Technology helps drive high cost of U.S. healthcare

POSTED IN: Quality and Safety, RIS and PACS, Financial/Revenue Cycle Management, Policy and Legislation

Higher prices and greater use of technology appear to be the main factors driving the high rates of U.S. spending on healthcare, rather than greater use of physician and hospital services, according to a new study from the Commonwealth Fund. The study found the U.S. spends more on healthcare than 12 other industrialized countries, yet does not provide “notably superior” care.

The U.S. spent nearly $8,000 per person in 2009 on healthcare services, while other countries in the study spent between one-third (Japan and New Zealand) and two-thirds (Norway and Switzerland) as much. While the U.S. performs well on breast and colorectal cancer survival rates, it has among the highest rates of potentially preventable deaths from asthma and amputations due to diabetes, and rates that are no better than average for in-hospital deaths from heart attack and stroke.

The report, “Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality,” presents analysis of prices and healthcare spending in 13 industrialized countries.

U.S. healthcare spending amounted to more than 17 percent of gross domestic product (GDP) in 2009, compared with 12 percent or less in other study countries. Japan’s spending, which was the lowest, amounted to less than 9 percent of GDP, according to study author David Squires, senior research associate at The Commonwealth Fund.

All of the countries in the study, except for the U.S., provide universal healthcare, and all struggle with rising health costs. The level of healthcare spending in the U.S., however, stands apart. If the U.S. were to spend the same share of its GDP on healthcare as the Netherlands – the country spending the next-largest share of GDP – the savings would have been $750 billion in 2009.

U.S. hospital stays ‘far more’ expensive

High U.S. spending on healthcare does not seem to be explained by either greater supply or higher utilization of healthcare services. There were 2.4 physicians per 100,000 population in the U.S. in 2009, fewer than in all the countries in the study except Japan.

The U.S. also had the fewest doctor consultations (3.9 per capita) of any country except Sweden. Relative to the other countries in the study, the U.S also had few hospital beds, short lengths of stay for acute care, and few hospital discharges per 1,000 population. On the other hand, U.S. hospital stays were far more expensive than those in other countries – more than $18,000 per discharge. By comparison, the cost per discharge in Canada was about $13,000, while in Sweden, Australia, New Zealand, France and Germany, it was less than $10,000.

“It is a common assumption that Americans get more healthcare services than people in other countries, but in fact we do not go to the doctor or the hospital as often,” said Squires. “The higher prices we pay for healthcare and perhaps our greater use of expensive technology are the more likely explanations for high health spending in the U.S. Unfortunately, we do not seem to get better quality for this higher spending.”

Prices for the 30 most commonly used prescription drugs were a third higher in the U.S. compared to Canada and Germany, and more than double the amount paid for the same drugs in Australia, France, the Netherlands, New Zealand, and the United Kingdom. Magnetic imaging (MRI) and computed tomography (CT) scans were also more expensive in the U.S., and American physicians received the highest fees for primary care office visits and hip replacements.

Healthcare in the U.S. also seems to involve greater use of expensive technology than in many other countries. The U.S. performed the most MRI and CT exams among countries for which data were available (Japan had the most MRI and CT scanners, but no data was available on the number of exams performed there). Knee replacements were also performed more often in the U.S. than any country except Germany – though hip replacements were not as common as in most of the other study countries.

High spending in the U.S. might be explained, in part, by the nation’s high rates of obesity and the associated medical costs. However, at the same time, the U.S. also has a very young population and few smokers relative to the other study countries – factors that could offset higher spending linked to obesity, the report notes.

Quality varies widely in U.S.
High spending in the United States does not always translate into high-quality care. According to the report, the U.S. had the highest survival rates in the study for breast cancer, as well as the best survival rates, along with Norway, for colorectal cancer. However, cervical cancer survival rates in the U.S. were worse than average and well below those of Norway.

Compared to other countries in the study, the U.S. had high rates of asthma-related deaths among people ages 5 to 39 and, along with Germany, very high rates of amputations resulting from diabetes. U.S. rates of in-hospital deaths after heart attack and stroke were average.

Japanese model
Japan offers an interesting model for controlling costs, Squires says. Although its healthcare system shares certain features with the U.S., Japan is the lowest-spending nation of the group ($2,878 per capita in 2008). Japan operates a fee-for-service system, while offering unrestricted access to specialists and hospitals and a large supply of MRI and CT scanners.

Rather than containing costs by restricting access, Japan instead sets healthcare prices to keep total health spending within a budget allotted by the government.

In the U.S., individual payers negotiate prices with healthcare providers, a system that leads to complexity – and varying prices for the same goods and services, according to the report.

“The Affordable Care Act gives us the opportunity to build a healthcare system that delivers affordable, high-quality care to all Americans,” said Commonwealth Fund President Karen Davis. “To achieve that goal, the United States must use all of the tools provided by the law – including new methods of organizing, delivering, and paying for healthcare that will help to slow the growth of healthcare costs, while improving quality.”

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