United States Continues to Have Highest Level of Health Spending

Gerard Anderson, PhD

The United States continues to spend the most on health care when compared to other Organization for Economic Cooperation and Development (OECD) countries. Health care prices and higher per capita incomes are major factors for higher U.S. spending, according to a study by researchers at the Johns Hopkins Bloomberg School of Public Health and Princeton University. Compared to the average OECD country in 2004, the United States has fewer health resources—physicians, nurses and hospital beds—and lower utilization of these resources. Health spending for chronic health issues, such as obesity, alcohol consumption and smoking, also contributes to high health spending in the United States. The study is published in the September/October 2007 issue of Health Affairs.

“We spend so much more money on health care in the United States than other industrialized countries primarily because our prices are so much higher,” said lead author of the study, Gerard Anderson, PhD, a professor in the Department of Health Policy and Management at the Johns Hopkins Bloomberg School of Public Health.

Using 2004 data, which is the most recent available, the researchers report the following key study results:

• U.S. health care spending per capita was 2.5 times greater than the median OECD country.
• The United States spent 15.3% of our gross domestic product on health care, which is substantially higher than any other OECD country.
• U.S. growth in health care spending per capita from 1994 to 2004 was similar to the OECD median.
• The United States has promoted policies to reduce the number of hospital days as a way to contain costs. It is now ranked fourth highest among OECD countries for hospital spending per capita.
• The United States spent 3.6 times what the median OECD country spent in 2004 for outpatient care. Most of the difference between the United States and other countries is attributable to higher spending on physician services.
• The United States had fewer physicians, nurses and hospital beds per capita than the OECD median.
• The United States also had lower utilization rates than the OECD median for physician visits per capita, acute care bed days and average length of inpatient stay.

The study authors examined the prevalence of chronic disease as an increasing financial burden in the United States and other countries. Five chronic diseases—diabetes, respiratory disease, cerebrovascular disease, heart disease and malignant neoplasm—cause two-thirds of deaths in the United States. Compared to other OECD countries, we have the highest mortality rate for some of these chronic diseases, but not all.

The authors explain that policy makers in the United States and elsewhere need to devote more attention to chronic disease, something that is already beginning to happen. “Policy makers in many countries have recognized the necessity of coordinating efforts to manage chronic disease, especially for people with multiple chronic diseases,” said Anderson. “It is recognized that behaviors such as diet, inactive lifestyle and alcohol and tobacco consumption must be modified in order for chronic disease to decrease, which would in turn reduce overall health care spending.”

Bianca K. Frogner, a JHSPH doctoral candidate, and Uwe E. Reinhardt, a professor with Princeton University, co-authored the study.

“Health Spending in OECD Countries in 2004: An Update” was supported by a grant from The Commonwealth Fund.