Why does US health care cost so much and deliver so little?

Can we improve access and outcomes?

We spend a lot in the US on health care but have relatively worse access, equity and outcomes. It's because we deliver overpriced (and usually effective) care to those who are wealthy enough to pay for it. Sadly, much of the care delivered is unneeded "flat of the curve" medicine. At the same time, those who are less privileged have more limited access to or cannot afford needed health care; our overall statistics for performance are weighed down heavily by this group.

The National Health Expenditure in the US in 2022 was $4.5 trillion or $13,493 per person[1]. Looking at OECD data for 2022, the US health expenditure was $12,555 (the international standard accounting includes fewer categories of spending). By comparison, the 2022 healthcare expenditure in Canada was $6319 per person[2,3]. With about one half the US expenditure per capita, the Canadians provided health care to everyone in that country.

How can the Canadians provide western-style advanced medical care to 100% of the population for far less than what we spend to deliver care to 90% of the population?* Put another way, why can't we, with twice what the Canadians spend per person, deliver a higher level of care to 100% of the population?

It costs too much

The largest factor causing the high average spend per person in the US is that our health care costs more per unit of care than in any other industrialized nation. So we inefficiently spend large amounts of money delivering too much overpriced care to many, while leaving others with less access to care that they need. And that's why our system underperforms at so many levels.

A significant contributor to the high cost of care is the massively inefficient way we administer the spending of the healthcare dollar. A study from Harvard and University of Ottawa compared administrative costs of healthcare spending in the US versus Canada. A crazy 34% of each healthcare dollar in the US goes toward administration($2497 per person), versus 17% in Canada ($550 per person)[4].

Other factors related to the health of the US population also lead to increased need for health care. I'll address those issues in another article.

What solutions are possible?

How could we make health care available to everyone, more efficiently? There is a lot of political power in the more than a trillion dollars being spent on the administration of the spending on health care. The massive spending on administration is employment for many voters and profit for influential businesses. Any solution will have to work in the face of that reality.

"Health care is hard" but it's not impossible. We have to find a better solution than what we have. The strategy to improve access and reduce costs will inevitably be based on the politics of what is possible.

I think there are two approaches we should consider:

1. A single payer "Medicare for all"

2. A regulated system that guarantees a basic level of care for everyone, leveraging public, non profit, and for-profit channels.

Many people have heard of the first approach, as it has achieved some recognition in the political sphere. It is widely thought of as government takeover of private health care, and has generated a lot of resistance. People who receive Medicare benefits praise the system of care (though many doctors are unhappy with reimbursements), and Medicare spends much less on administration compared to private insurance plans. Yet those who experience the inefficiency of commercial health insurance fear a government-run benefit — even if that benefit retains their current choice of healthcare provider and is also fee-for-service.

Many people are less aware of the system of health care implemented in Germany, where everyone is covered. In Germany, the management and delivery of health care benefits is in the hands of private business (both for-profit and non-profit), with a much smaller number of people covered by social welfare programs. But everyone is covered, and the system delivers a standard of health care that is effective by all measures. Wealthy people are able to access more expensive private health care, and people can purchase supplemental coverage if they wish. And in Germany, the per capita healthcare expenditure of $8,011 is more than in Canada, but still quite a bit less than in the US.

The advantage of the privately run options is that they give an important and ongoing role to the current commercial health insurance companies.

Central to the success of any better system is the definition of covered health care, (as we have with Obamacare), standardization of the payments for services, and the elimination of complexity of managing claims and payments. Complexity and administrative overhead are eliminated if we standardize the costs for services, and eliminate routine processes for reviewing and denying claims (we implement other safeguards that are much more cost effective). This is possible to do in a fee-for-service system, and is also accomplished with value-based approaches that allow for a variety of provider-compensation schemes.

Can we afford it?

Perhaps it is better to ask, how can we afford not to improve the current system.

For either approach to be affordable to the nation, the price of services will have to come down. The good news is that if we reduce the administrative overhead, there are already ample funds being spent today that could pay for all the care needed for everyone. The bad news is there would be huge disruption if we no longer need to employ nearly as many people to manage contracting, eligibility, enrollment, claims, and benefits management.

Will it happen?

It's not clear to me that there is yet a sufficient understanding of how bad the current situation is, how many people are suffering needlessly, and how much of a drag on our economy the high and increasing cost of care causes.

We can expect there to be quite a bit of resistance to any change in the current flow of healthcare dollars, and there doesn't seem to be (yet) sufficient political will to make difficult changes.

What we can and should do is raise awareness and advocate for a system of care that enables everyone to have access to affordable care. People should not be forced into bankruptcy because they fall ill. And they shouldn't suffer from chronic illnesses that could easily be managed with relatively low cost ambulatory care.

What is HealthTap doing about it?

I'm proud of the virtual primary care service that HealthTap offers as a partial solution to make health care available more conveniently and cost-effectively to anyone who needs it. We connect people with highly qualified and experienced primary care doctors on a platform that is the most convenient and effective way to receive primary health care!

Anyone can sign up and pick their own doctor for ongoing primary care, using their health insurance or subscribing to pay for low cost doctor visits. When you choose your doctor on HealthTap, you get health care via immediate urgent care or scheduled primary care video consults, and via free text messaging with the doctor who knows you. Electronic prescriptions (other than for controlled substances) go directly to your retail or mail-order pharmacy. Your doctor orders lab tests and you get your blood drawn at a Quest Personal Service Center (or use any lab of your choice and share your results with your doctor).

On HealthTap, the doctor who knows you will help you and take care of you.

It's easier, more convenient, and effective. And it costs less.

If you are a doctor who would like to join the HealthTap Medical Group, visit us at www.healthtap.com/for-doctors

Notes:

* It is a conservative estimate to say that only 10% of the population does not have access to needed routine care. US Census reports that in 2023, 7.9% of people were uninsured. The 2023 Commonwealth Fund Health Affordability Survey found that 29–42% of insured people delayed or skipped needed healthcare or medications because they couldn't afford it (29% for those with employer-sponsored health insurance versus 42% for those with Medicare)[5].

References:

[1] National Healthcare Expenditure CMS

[2] National health expenditure trends, 2022 Canadian Institute for Health Information

[3] Health spending OECD

[4] Health Care Administrative Costs in the United States and Canada Ann Intern Med 2020 Jan 21;172(2):134-142

[5] Costs and Medical Debt Are Making Americans Sicker and Poorer CommonwealthFund