Health Spending Has Grown Slower in the U.S. than in Other Developed Countries, 2007 -2011 (But It Won’t Last)
We have been skeptical that Obamacare explains the slow rate of growth in health spending. A new research paper by Luca Lorenzoni and colleagues, from the Organization for Economic Co-operation and Development confirms not only that the slowdown occurred well before Obamacare, but that the effect was stronger in the U.S. than in Canada, France, Germany, the Netherlands, and Switzerland.
The report shares some disturbing data:
- Government-health spending as a share of all U.S. health spending increased by 4.8 percentage points, from 44.0 percent (2000) to 48.8 percent (2011), whereas it shrank somewhat in Canada, France, and Germany;
- Despite the growth in consumer-driven health care, in the U.S., the share of spending paid directly out-of-pocked dropped by 2.1 percentage points, from 14.2 percent (2003) to 12.1 percent (2011), whereas it increased somewhat in Canada and France;
- Health administration and health-insurance share of government-health spending increased by 1.2 percentage points, from 5.1 percent (2000) to 6.3 percent (2011), whereas it shrank in Canada, France, Netherlands, and Switzerland.
The report also gives us more insight into a more important question: Do we spend too much on health as a share of Gross Domestic Product (GDP) versus other countries? The answer remains “no”.
Table A shows that U.S. GDP per capital after spending on health care was $34,479 in 2000, higher than any other country. In 2011, it was $35,212, still higher than other countries. However, the change over the years is concerning. Other countries increased the amount of incomes not allocated to health care much faster than the U.S. did. Indeed, it appears that almost all U.S. GDP increase during those eleven years was chewed up by health care. Switzerland, where patients control one quarter of their health spending directly (versus less than one eighths in the U.S.) has managed to have economic growth without letting the healthcare sector devour too much of it.
2000 to 2011 was a period of significantly increased government control of U.S. health care. Needless to say, Obamacare has put that tendency into overdrive. We can expect the U.S. to deteriorate in measurements of international health spending in the years to come.
What about 2012 and 2013?
Hopefully in the next few years to come, we can see the impact that ObamaCare has had on health spending in relation to other countries. If I had to guess, it would be quite an adverse outcome.
When comparing costs internationally, a three-year lag is actually very good. It takes a lot of work to compile and standardize the data (which comes from government).
It looks that even though we have the highest GDP when taking away health spending, it hasn’t grown substantially much like other countries. Perhaps because more of our dollars are going to health care needs.
“Do we spend too much on health as a share of Gross Domestic Product (GDP) versus other countries? The answer remains “no”.”
Well, it did in 2011. I wonder if we can say the same after ObamaCare’s numbers come in.
If your goal is to slow health spending, that is relatively easy. Just outlaw health plans of any kind — including Medicaid and Medicare. Since there are benefits from programs that reduce individuals’ health risk, that is not likely to happen. If you believe that health care should be free at the point of service, the only way that I can think of to slow spending is overt rationing. Most Americans aren’t too enthusiastic about having a bureaucracy dictate what medical care they’re allowed to have.
Since these two extremes are politically unpalatable, maybe we need to work on something in between. That could be catastrophic coverage, with cost-sharing and reference pricing. The fact that we’re even having this debate is evidence that many left-of-center policy wonks know little about health economics; or they aren’t willing to cede control over any decision to consumers.
What I found most interesting is low little Americans are actually controlling their healthcare spending – just 1/8. And we have thus had healthcare spending eat up most of our economic growth. This is a bad formula. Perhaps we would actually have more economic growth (left to enjoy) is we had more direct control over our healthcare spending.
Obamacare actually lowers the amount of patient control, and we will therefore suffer lower living standards as a result.
“Government-health spending as a share of all U.S. health spending increased by 4.8 percentage points, from 44.0 percent (2000) to 48.8 percent (2011).”
This is not surprising. However, seeing what that will look like in upcoming years will be interesting after ACA. And to see if it still holds an inverse relationship to government health spending of Canada and France.
Walter, I think you ask a good question. I believe that government health spending as a percentage of US health spending will continue to rise with the advent of Obamacare. This will be mainly due to the subsidies provided by the government, and ultimately from the taxpayers. Such a redistribution of wealth will slow economic growth even further, and the US will continue a downward economic descent.
Unless we change the track we are on, the government share will continue to increase.
Look forward to a blog entry about the latest Congressional Budget Office (CBO) estimates soon!
John–I wonder if anyone tracks the amount of healthcare spending that is a :consumer good” as opposed to a sickness expenditure. If people choose to spend their dollars on an optional healthcare service, it should not lead to rate regulation, or other controls over health plans or providers. In fact, it should be looked on as indicator of a healthy service sector that people want.
Wanda Jones
San Francisco
I am sure somebody somwhere does, but there would be a lot of gray in dividing the spending into those two categories, would there not?
What I hope to also research more on is the goods and services for which people pay out of pocket. That is, it is one thing to say that Swiss consumers spend 25 percent of health spending directly, versus U.S. consumers only spending 12.5 percent. However, I think there are differences. For example, French will pay out-of-pocket for a house call. Canadians do not pay out of pocket for a physician, but they will spend a lot out of pocket for prescription drugs and optical care (unless they have employer-based coverage).
That which the state decides to cover or not cover, or mandate private coverage for or not, will have consequences for overall spending.