Ashish Jha on Why U.S. Healthcare is so Expensive

By Robert Lamell and Zach Jarou, MD, Class of 2020

 Authors Robert Lamell (left) and Zach Jarou, MD (right)

Authors Robert Lamell (left) and Zach Jarou, MD (right)

Most people agree that an ideal health care system is easy to access and provides low cost, high quality care. However, nearly one out of every 10 Americans is uninsured, and approximately 60% are covered by high deductible plans. Nearly one out of every five dollars in the United States is spent on healthcare -- a number much higher compared to the rest of the world. And in return for this investment, we have one of the lowest life expectancies, 78.8 years compared to a mean of 81.7 in other high-income countries.

On October 10th, the University of Chicago MacLean Center for Clinical Medical Ethics and the Center for Health and the Social Sciences, hosted the second lecture of their 2018-2019 lecture series focused on “Improving Value in the U.S. Health Care System.” Guest lecturer Ashish Jha, MD, MPH and director of the Harvard Global Health Institute, presented findings from his March 2018 publication in the Journal of the American Medical Association, “High Care Spending in the United States and Other High-Income Countries.” In this study he compared features of the US health system with those in Japan, Germany, the UK, France, Canada, Australia, the Netherlands, Sweden, Switzerland, and Denmark.

In his talk, Dr. Jha dispelled many commonly held beliefs about the US health system compared to other countries around the world. For instance, while access to care in the US is abysmal for those without insurance, once you have coverage it only takes 6 days to see a specialist in the US compared to 13 days on average in comparable countries, and up to 39 days in Canada. Eighty-one percent of patients in the US report that they are able to spend adequate time with a physician, compared with 83% on average (though interestingly primary care visits in the US are approximately 20 minutes long compared with 10 minutes in the UK where 86% of patients reported having adequate time).

On average, countries spend approximately 12% of their GDP on health care. The US is a striking outlier at 17.8% as of 2016, which raises the question: why are we spending so much more than the rest of the world? The mantra for the past decade which has influenced the majority of our policy decisions is that the US health system is primarily burdened by overutilization. Americans are too quick to go to the doctor, and lack of primary care leads to an excess of hospitalizations, right? Wrong! Americans see a physician an average of 4 times per year compared to 6.6 times per year on average, and 12.7 times per year in Japan. The number of hospital discharges per one thousand population in the US is only 125 compared to a mean of 149, and up to 255 in Germany.

So while overutilization may play a role in total spending, it’s not a uniquely American problem, and it certainly doesn’t explain why Americans are paying 48% more than similar high-income countries. If total spending is equal to quantity times price, perhaps we should be focusing more of our attention on the latter. America spends 8% of health care dollars on administration compared to a mean of 3% in the rest of the world, and it’s not as simple as private versus public payers since Canada, a single-payer system, spends 3%, and Switzerland, a private system, spends 4%. The average spending on pharmaceuticals per capita is $1443 in the US (15% of all health care costs) compared to a mean of $749--Americans are paying nearly twice as much for the exact same drugs! An abdominal CT scan costs $844 in the US, compared to $383 in Switzerland or $85 in Spain. Getting your appendix removed costs $15,930 in the US, compared to only $6199 in New Zealand or $1786 in South Africa. A knee replacement costs $28,184 in the US compared with only $15,941 in Australia or $6687 in Spain. The US is paying exorbitant prices for procedures that can be performed at a much lower cost in most other parts of the world.

In summary, health systems are not divorced from the political systems that created them--they are a reflection of the culture and societies that create them. The US system is one that has been designed for choice, not for universal access and not for decreasing cost. While there’s no doubt that we have work to do in reducing utilization, if we’re going to move the needle on US healthcare spending, it’s time to turn our attention to the elephant in the room: prices.

Booth students interested in registering for the many other lectures in the “Improving Value in the U.S. Health Care System” series can register at MacLeanCenter.eventbrite.com.