What is unique about American health care? Americans control a smaller share of our health spending than do residents of most other developed countries. More importantly, the share of health spending controlled by Americans, rather than government or insurers, has declined much faster than it has in any other developed country (for which we have measurements) in the last couple of decades.
Chart 1 shows the share of health spending controlled directly by patients (also known as “out-of-pocket” spending) in ten developed countries, including the United States, from 1988 through 2008. (Not all countries are represented for the entire period.) Switzerland, a country widely praised for its health care, allows patients to control significantly more of their health dollars than any other country does. Out-of-pocket spending in Switzerland has fluctuated around one third of total health spending since 1998.
Everybody all over the world,
In every nation.
In all other countries, out-of-pocket spending has clustered around 15 percent of total health spending. However, countries are showing different trends. In the late 1980s, the United States allowed patients to control more health spending than any other country, except Switzerland. By 2003, it had dropped to the bottom of the pack.
Chart 2 shows the change in the share of out-of-pocket spending for all countries for which data is available for the entire two decades. It shows unequivocally that the United States has been moving in the wrong direction: Removing health dollars from patients’ control and giving it to government and insurers to spend. The share of U.S. health spending controlled directly by patients has dropped by almost half in twenty years. No other country comes remotely close to this failure of consumer direction.
Indeed, only three of the nine countries have experienced a drop in patient control. The next worst is Switzerland, for which the drop was only twenty percent. As noted above, Switzerland has an extraordinarily high share of direct payment, so a loss of consumer sovereignty, while worrying, is less of a concern than in countries like the United States where the share of health spending controlled by patients was already low in the 1980s. Ireland showed a marginal drop in patient control over the period, with out-of-pocket spending as a share of total health spending dropping by about eight percent.
In every other country, the share increased or remained stable over the period. Tiny Luxembourg experienced a large jump in patient control around the turn of the century, but this was from a very low base. (Out-of-pocket health spending jumped to 11.8 percent of total health spending in 2000 from just 7.4 percent the year before.)
In other countries, the increase in patients’ share of health spending clustered around 15 percent over the period. Even in Canada, where government continues to assert monopoly control over residents’ access to health care, the share of health spending controlled by patients directly remained unchanged. As a result, Canadians now enjoy more direct control over their health dollars than Americans do!
The lesson is clear: The United States continues to experience a long-term trend of loss of patients’ control of health spending. Attempts to reverse this with tools such as Health Reimbursement Arrangements, Flexible Spending Arrangements, Medical Savings Accounts, and Health Savings Accounts have not resulted in systemic change.
As a result, Americans control less of our own health spending than do residents of other developed countries. After ObamaCare is defeated, reversing his long-term trend must be the top priority of the real health reform that replaces it.