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

Health Costs and the Disappearing Paycheck

Annual health deductibles for workers have increased eight times faster than wages in the past decade. How is this impacting families?

Every day in America the discussion of Health Costs goes from the news room to the living room of 152 million Americans whose benefits provided by an employer sponsored plan. They don’t need the news anchor to tell them things are going in the wrong direction.

The latest Health Benefits Survey by the Kaiser Family Foundation tells the story of how healthcare costs are increasingly eating up more of the earnings of workers particpating in plans that are becoming harder for companies to provide as costs escalate.

The  2018 benchmark Kaiser Family Foundation Employer Health Benefits Survey chronicles the impact of rising health costs on both workers and employers of all sizes providing sponsored health plans. Top line things to know from this survey:

  • Annual family premiums for employer-sponsored health insurance rose 5 percent to average $19,616 in the past year, extending a seven-year run of moderate increases. On average, workers are now contributing $5,547 toward the cost of family coverage, with employers paying the rest.
  • Since 2008, annual deductibles have increased eight times faster than workers’ earnings and three times faster than general inflation.
  • A quarter (26%) of all covered workers are now in plans with a deductible of at least $2,000, up from 22 percent last year and 15 percent five years ago.  Among covered workers at small firms (fewer than 200 workers), 42 percent face a deductible of at least $2,000.

While there is a great deal of focus on expanding access to health services for the uninsured, those who are insured by company plans face their own set of challenges in the ever-growing personal costs of being insured.

The burden of deductibles on workers will continue to impact them in two ways: a growing share of covered workers will face a general annual deductible, and the average deductible will continue to increase faster than increases in take-home pay.

When it comes to employers being proactive in finding ways to help employees manage health (rather than merely paying bills when they are not) there are several trends worth noting:

  • Among large firms that offer health benefits, one in five (21%) report they collect some information from workers’ mobile apps or wearable devices such as a FitBit or Apple Watch as part of their wellness or health promotion programs. That’s up from 14 percent last year.
  • Most large offering employers (70%) provide workers with opportunities to complete health risk assessments, which are questionnaires about enrollees’ medical history, health status, and lifestyle, or biometric screenings, which are health examinations conducted by a medical professional, or both. Thirty-eight percent of large offering firms provide incentives for workers to participate in these programs. The maximum financial incentives for these and other wellness programs often total $500 or more.
  • Telemedicine: About three quarters (74%) of large offering firms (at least 200 workers) cover services provided through telemedicine, such as video chat and remote monitoring, which allow a patient to get care from a provider at a remote location. That’s up from 63 percent last year and 27% in 2015.
  • Retail health clinics: Similarly, three quarters (76%) of large offering firms cover services received in retail clinics, such as those located in pharmacies, supermarkets and other retail stores. A small share also provide financial incentives for workers to use these clinics.

“Health costs don’t rise in a vacuum. As long as out-of-pocket costs for deductibles, drugs, surprise bills and more continue to outpace wage growth, people will be frustrated by their medical bills and see health costs as huge pocketbook and political issues,” KFF President and CEO Drew Altman said.


For Consideration:

  • How is the trend of rising deductibles and other “out-of-pocket” expenses impacting you and your family? Is this a minor inconvenience or a major issue impacting other aspects of your life (e.g. daily living expenses, vacations, saving for retirement or college)?
  • How does this issue rank relative to issues you would like to have elected leaders review and address?
  • To lower costs how open are you to trying new activities such as actively particpating in workplace wellness programs or using lower cost care options such as telemedicine?

Additional Resources:

The complete Employer Health Benefits Survey report can be downloaded here which includes over 200 exhibits and in-depth review of key issues impacting both the worker and the employers who also continue to be impacted by rapidly increasing health costs.

Download the Summary of Findings which provides an overview of the 2018 survey results. This serves as a great handout for discussions or email attachment for those interested in learning more about this important issues impacting workers.

This related brief on the Peterson-Kaiser Health System Tracker examines employer claims data to measure the uptake of telemedicine services by employees and their family members.

Financial Burden of Medical Care: A Family Perspective: This downloadable data brief from the National Center for Health Statistics utilizes data from the National Health Interview Survey (NHIS) to provide key findings on the financial burden medical care has on American families. The brief reports that 1 in 5 persons was in a family having problems paying medical bills, and 1 in 10 persons was in a family with medical bills that they were unable to pay at all.