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Labor, drug and administrative costs the main reasons why the US spends so much on health care.

Posted Monday, March 26, 2018 by Tyler Goldberg-Hoss

A recent study published in the Journal of the American Medical Association (JAMA) looked at health care spending in the United States and how it compares with other “high-income” countries such as Germany, Canada, Australia, and France.

The study found a number of interest things:

In attempting to answer why we spend so much to get comparable (or worse) health care, the report focused on three things.

First, we pay our health care providers more. For example, we pay general physicians $218,173/year, while in the other countries the range was $86,607-$154,126.

Second, we pay substantially more per person for the costs of goods, particularly drugs. In the US per capita spending is $1443, versus $466-$939 in other countries.

Finally, administrative costs accounted for 8% of all health care spending in the US, versus a range of 1%-3% in the other countries.

In my line of work, malpractice litigation, some focus group participants and jurors have a tendency to believe that malpractice itself – in the form of rising professional insurance or defensive medicine – is a large reason why our health care costs are so high.

The report addressed this indirectly, stating:

“The data also suggest that some of the more common explanations about higher health care spending in the United States, such as underinvestment in social programs, the low primary care/specialist mix, the fee-for-service system encouraging high volumes of care, or defensive medicine leading to overutilization, did not appear to be major drivers of the substantially higher US health care spending compared with other high-income countries.” (emphasis added)

It is clear, not only from this report but also from our collective understanding, that health care is an ongoing issue in our country. On the bright side, this report gives us clues as to how we might fix it.

You can read the full report here:

Health Care Spending in the United States and Other High-Income Countries

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