International statistics show that the United States spends twice as much on health care per capita as the average OECD country. But are these numbers accurate?
Health care is a sector where normal market forces have been so suppressed that no one ever faces a real price for anything. So, adding over all the transactions produces a total number whose meaning is very unclear.
To make matters worse, other countries do more than we do to shift costs in ways that reduce the cash flow that government has to fund. For example, other countries are more aggressive than we are at suppressing provider incomes (not just doctors, but also nurses, hospital personnel, etc.) Here are the numbers on doctor incomes:
Source: Health Affairs; gated, but with abstract.
On paper, suppressing provider incomes makes the spending total look lower. But as explained in a previous Alert, these actions do not lower real social costs. Costs are merely shifted from one group to another. One could accomplish this more directly by imposing a tax on all doctors and health care workers and using the proceeds to subsidize health care consumption by everyone else. But again, such measures would not lower social costs, they would merely shift costs.
If we ignore the money totals and look instead at real resources, the U.S. system looks pretty good, relative to other developed countries. For example, we use fewer doctors per capita, fewer nurses, fewer admissions, fewer hospital days, fewer beds, etc. than the OECD average; and we achieve as good or better health outcomes. About the only thing we use more of is technology. So with accurate accounting, it may be that the cost of U.S. health care is right in the middle of the pack.
Interestingly, even though other countries do more than we do to shift costs and disguise costs, the money totals over time seem to be growing at similar rates. Over the past four decades, the rate of growth of real per capita health care spending in the United States has been right below the OECD average.
NOTE: The source material for this Alert may be found in a paper I wrote with Linda Gorman, Devon Herrick and Bob Sade on international health care comparisons.