth and final report is IOM Committee on the Consequences of Uninsurance, Insuring America's Health: Principles and Recommendations (Washington: National Academies Press, 2004). All reports can be found on the IOM Web site, www.iom.edu/project.asp?id=4660 (31 January 2004).
30. Mark B. McClellan, commissioner, Food and Drug Administration, "Speech before First International Colloquium on Generic Medicine" (esp. pp. 3-5), Cancun, Mexico, 25 September 2003, www.fda.gov/oc/speeches/2003/ genericdrug0925.html (12 December 2003). (McClellan became the administrator of the Centers for Medicare and Medicaid Services in 2004.)
31. E. Becker, "U.S. Fights for Higher Drug Prices Overseas," International Herald Tribune, 27 November 2003, iht.com/articles/119318.htm (12 December 2003).
32. See U.E. Reinhardt, "An Information Infrastructure for the Pharmaceutical Market," Health Affairs 23, no. 1 (2004): 107-112, Exhibit 1.
33. See, for example, H.A. Huskamp et al., "The Medicare Prescription Drug Benefit: How Will the Game Be Played?" Health Affairs 19, no. 2 (2000): 8-23; and P. Kanavos and U.E. Reinhardt, "Reference Pricing for Drugs: Is It Compatible with U.S. Health Care," Health Affairs 22, no. 3 (2003): 16-28.
34. See, for example, H.A. Huskamp et al., "The Medicare Prescription Drug Benefit: How Will the Game Be Played?" Health Affairs 19, no. 2 (2000): 8-23; and P. Kanavos and U.E. Reinhardt, "Reference Pricing for Drugs: Is It Compatible with U.S. Health Care," Health Affairs 22, no. 3 (2003): 16-28.
35. P.M. Danzon and M.F. Furukawa, "Prices and Availability of Pharmaceuticals: Evidence from Nine Countries," Health Affairs, 29 October 2003, content.healthaffairs.org/cgi/content/abstract/hlthaff.w3.521 (12 February 2004).
36. President George W. Bush, "Compassionate Conservatism: What Does It Mean Now?" The Commonwealth (Publication of the Commonwealth Club of California), 18 June 2002, 3-8.
37. Personal expenditure, one of the main components of GDP, includes purchases of goods and services by individuals resident in the United States.
38. D.M. Cutler and M. McClellan, "Is Technological Change in Medicine Worth It?" Health Affairs 20, no. 5 (2001): 11-29. See also the series of essays in K.M. Murphy and R.H. Topel, Measuring the Gains from Medical Research: An Economic Approach (Chicago: University of Chicago Press, 2003).
39. D.M. Cutler and M. McClellan, "Is Technological Change in Medicine Worth It?" Health Affairs 20, no. 5 (2001): 11-29. See also the series of essays in K.M. Murphy and R.H. Topel, Measuring the Gains from Medical Research: An Economic Approach (Chicago: University of Chicago Press, 2003).
40. L.T. Kohn, J.M. Corrigan, and M.S. Donaldson, eds., To Err Is Human: Building a Safer Health System (Washington: National Academies Press, 2000); IOM, Crossing the Quality Chasm (Washington: National Academies Press, 2002); and E.S. Fisher et al., "The Implications of Regional Variations in Medicare Spending, Part 1: The Content, Quality, and Accessibility of Care," Annals of Internal Medicine 138, no. 4 (2003): 273-287.
41. L.T. Kohn, J.M. Corrigan, and M.S. Donaldson, eds., To Err Is Human: Building a Safer Health System (Washington: National Academies Press, 2000); IOM, Crossing the Quality Chasm (Washington: National Academies Press, 2002); and E.S. Fisher et al., "The Implications of Regional Variations in Medicare Spending, Part 1: The Content, Quality, and Accessibility of Care," Annals of Internal Medicine 138, no. 4 (2003): 273-287.
42. L.T. Kohn, J.M. Corrigan, and M.S. Donaldson, eds., To Err Is Human: Building a Safer Health System (Washington: National Academies Press, 2000); IOM, Crossing the Quality Chasm (Washington: National Academies Press, 2002); and E.S. Fisher et al., "The Implications of Regional Variations in Medicare Spending, Part 1: The Content, Quality, and Accessibility of Care," Annals of Internal Medicine 138, no. 4 (2003): 273-287.
43. Calculated from Chernew et al., "Increased Spending on Health Care," Exhibit 1.
44. I b i d.
45. Heffler et al., "Health Spending Projections through 2013," Exhibit 1.
46. Conversion to constant dollars is made with the chain-weighted GDP deflator, assumed by the actuaries to rise at a rate of 2.55 per year during the decade. The assumed annual population growth rate is 0.81 percent.
47. Chernew et al., "Increased Spending on Health Care."
48. Henry J. Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits Survey: 2003, Summary and Findings (Menlo Park, Calif.: KFF/HRET, 9 September 2003), Exhibit 1.
49. Ibid., Exhibit 2.
50. See, for example, M.L. Katz and H.S. Rosen, Microeconomics (Homewood, Ill.: Richard D. Irwin Inc., 1991), 15-16; and U.E. Reinhardt, "Rationing in Health Care: What It Is, What It Is Not, and Why We Cannot Avoid It," in Strategic Choices for a Changing Health System, ed. S.H. Altman and U.E. Reinhardt (Chicago: Health Administration Press, 1996), 63-99.
51. See, for example, M.L. Katz and H.S. Rosen, Microeconomics (Homewood, Ill.: Richard D. Irwin Inc., 1991), 15-16; and U.E. Reinhardt, "Rationing in Health Care: What It Is, What It Is Not, and Why We Cannot Avoid It," in Strategic Choices for a Changing Health System, ed. S.H. Altman and U.E. Reinhardt (Chicago: Health Administration Press, 1996), 63-99.