Why Does Health Care Cost More in the United States?

    • September 8, 2011

The United States spends more per capita on health care than other countries. That fact has sparked endless debate over the reasons, how—and whether—to change it, and if our increased spending is buying higher quality care.

A new study funded in part by the Robert Wood Johnson Foundation (RWJF) through its Investigator Awards in Health Policy Research program sheds new light on those questions, and may help policy-makers answer them.

The key driver of U.S. spending on primary health care and specialized orthopedic care is the comparatively high fees charged by U.S. physicians, the study finds. These fees—higher than in five other economically advanced countries studied—drive spending more than factors such as costs associated with medical education and practice.

Health care decision-makers “focus a lot on the quantity of health care—whether people are using too many services or getting too many procedures done,” said Miriam Laugesen, Ph.D., an RWJF awardee and the lead author of the study. “What we show is that the big reason health care costs more in the United States is because of physician fees. That translates into higher costs for everyone.”

Laugesen, an assistant professor in the department of health policy and management at Columbia University’s Mailman School of Public Health and a recipient of the RWJF Investigator Award in Health Policy Research (2009), conducted the study with Sherry Glied, Ph.D., a professor of health policy and management at Columbia University’s Mailman School of Public Health and a 1995 recipient of the RWJF Investigator Award. It was published in the September edition of Health Affairs, a leading health care policy journal.

Study Produces a ‘Finer-Grained’ Comparison of Health Care Fees across Nations

Apples-to-apples comparisons of health care prices across countries are difficult to make because the day-to-day work of physicians varies greatly, even within the same country, the authors write. But this study allows for what the authors call “a finer-grained” comparison because it distinguishes between fees paid by patients funded by public and private entities and between primary and specialty care.

For the study, Laugesen and Glied compared fees charged by physicians for two types of services—basic primary care visits and hip replacements—in Australia, Canada, France, Germany, the United Kingdom and the United States.

They found that U.S. physicians are paid 27 percent more than their counterparts in other countries for primary care services paid for by Medicare and 70 percent more for primary care office visits paid by private insurers.

The disparity was much greater for orthopedic care—a key reason U.S. spending on hip replacements far outpaces spending for the same service in other countries. Medicare fees for hip replacements in the United States are 70 percent more than public fees in other countries, and private insurer fees are 120 percent more for hip replacements than private insurer fees in other countries, they found.

Laugesen and Glied took into account confounding factors such as the expenses associated with medical practice, the cost of medical school, and the supply of primary care physicians and specialists.

Among their findings was the fact that U.S. physicians—and orthopedic surgeons in particular—earned more than their foreign counterparts.

Lowering fees, at least for U.S. primary care doctors, isn’t necessarily a solution, according to some analysts. In fact, some call for the opposite: an increase in U.S. primary care physician salaries to curb a shortage of primary care providers.

Indeed, U.S. primary care physicians earned only 42 percent as much as U.S. orthopedic surgeons—a greater disparity than in any of the other countries studied, Laugesen and Glied found.

The Robert Wood Johnson Foundation Investigator Awards in Health Policy Research supports highly-respected and innovative scholars from a wide range of fields to undertake ambitious, cutting-edge studies of significant health policy challenges facing America. The program provides one of the few funding opportunities for outstanding researchers throughout the stages of their careers to explore bold new ideas for improving the nation’s health or health care system.