U.S. Health: First in Spending but Last in Results…Why?

America’s top clinical talent and mega-investments in “health services” do not correlate to better overall health compared to other countries. Learn why.

Let’s get the good news out of the way first.

If you are going to get sick and have great insurance or lots of money, there is no better place to do so than in the United States. We excel at taking care of really sick people.

Medical miracles are performed daily through an amazing pool of talented clinicians who have access to the best technology, facilities and pharmaceuticals.

In this regard, we are the envy of the rest of the world. But there remains a most vexing question: Why do we invest more in healthcare than any country on the planet to have the “best of the best”, only to come in last compared to other countries in success measures like outcomes, longevity, quality and access?

Simply put, America’s mega-investment in “health services” does not correlate to better overall health.

The Commonwealth Fund is a private foundation started in 1918 by one of America’s first female philanthropists Anna Harkness. Its mission is to research, study and promote high performing health care systems to achieve better access, improved quality, and greater efficiency, particularly for society’s most vulnerable citizens.
 
Paying More for Less
In its most recent report, Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care, the authors note that despite having the most expensive health care, the United States ranks last overall among the 11 countries on measures of health system equity, access, administrative efficiency, care delivery, and health care outcomes.

While there is room for improvement in every country, the U.S. has the highest costs and lowest overall performance of the nations in the study, which included Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, and the United Kingdom. The U.S. spent $10,739 per person on health care in 2017, compared to $4,094 in the U.K., which ranked first on performance overall.

Among the 11 high-income countries surveyed, the U.S. is the only one without universal health insurance coverage. The U.S. offers its citizens the least financial protection among these wealthy countries.

Since 2004, the U.S. has ranked last in every one of six similar reports.

In a recent issue of the New England Journal of Medicine, lead author and Commonwealth Fund senior vice president for policy and research Eric Schneider, M.D. reflected on lessons from top performing countries and actions the U.S. could take to move from last to first among wealthy countries. They include:

  • Expand health insurance coverage. The highest-performing countries have universal coverage that allows people to get the health care they need at little or no cost.
  • Invest more in primary care. Spending up front to make primary care accessible, available on nights and weekends, and affordable keeps people healthier and reduces costs in the long run.
  • Cut down on paperwork. The U.S. leads the world when it comes to time spent dealing with the requirements of our cumbersome health insurance system. Reducing the administrative burden would give countless hours back to patients, caregivers, and physicians while also making the system easier for people to navigate.
  • Invest more in social services to reduce disparities. Factors beyond traditional health care, such as housing, education, nutrition, and transportation, have a substantial effect on people’s health. Investing in services that provide support in these areas can make our population healthier as a whole and reduce health care costs.

Additional report findings related to improving the U.S. health system include:

  • Access to Care: Other studies show that access to care and ability to afford care have improved markedly in the U.S. following the Affordable Care Act. Nevertheless, compared to other countries, Americans of all incomes have the hardest time affording the health care they need. The U.S. ranks last on most measures of financial barriers to care, with one-third (33%) of adults reporting they did not take a prescription drug, visit a doctor when sick, or receive recommended care in the past year because of the expense. This is four times the rates for patients in Germany (7%), the U.K. (7%), Sweden (8%), and the Netherlands (8%).
  • Health Care Outcomes: The U.S. ranks last overall on health care outcomes. Compared to other countries, the U.S. comes in last on infant mortality, life expectancy at age 60, and deaths that were potentially preventable with timely access to effective health care. However, there are some bright spots: the U.S. performs relatively well on certain clinical outcomes, such as lower in-hospital mortality rates for a heart attack or stroke and is a top performer in breast cancer survival.
  • Care Process: The U.S. ranks in the middle for care process, which is a combination of four separate measures: delivery of preventive services, safety of care, coordinated care, and patient engagement. On three of the four measures, the U.S. ranks near the top, coming in third on safety and fourth on prevention and engagement. The U.S. tends to excel on measures that involve the doctor–patient relationship, wellness counseling, and preventive care, such as mammograms and adult flu shot rates.
  • Administrative Efficiency: The U.S ranks near the bottom on this measure because of the amount of time providers and patients must spend dealing with administrative issues, duplicative medical testing, and insurance disputes. More than half (54%) of U.S. doctors reported problems trying to get their patients needed treatment because of insurance coverage restrictions. In Norway and Sweden, which rank first on this measure, only 6 percent of doctors reported this problem.

Special thanks to the Commonwealth Fund for their research as well as the outstanding materials they provide.  


For Consideration:

  • What do you see as the key reasons for the U.S. to have such low performance ratings compared to the investments made in the health system?
  • What might we learn from other countries that invest less but have health measures that are significantly better than the U.S.?
  • Do you believe this data provides a valid comparison of the performance of health systems and also reflect the “performance measures” that are important in assessing value?

Resources:

Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care:

Additional resources my be found by clicking on the “Resources” in the Navigation bar

 

$3.5 Trillion: Where it Comes From and Where it Goes

In the time it takes to read this $4 million will be spent on healthcare. Here’s where it went.

You don’t need to be an economist to understand that in the time it takes to finish this sentence $4 million will be spent on healthcare.  On average, this is the amount of money that will trade hands as you read each and every sentence.

Where does this money come from? Well, mainly from you and people like you.

Today the annual price tag for the American healthcare system is $3.5 trillion.[i]  This is what $3.5 trillion looks like:

$3,500,000,000,000

That’s an average of $10,739 per citizen per year to provide some, but not all, Americans with access to health services.

To put this number in perspective, about eight trillion dollars a year is spent on healthcare worldwide.[ii] This is roughly ten percent of the world’s Gross Domestic Product (GDP). By comparison, healthcare in America currently consumes 17.9% of its GDP and climbing.

No other industrialized country has similar healthcare costs. We spend two-and-a-half times more than other developed nations.

By any standard these are big numbers. Perhaps if the United States had the healthiest citizens with the best longevity our investment in healthcare would represent a bargain.  But, as noted in other posts, we put more in but get less out compared to other nations.

Imagine putting more money into your 401k retirement plan than your neighbors only to learn they were much better off with a larger nest egg because they invested in things that provided a higher return. The challenge for reforming healthcare is not much different.

While the dialogue around healthcare is complex, the goal of reform is simple: Where should we make investments in keeping with a set of goals that provide the best returns we seek to achieve with the health system?  As you consider this question, let’s start by looking at where all money for the health system comes from and where it goes. 

Where money comes from

To start, it’s important to understand that the majority of resources for health come directly from government-run health and medical programs funded through taxes paid by employers, employees and retirees.

The government also influences how private funds from employers and citizens are collected and spent through a complex series of laws, regulations and tax incentives. These include things like coverage mandates, payroll taxes and medical savings accounts.

Explaining the intricacies of how the healthcare finance system works would fill volumes of books. For now, we’ll keep things simple by using a view from government accounting known as “Type of Sponsor”.  Type of Sponsor is the entity that is ultimately responsible for financing the health care bill, such as private businesses, households, and governments.  These sponsors pay health insurance premiums and out-of-pocket costs, or finance health care through dedicated taxes and/or general revenues.[iii]

In using this approach, we see that the federal government accounts for the largest share of health spending at 29%, followed by households at 28%, private businesses at 20 % and finally state and local governments at 17%.

Today, almost half of all funds used in healthcare (45%)  come from government sources including the federal government which funds programs such as Medicare (healthcare for seniors) as well as state and local governments which contribute funds to support programs such as Medicaid (healthcare for low income).

The second largest category is “households” which is really all of the “out-of-pocket” expenses consumers like you spend on everything from healthcare co-pays to the costs of over-the-counter and other items purchased to manage health and medical conditions.

Where the money goes

Now that we have a sense of where money comes from to fuel today’s the health system, let’s shed some light on where we all this money goes. Here is how $3.5 trillion is spent:

A quick glance at where the money goes shows that more than half of all funds go to support hospitals and physicians. Almost a quarter of all funds are used to support the cost of administering health systems and programs.  This leaves roughly one quarter of all funds for everything else such as home health, school and workplace health, dental and other clinical disciplines such as chiropractic and physical therapy.

Within these numbers are other issues to be understood and addressed. As an example, the Institute of Medicine reports that up to one third of all expenditures, about $750 billion, is spent on unnecessary administrative services, inefficiencies and care that doesn’t actually improve health.[iv]

For most of us, it’s easy to get lost in these numbers. To better understand what’s going on, and formulate our own views on how we spend on healthcare, let’s look at four trends driving how money is spent which start to shed light on why we have some of the performance issues we’ve already noted. 

It’s Sickcare not Healthcare

While we euphemistically talk about the reform of “healthcare”, the numbers above show that that the majority of the systems and expenditures today are heavily weighted towards treating people once they become ill or injured. While this may seem like stating the obvious, it’s a fundamental issue when it comes to the debate around spending more than any other country only to have our comparative measures be lower than other countries spending less.  

When you “follow-the-money” you see that today’s health care system is mainly a disease-management system. It’s rooted in financial incentives for treating medical problems once they occur as opposed to helping people maintain or regain their health.

This brings us to a fundamental question critical to the health reform debate: What is the purpose and goal of our health system?

Should it focus on treating illness and injury once these occur or should it be geared towards prevention and health maintenance?

To put this into perspective, in 2015, thirty two percent of all funds spent went to hospitals while two tenths of one percent of all funds went towards things like maternal/child health services and school health programs.[v]

The simple answer is that the system should do both. The deeper question to ponder is what the balance should look like in terms of priorities, expenditures and desired outcomes.


For Consideration:

  • What is you view on the balance of where funds come from and how they are allocated or spent?
  • If you could change things, how would you balance investments in treating people who are ill or injured versus investing in prevention and wellness measures?

Resources:

Americans Remain Dissatisfied With Healthcare Costs is a report by Gallup on the results of a recent poll showing that most Americans consider healthcare costs and access to be a major issue. Provides a breakdown of the issues along with useful charts to explain details surrounding the issues.

The National Health Expenditure Accounts (NHEA) are the official estimates of total health care spending in the United States. Dating back to 1960, the NHEA measures annual U.S. expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care. This is one of the best starting point sites for researching or understanding health expenditures in the United States.

Download this brief from CMS which highlights National Health Expenditures for the most recent year data is available. A concise resource that serves as a great handout or reference guide to understanding health expenditures.

Explore and compare Global Health Expenditures through this site sponsored and managed by the World Health Organization. Includes data updated to 2018 and reflects health financing reforms taking place in Member States, between 2000-2016.


References:

[i]https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html

[ii] World Health Organization. Global Health Expenditure Database (GHED) [

[iv] http://www.nationalacademies.org/hmd/Reports/2012/Best-Care-at-Lower-Cost-The-Path-to-Continuously-Learning-Health-Care-in-America/Infographic.aspx

[v] National Health Expenditures by type of service and source of funds, CY 1960-2015. CMS.   https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/NHE2015.zip

Two Important Numbers in Health Reform are 5 & 50

5 & 50 are two numbers that explain where half of all healthcare expenditures go in America today and represent a key area health reform must address.

We often here about the $3.5 trillion we invest annually for Healthcare in the United States. Breaking this down further, this means we spend an average of  $10,739 per citizen.

This last number demonstrates how statistics can sometimes be misleading. As noted, we spend an average of $10,739 per citizen.  But, understanding where the money is actually going provides a key insight as to why our investments are high but results are often lower than other countries spending less.

Look closely at where the money goes you see that five percent of people account for 50 percent of total health spending.

Think about these stats for a moment.

Health-care spending represents almost one-fifth of the United States’ economy.

In digging further into these numbers, the data from the National Institute for Health Care Management suggests that the health problems of about 15 million Americans consume almost one-tenth of the Gross Domestic Product (GDP) of the United States — around $1.7 trillion.

Those citizens in the “five percent” group are known as “super users” of the health system.  They include the “sickest-of-the-sick” or have multiple chronic conditions requiring intense and continuous care regimens.

We are bombarded with stats that show, on average, the United States spends more on health per citizen than any other country on the planet. The reality is that most of these expenditures are concentrated on fewer people entering the health system once they are very ill (including being admitted to expensive, technology rich environments when nearing end-of-life).

Ethicists often ponder the issue of distributive justice…How do we use a finite amount of resources to do the most good for the most people?

To raise the question above is not to suggest we turn our backs on those women and men who are members of the medical “super-users” group whose lives (including quality of life) are dependent on utilizing the system in place today.  

If we are serious about true reform, the deeper issue to consider is how we change the systems super-users are dependent on to better serve their needs while becoming more effective stewards of the resources required to meet the needs of this vulnerable population.

As we look ahead, these questions are worth considering by anyone in, or touched by, the current healthcare system.


For Consideration:

  • What is your view on whether half of all resource expenditures should go towards supporting the needs of a small group of people?
  • The rapid growth of the elderly population (a baby-boomer now turns 65 every 15 seconds and will for the next decade) will expand the size of the “super-user” group requiring intensive & costly services. What alternative or innovative ideas would support the needs of this population while making better use of our resources?
  • Do you know someone who is a “super user” of the health system? What services are they dependent on? What might you change to better serve his or her needs while make better use of resources?

Resources:

If you want to go deeper in exploring this topic:

There is a great article in the Atlantic by writers Karen Weintraub and Rachel Zimmerman. Fixing the 5 Percent is a thoughtfully-written piece that explores both the problem as well as solutions others are pioneering to improve the effectiveness of services and costs.

If you want to delve deeper in the actual data and trends download this PDF from the Agengy for Healthcare Quality and Research


References:

National Health Expenditures by type of service and source of funds, CY 1960-2015. CMS.   https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/NHE2015.zi

“UNDERSTANDING U.S. HEALTH CARE SPENDING”. National Institute of Healthcare Management, July, 2011. http://www.bcnys.org/inside/health/2011/HealthCarePremiumsNIHCM0711.pdf

“The High Concentration of U.S. Health Care Expenditures”. Agency for Healthcare Research and Quality. https://archive.ahrq.gov/research/findings/factsheets/costs/expriach/

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/19/the-two-most-important-numbers-in-american-health-care

Has Healthcare Value Improved in the Last 25 Years?

Measuring the value we receive from the U.S. Health system is a tricky but important part of the health reform conversation.

Measuring the value we receive from the U.S. Health system is a tricky but important part of the health reform conversation. If we strip down the complexities there are two questions worth considering:

  • Is the U.S. health system generating better value than in the past?
  • How do factors other than the healthcare system affect health outcomes (compared to other countries)?


As noted in other articles on this site, the United States spends more per citizen than any other country but ranks lower than most on almost all comparative value measures including quality, costs and outcomes.

To examine the issue of “value” the Kaiser Family Foundation developed an approach to measure the level of improvement in health outcomes over time, and the incremental costs incurred by the health system.

This work is part of the Peterson-Kaiser Health System Tracker which includes a “Dashboard” of indicators that can be used to describe, evaluate and compare changes in the value of U.S. healthcare over time. With many measures spanning 25 years, or approximately a generation, the Dashboard paints a picture of how the value of the system has changed over time.

The assessment looks at whether the value of the U.S. health system has improved or worsened from 1991 – 2016 by measuring the level of improvement in health outcomes, and the incremental costs the healthcare system incurred at the same time.

Here is a summary of results:

  • Between 1991 and 2016, life expectancy increased by 3.1 years to 78.6, representing a 4% improvement. In the same time, disease burden (as measured by  something known as the total number of disability adjusted life years, or DALYs) improved by 12%.
  • At the same time, there was a worsening of years living in disability which is largely due to  an increase in substance use disorders. Substance use is actually one of the primary contributors to the decline in life expectancy in 2015 and 2016, the first time life expectancy has dropped two years in a row in several decades. This trend clearly points to the importance of social and environmental determinants being included in the broader debate of health reform.
  • In looking at this data there is a very troubling trend in Women’s Health where outcomes have actually gotten worse.  In the United States maternal mortality has gone up significantly from 14 deaths per 100,000 live births in 1991 to nearly 31 in 2016.  

The good news is that the study shows that health outcomes have generally improved in the U.S. over the past 25 years as measured by life expectancy and disease burden. However, since value is a function of outcomes and costs, one must also take into account the increase in health spending

In 1991, the Gross Domestic Product (GDP) attributable to healthcare was 12.8% or $788 billion. By 2016, healthcare consumed 17.9% of GDP or $3.3 Trillion. This brings us to a key question in how we evaluate value:

  • Is the 4% improvement in life expectancy and 12% reduction in disease burden enough to warrant a 40% increase in GDP consumption over the past 25 years?
  • What does this portend for future access and affordability? This is an especially important issue to address as part of health reform in the United States as we consider a shift in demographics such as increase in elderly population, as well as the impact of other key health challenges such as the Opioid epidemic.

As a comparison to America’s performance as noted above, similar nations during the same period generated an average increase in life expectancy of 5.2 years, or 7%, compared to the U.S.’s 3.1 years, or 4% improvement. In these countries, disease burden improved by 22%, compared to the U.S.’s 12%.

By these indicators, comparable countries spent under two thirds (60%) of what the U.S. spent on healthcare relative to GDP.

Relative to the health reform debate, another interesting finding is that the United States spends less on social services and more on healthcare,  but has worse health outcomes than similar countries.

And so, to summarize the question of whether value from the healthcare system has improved:

  • The outcomes generated by U.S. healthcare as measured by life expectancy, mortality amenable to healthcare, and years lost to premature death have improved over the past quarter century.
  • Total years living in disability have increased with mental health and substance use issues being the leading contributors to the increase.
  • If total spending for health had remained constant at 12.8% of GDP, one could easily conclude that the value proposition had improved dramatically. Unfortunately, healthcare spending in 2016 consumed 17.9% of the nation’s wealth, which is a 40% increase from 1991.  

This assessment points to a significant opportunity to be more efficient and effective in improving life expectancy and reducing the burden of disease while shedding light on socioeconomic factors and the potential impact lower investment in social services is having on outcomes.


For Consideration:

  • Did improvements seen over the past quarter century need to cost this much as they did?
  • Had the level of investment in the U.S. health system been at a similar level (percentage of GDP) from 1991, or mirrored other countries, what else might we have invested in to improve the health and wellbeing of citizens?
  • Do you believe that higher levels of investment in public and social services (as happens in other countries) correlates to higher levels of health outcomes?

Additional Resources:


Americans Remain Dissatisfied With Healthcare Costs

This report from Gallup summarizes results of a recent poll showing that most Americans consider healthcare costs and access to be a major issue. Provides a breakdown of the issues along with useful charts to explain details surrounding the issues.

Peterson-Kaiser Health System Dashboard

This site includes a rich set of data from credible sources that allow users to explore a variety of indicators of health spending, quality of care, access, and health outcomes. Provides great visuals and infographics that can be downloaded and used (with attribution). While easy to use, the site also includes a brief tutorial.

The Kaiser Family Foundation (KFF)

The Kaiser Family Foundation (KFF) is a non-profit, private operating foundation focusing on the major health care issues facing the U.S., as well as the U.S. role in global health policy. KFF’s website focuses on policy research, basic health care facts and numbers, and health reform implementation information. The Kaiser Family Foundation is not associated with Kaiser Permanente or Kaiser Industries.

The Single Most Important Question in the Reform Debate

Regardless of your political leanings your approach to any reform proposal will be anchored to this single question.

Regardless of your political views or social priorities, your approach to any health reform proposal or debate should be anchored to a single question. Directly or indirectly, how you answer this question is central to evaluating any proposal for creating sustainable reform.

The question that is foundational to all others in the health reform debate comes down to this:

Is healthcare a right or a privilege?

For the record, while most other developed countries have constitutionally declared or legislated healthcare as a right for all citizens, America has not. This is not an editorial comment but a statement of fact.

When the framers of the Constitution and Bill of Rights were defining fundamental human rights, average life expectancy was 35 years of age. [i]  The concept of “healthcare” as we know it today simply did not exist.

Healthcare as a right means that all citizens are guaranteed access to some level of care or services. While the type or level of service might change, the commitment of equal access to “something” does not.

For example, Canada decreed healthcare as a right in 1984.  Their system is known for guaranteeing all citizens access to certain services but often then keep patients waiting in line to access services based on budgetary targets. The United Kingdom guarantees all citizens the right to care with a founding principle of “free at the point of service” but often have some people waiting in line for service while others buy supplemental insurance policies that allow them to “jump the que” and gain better access to services.

Regardless of how the system is organized, or how well it actually works, healthcare as a right means that there is a safety net that catches all citizens.

The debate about healthcare as a right in America began with the advent of two events in history.

The first was the beginning of the Industrial Revolution. A massive shift of people going from working on farms to factories gave rise to a new set of health issues and began the debate on the role of private companies and the government in providing for the health of workers and citizens.

Around the same time medicine moved out of the shadows of quackery and into the realm of being a repeatable, scientific discipline.

Ever since, America has wrestled with whether healthcare is a right or privilege.

In the 1940’s President Roosevelt attempted to address the issue of whether healthcare is a right as part of a broader social initiative known as America’s “Second Bill of Rights.”

As WWII was coming to a close, FDR put forward a sweeping social program known as America’s Second Bill of Rights that included healthcare.

In 1945 President Truman proposed a national health program to include all Americans declaring in a speech to Congress “We should resolve now that the health of this Nation is a national concern; that financial barriers in the way of attaining health shall be removed; that the health of all its citizens deserves the help of all the Nation.”  It was denounced by the American Medical Association and called a communist plot by a House subcommittee.[ii]

The Clinton administration made healthcare their top platform priority but failed to get a plan through Congress.

Finally, the Affordable Care Act was passed during the Obama administration (aka Obamacare) in 2010 that created vehicles for citizens to have access to health plans while mandating coverage and fines for those choosing not to participate. The Trump administration from the outset worked to disassemble the Affordable Care Act.

The brief history of Affordable Care Act noted above is a cautionary tale that shows us that until healthcare is deemed a right, the fate of lasting reform will rise and fall based on the whims and views of those who control Congress and the White House (This situation continues to play out as I write this article).

An interesting corollary to the right to healthcare is our view and laws pertaining to the “right” to education. While the U.S. Constitution does not explicitly enumerate a positive fundamental right to education, a series of court decisions and legislation provide any citizen a right to a certain level of education.

As daunting as it may seem, American voters, business and political leaders have shown that they can commit to healthcare as a right in certain circumstances.

Healthcare has been decreed as a right in certain situations and for certain people. As part of the Great Society, congress enacted legislation in 1965 to guarantee seniors the right to healthcare via the Medicare program and to assist states in the provision of health services to the indigent via Medcaid.

And, since 1986, all citizens have a right to assistance in an emergency room…Unfortunately, the law only requires that a patient be stabilized. [iii]  After that you are subject to the whims of the situation.

If you believe that healthcare is a right, then any proposal for reform must call out and explicitly address this issue.


For Consideration:

  • Do you believe healthcare to be a right or a privilege?
  • If you believe healthcare to be a right, the question that follows is “a right to what?”  Is there a set of services to which everyone has access?
  • How should any proposal for reform address these fundamental questions?

Additional Resources

To better understand the history of this issue in the United States, see the article , Health Reform – What a Long Strange Trip It’s Been.

Learn which countries have Universal Health Access and explore how each has achieved this status (single payer, private system mandates, other models) from Wikipedia.

References:

[i] http://keywen.com/en/LIFE_EXPECTANCY

[ii] Dr. Howard Markel, “69 years ago, a president pitches his idea for national health care”. November 19, 2014. PBS Newshour. http://www.pbs.org/newshour/updates/november-19-1945-harry-truman-calls-national-health-insurance-program/

[iii] Health Care for Some: Rights and Rationing in the United States since 1930. Beatrix Hoffman.  University of Chicago Press. 2012