Health spending vs your action agenda

So why does health care cost so much? And what’s that have to do with driving your organization’s policy agenda?

A new paper published in JAMA[1] says that things are not simple, and that the truth is different from what policy-world has led the real world to believe.  It confirms while U.S. per-capita health care spending is twice that of other high-income countries,[2] we are neither living as long or as well.[3]

But it is not because we are not seeing health care professionals enough; we do about as much as anyone. It is not because social determinants of health are worse in the U.S.; social spending is about the same here as it is elsewhere. It’s not defensive medicine, really.

Echoing a 2003 landmark by the late legendary health economist Uwe Reinhardt,[4] it’s the prices.

Prices for specialty physician services are highest in the U.S., about twice the mean of high-income nations. For generalist physicians the gap is narrower, 74% more than the mean. Prices for certain pharmaceuticals are quite a bit higher. However, pharmaceuticals amount to only about 10% of total health care spending; reducing pharma spending to zero does not eliminate the U.S. health care cost gap. Administrative costs in the U.S. are 8% of health care spending, more than twice the mean of other countries studied. We do more MRIs, knee replacements, cesarean sections, coronary artery bypasses,[5] coronary angioplasties and asthma hospitalizations than most of the rest. Clinical outcomes are worse in the U.S. than elsewhere.

We’re not tops in everything costly. The U.S. ranks middling in hospital discharges, COPD, and out-of-pocket costs for pharmaceuticals and other health services. However, in the U.S. people are more likely to skip health care appointments than in other high-income countries. We have significant health and care disparities within the American population.

In short, U.S. health care and utilization looks quite a bit like the rest of the industrialized world’s care and utilization. And it’s a lot more expensive and not performing as well.

There may be good reasons U.S. health care spending is so much greater. The market for labor in the U.S. is different. Our GDP is much higher and wealth makes it possible. Comparing quality measures can mislead.[6]  But the public verdict is clear. Republicans and Democrats agree (!) that policymakers’ top priority in health care should be reducing individual health care costs (64% Rs, 70% Ds, 67% total)[7] and combating the opioid crisis. Partisan splits appear on whether to repeal the Affordable Care Act and on addressing federal spending or role in health care.

Having described the state of U.S. health and health spending at length, what solutions do the authors offer?  Not much except to say that their data and findings should drive policy action. They support more competition, data and understanding. But they beg some humility.

No question, however, that organizations ought to frame their policy agendas in terms of costs and outcomes and apply data-driven evidence policymakers can grasp.

Large figures are meaningless. Relative figures are better. Personal figures powered by evidence are best.

Linking data to actual people and organizations in the constituent community: better still.

Clean visual presentation is icing on the cake.

Innovation changes things. But be sure in describing costs, cost savings and benefits, ensure whether the object of your request is also the entity benefiting from the gains the innovation delivers. Bringing a health plan an initiative to save “the system” money is no benefit to the health plan unless it saves the health plan something, too.   

Persuading yourself matters. But persuading you does not guarantee it persuades anyone else. Answering “what’s in it for me” for everyone you hope to persuade is a start.

The political economy and the real economy and their standards for evidence are related but different. Expect your evidence to be challenged. Anticipate and answer the challenges.

How you do it this time matters this time and next time.

There is a difference between a plan and magical thinking.

Are you ready?


Frank Talk is a product of Cardinal Waypoint LLC. You can have Cardinal Waypoint at work for you. Contact Cardinal Waypoint here.


[1] Papanicolas I, Woskie L, Jha A. Health care spending in the United States and other high-income countries. JAMA 2018;319(10): 1024-1039. March 13, 2018., retrieved 3/14/2018.

[2] Ibid. The U.S. spent 17.8% of GDP on health care in 2015, compared with 9.6% of GDP in Australia and 12.4% (the next highest share) in Switzerland. Mean spending per capita on health was $9,403 in the U.S. vs. a mean of $5,419 elsewhere.

[3] Ibid. U.S. showed highest rates of obesity, lowest life expectancy, maternal mortality six times the mean of other high-income countries, highest infant and neonatal mortality by most measures. On the positive side, U.S. rates of smoking and alcohol consumption are lower than most high-income countries.

[4] Anderson G, Reinhardt U, Hussey P, Petrosyan V. It’s the prices, stupid: why the United States is so different from other countries. Health Affairs 2003;22(3). May-June 2003., retrieved 3/14/2018. Also Reinhardt U, Hussey P, Anderson G. U.S. health care spending in an international context. Health Affairs 2004;23(3). May-June 2004., retrieved 3/14/2018.

[5] Papanicolas et al. “In 2013, the International Federation of Health Plans reported that the average cost in the United States was $75,345 for a coronary artery bypass graft surgery, whereas the costs in the Netherlands and Switzerland were $15,742 and $36,509, respectively.”

[6] Baicker K, Chandra A. Editorial: Challenges in understanding differences in health care spending between the United States and other high-income countries. JAMA 2018;2018;319(10):986-987., retrieved 3/15/2018.

[7] Kirzinger A, Hamel L, Clark C et al. U.S. public opinion on health care reform 2017. JAMA 2017;317(15):1516., retrieved 3/14/2018.

Frank PurcellComment