More on the Latest Commonwealth Fund Study: The United States is the Third Lowest Spender on Health Care in Eleven Developed Countries
Devon Herrick has already addressed some of the shortcomings of the Commonwealth Fund’s latest survey of eleven developed countries, which questions thousands of residents about their health costs and access to health care. The report is inevitably spun with headlines such as: “We pay more, wait longer than other countries“.
In the United States, health spending accounted for almost 18 percent of GDP in 2011. The Netherlands comes next, at just under 12 percent. In dollar figures, the U.S. spent $8,508 per capita, versus only $5,669 in Norway, the runner-up. This certainly invites us to question whether we are getting our money’s worth. Free-market reforms, as described in Priceless, are expected to reduce costs.
However, it’s not clear that relatively high U.S. health spending is a burden on the nation. Table A, which uses data from the survey, shows that when we subtract U.S. health spending from our Gross Domestic Product (GDP), we still had $39, 560 per capita to spend on everything else we value. Only two countries, Norway and Switzerland, beat the U.S. on this measure. In the United Kingdom for example, GDP per capita after health spending was only $32,818 in 2011 (adjusted for the cost of living). So, even though American health care is significantly more expensive than British health care, the average American enjoyed $6,742 more GDP after health spending than his British peer.
Table A
| Country | Health Spending/Capita (2011) |
Share of GDP/Capita |
GDP/Capita (2011) |
GDP/Cap less Health Spending/Capita (2011) |
| Norway | $5,669 | 9% | $60,957 | $55,288 |
| Switzerland | $5,643 | 11% | $51,300 | $45,657 |
| United States | $8,508 | 18% | $48,068 | $39,560 |
| Australia | $3,800 | 9% | $42,697 | $38,897 |
| Netherlands | $5,099 | 12% | $42,849 | $37,750 |
| Sweden | $3,925 | 10% | $41,316 | $37,391 |
| Canada | $4,522 | 11% | $40,375 | $35,853 |
| Germany | $4,495 | 11% | $39,779 | $35,284 |
| United Kingdom | $3,405 | 9% | $36,223 | $32,818 |
| France | $4,118 | 12% | $35,500 | $31,382 |
| New Zealand | $3,182 | 10% | $30,893 | $27,711 |
Source: Schoen, C., et al., “Access, Affordabiliy, and Insurance Complexity Are Often Worse in the United States Compared to Ten Other Countries”, Health Affairs (November 2013).
Indeed, there is good evidence that high GDP per capita is a cause of high health spending. David Cutler (occasionally criticized in this blog for his support of ObamaCare) and Dan Ly have explained that physicians’ incomes are a major factor driving up U.S. health spending. The average U.S. specialist earned an income of $230,000 (2010) versus $129,000 in twelve other developed countries.(It is unclear whether Cutler is reporting 2010 earnings in 2010 dollars or 2004 constant dollars.)
That is a dramatic difference, but it has little to do with health care per se. Rather, it is a specific case of the general distribution of labor income within a country. Overall, high-income earners in other developed countries earn significantly less than high-income earners in the U.S. Cutler and Ly define “high earners” as those in the 95th to 99th percentile of the earnings distribution. He shows that U.S. specialists earn 37 percent more than the average of these U.S. high earners. However, their international peers earn 45 percent more than their high-earning, non-physician, peers.
When an American physician laments the state of medicine, and encourages her child to become a computer scientist or investment banker instead, this is what she is talking about. So, it is highly unlikely that we could reduce U.S. physicians’ incomes, and maintain an adequate supply of them, without destroying the opportunity for Americans (and immigrants) to earn high incomes in lots of different fields.
Reducing the cost of U.S. health care is a worthy goal, but it needs to be achieved by reducing the role of government at home, not importing a different model of government intervention from abroad.
“The report is inevitably spun with headlines such as: “We pay more, wait longer than other countries“”
The news can’t stomach keeping things sane and rational.
Switzerland continues to reign supreme.
After Norway, you mean.
Yet another Commonwealth Fund study to bash the United States health care system because it’s not socialist enough.
This makes sense. Health costs are relative to where you live.
Which makes comparisons between America and the Netherlands unimportant.
Exactly. Apples and oranges. It’s like comparing internet speeds between Europe and Sub-Saharan Africa. The people have different needs, so the metric isn’t useful.
” physicians’ incomes are a major factor driving up U.S. health spending. The average U.S. specialist earned an income of $230,000 (2010) versus $129,000in twelve other developed countries.(It is unclear whether Cutler is reporting 2010 earnings in 2010 dollars or 2004 constant dollars.)”
OK, fine, what is the average salary of a hospital administrator? Probably well in to 6 figures. And tell you what, I’d like the guy opening my skull and working on my brain to make darn good money, given his level of education and experience.
We need to have the system that works for us, not the one that works somewhere else.
Those systems can inform us, but they can’t dominate us.
Exactly.
What I would like to see is the comparison of these after-health-costs GDP per capita to the cost of living in each country. That will really show which citizens are better off.
These costs are measured in purchasing-power parity (PPP) dollars. So, they do take into account cost of living.
(Someday, I do have to write another post comparing the costs of various items in the consumer’s basket, including health care. It would be very illuminating. My general idea is that when we compare health spending per GDP internationally, we focus on the numerator, whereas the denominator tells more of the story.)
These international comparisons are pathetic. Norway has a population of 5 million, Switzerland 8 million, and both are ethnically homogenous. The United States can learn absolutely nothing useful from them.
Utah and Colorado do pretty well perhaps we should all try to do what they do. Those states are more like the rest of the US than Italy is.
Per Capita Medical Spending and Life Expectancy by US State
Med. Spending Life expectancy
Utah 5,031.00 80.20
Arizona 5,434.00 79.60
Georgia 5,467.00 77.20
Idaho 5,658.00 79.50
Nevada 5,735.00 78.10
Texas 5,924.00 78.50
Colorado 5,994.00 80.00