Why Are Americans Spending More on Healthcare Than Any Other Nation, While Getting Lower-Quality Care?

The following is an excerpt from Dr. Elizabeth H. Bradley and Lauren A. Taylor's new book, The American Health Care Paradox: Why Spending More is Getting Us Less (Perseus Books, 2013).

Joe is a twenty-eight-year-old man with type 1 diabetes, living in the United States. He lacks permanent housing and has been staying in a friend’s condemned, boarded-up house. To avoid being seen there, Joe enters through the marshlands behind the house. His shoes are full of holes, but he cannot afford to replace them. Joe’s diet has similarly suffered from his lack of income; he some- times goes several days without fresh food, which negatively af- fects his diabetes. Also, after a lifetime of poor insulin control, he is starting to lose circulation in his feet. Last year, Joe had two toes removed on his right foot to save his life (hospital cost: $7,132). Still, neuropathy continues to cause him decreased sensitivity in and increased risk of trauma to his feet. The doctor he last saw emphasized the importance of keeping his feet dry, getting proper nutrition, and taking his costly insulin as prescribed, all of which Joe is eager to do. Since that appointment, Joe has been diligent in taking his insulin, but dry feet and proper nutrition remain dif- ficult to achieve due to his living conditions and unemployment. His doctor has already raised the issue of having to have more toes removed on his left foot (cost: $14,430), and without immediate changes, Joe will need to have a below-the-knee amputation in the years ahead (cost: $17,347) and will likely need a wheelchair (cost: $1,042). The estimated cost of his medical expenses will top $30,000, paid by a state medical assistance program that is funded by taxpayers. Amid a system marked by the most advanced medical treatment in the world, Joe is dying a slow, painful, and expensive death. A decent pair of shoes costs $50.

We begin with the true story of a young man living in the United States. While that story may sound like the basis of a Hollywood plot, we encountered similar stories throughout our research on the American health care system. It goes without saying that Joe needs more than a good pair of shoes to improve his health; he also needs accessible shelter and nutritious food. But the cost of these interventions still pale compared with $30,000 in medical treatment he is currently on track to accrue in the coming years. Furthermore, shelter, food, and shoes might enable him to return to work and not suffer a lifetime dependent on a wheelchair. Joe, and many others like him, illustrate how inadequate attention to social services and supports can lead to exorbitant health care expenses. We confront the consequences of this imbalance experienced by people across the income spectrum. Joe’s is one story, which, replicated across the country, begins to unravel the paradox that has perplexed policymakers for decades: How is it that the United States spends more per capita than any other nation on health care, while Americans fare worse in many measures of health?


According to the 2013 Institute of Medicine report Shorter Lives, Poorer Health, Americans have lower life expectancy and higher rates of infant mortality, low birth weight, injuries and homicides, adolescent pregnancy and sexually transmitted diseases, HIV/AIDS, drug-related deaths, obesity, diabetes, heart disease, chronic lung disease, and disability than people in other industrialized countries. Furthermore, racial and economic disparities fail to explain this national health disadvantage in the United States. Americans who are white, insured, college educated, and upper income have poorer health than do their counterparts in other industrialized countries. Although the Institute of Medicine report was circulated as news, the “spend more, get less” paradox it documented has been recognized for decades. As early as 1971, Nathan Glazer, a sociologist at Harvard University who worked on President Lyndon Johnson’s Model Cities Program, used the term paradox to describe American health care. In his article published in The Public Interest, Glazer pointed out that while the American population increased 17 percent between 1955 and 1965, medical personnel increased 63 percent with no improvement in general health of the population. More recently, Dartmouth economist Jonathan Skinner used the term to demonstrate that between 1986 and 2005, the geographic regions with the largest increases in Medicare spending were not the ones with the largest survival gains.

Researchers, policymakers, and practitioners have offered a number of rationales for this paradox mostly related to the design and financing of the health care system. Pundits of various political views have laid blame on greedy insurance companies, inefficient and wasteful hospitals and government programs, and skyrocketing costs of pharmaceutical drugs. These assertions can be supported with data but do not fully explain why spending more on health care is getting Americans less health.

We propose a different explanation, based on compelling data gathered over years of research. Inadequate attention to and investment in services that address the broader determinants of health is the unnamed culprit behind why the United States spends so much on health care but continues to lag behind in health outcomes.

The idea that Americans spend more and get less when it comes to health care is frustrating to a populace long steeped in the virtues and benefits of capitalism. The American spirit resists the thought that the nation may not be getting value for money. The situation is upsetting not only because it connotes waste in the system, but because it provides evidence of the United States’ falling behind its peer, industrialized countries—spending more but not being any healthier for it. The United States ranks top out of thirty-four nations in national spending on health care as a percentage of GDP. Data from countries in the Organisation for Economic Co-operation and Development (OECD) from 2009 puts US health care spending at $7,960 per person, while most others spend less than $4,000 per capita (see Figure 1.1) and rank above the United States in multiple measures of health.


[Source: OECD, Health at a Glance 2011 (Paris, France: OECD Publishing, 2011).]

Most of the health care spending finances hospitals, physicians, and clinics. According to 2010 data from the Centers for Medicare & Medicaid Services, it is allocated as follows: approximately 31 percent is for hospital care; 20 percent, for physician and clinic services; 10 percent, for prescription drugs; 7 percent, for dental and other professionals; 7 percent, for government administration; 6 percent is for investment (structures, equipment, and noncommercial research); 6 percent is for nursing home and other long-term care; and 14 percent is for other medical costs including home health care (3 percent), government public health activities (3 percent), other medical products (3 percent), and other health, residential, and personal care (5 percent).

This piece was published with permission from Perseus Books.


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