- Winter 2006-

U.S. Spends More on Health Care Than Any Other Country

The U.S. continues to spend significantly more on health care than any country in the world. In 2005, Americans spent 53% per capita more than the next highest country, Switzerland, and 140% above the median industrialized country, according to new research from the Johns Hopkins Bloomberg School of Public Health.

The study authors analyzed whether two possible reasons supply constraints and malpractice litigation could explain the difference in health care costs. They found that neither factor accounted for a large portion of the U.S. spending differential. The study was featured in a summer issue of the journal Health Affairs.

“It is commonly believed that waiting lists in other countries and malpractice litigation in the United States are major reasons why the United States spends so much more on health care than other countries. We found that they only explain a small part of the difference,” says Gerard Anderson, lead author of the study and a professor in the Bloomberg School of Public Health’s Department of Health Policy and Management.

The study authors reviewed health care spending data on 30 countries from the Organization for Economic Cooperation and Development (OECD) for the year 2003. U.S. citizens spent $5,267 per capita on health care. The country with the next highest per capita expenditure, Switzerland, spent $3,446 per capita. The median OECD country spent $2,193 per capita.

One of the commonly cited reasons why U.S. citizens spend more on health care than other countries is that these other countries have waiting lists, especially for elective surgery. The procedures with waiting lists in these other countries, however, represent only three percent of spending and therefore cannot explain much of the cost differential.

Another perceived cause of higher health care costs in the U.S. is that malpractice suits increase the prices charged by doctors and cause them to practice defensive medicine, which occurs when doctors order extra tests or procedures to reduce their risk of being sued. The researchers compared the number of malpractice claims and awards in the U.S., Canada, Australia and the United Kingdom and found that while U.S. citizens sue more often, the actual settlements from all four countries were comparable.

According to the study authors, defensive medicine probably contributes more to higher health spending than malpractice premiums, but determining which tests and second opinions should be defined as defensive medicine is less clear. The highest estimate for costs of defensive medicine in the U.S. is only nine percent and many experts believe this number is too high.

“As in previous years, it comes back to the fact that we are paying much higher prices for health care goods and services in the United States. Paying more is okay if our outcomes were better than other countries. But we are paying more for comparable outcomes,” says Anderson, who is also the director of the Johns Hopkins Center for Hospital Finance and Management.

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