In Discussions, Life, Money, USA

Why is healthcare so expensive in the U.S.?

Here you go!

An American (John Green) with the facts about American healthcare versus global healthcare and it surprisingly comes down to negotiation……

A quick summary of the salient facts by John Green in the video:

  • Costs in taxes come to almost $7300 USD per person for healthcare, for not having any healthcare (irony!)
  • Other comparable countries are at around half that cost or less (e.g. Canada)
  • U.S. spends 18% of its GFP on healthcare costs versus comparable countries at 9% (Australia) yet go to fewer doctors!
  • Only about 28% of Americans get healthcare funded by the government, which includes Congress (politicians)
  • What kills it all is the cost: $124/month for Lipitor in the U.S. only costs $7/month in New Zealand
  • Americans pay a LOT more for healthcare but the differences are not noticeable and they are 33rd on the list for life expectancy (I reckon way past the other countries listed on the graphs above who pay less)
  • Higher healthcare costs attributed to malpractice suits only accounts for 2% of the cost of healthcare
  • Relative to the size of the U.S. economy: Americans spend about $75 billion more on higher salaries, $100 billion more on marketing and admin, and $90 billion more on medications because it simply costs more in the U.S. rather than it being due to taking more medication (quantity), and patient care is $500 billion more than other countries due to a lack of centralized negotiation with healthcare providers and medical manufacturers (except for Medicaid)

CONCLUSION

(which was of no surprise to me)

Americans pay more in healthcare because those being paid can get away with it and therefore, charge as much as they want because healthcare is an actual NEED.

(Click to embiggen images)

US-Healthcare-Costs-compared-to-Global

US-Healthcare-Costs-compared-to-Global-Hospital-STay.png

How much is spent per person on healthcare in each country US-Healthcare-Costs-compared-to-Global-Spending.png

 


 

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Sherry of Save. Spend. Splurge.

Millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. Since then, I have paid my $600K home in cash (my half was $300K), my $180K casr in cash, worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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18 Comments

  1. NZ Muse

    Love John Green. His writing, and the youtube channel he and his brother is pretty amusing.

    I definitely do not understand the US. Taxes aren’t THAT much lower. That said, everything is definitely cheaper in North America (yes I’m including Canada in that) than it is in Oceania.

    Reply
    1. save. spend. splurge.

      Taxes in some states are very low, and are just the federal tax, with no state tax, like Texas or Florida where I lived.

      Reply
  2. SarahN

    And this is where Australia is slowly slipping into being more and more like the US. This week our budget was announced, and the idea what we shall pay $7 to see a doctor, like a general practitioner. Previously, you could see certain doctors (called bulk billing doctors) for free. Private doctors could choose to charge a ‘gap’ between the amount per consult the govt gave them, and what they think it costs to provide the services.

    It’s not the only change proposed by our Right wing govt, and there’s a lot of concern. I see education and health moving more and more to the right and like the US’s system, and I’m not at all happy about it. Then again, another reason to relocate permanently to France, which was the dream!

    Reply
    1. save. spend. splurge.

      Well in France BF did tell me that at one point (or perhaps even now) they made people pay a small nominal fee of about $10 or so JUST to deter people from going to the doctor for any little ailment. You’d only go to the doctor if you really felt like you were sick, and this apparently saved them a LOT of money because when going to the doctor is free, everyone turns into a hypochondriac.

      Reply
      1. SarahN

        @save. spend. splurge.: hahah well they do say the French are hypocondriacs, and by the number of green crosses for pharmacies you see, I can believe it!

        I don’ think a nominal fee is the problem, I do think it’s a start to a slippery slope where it’ll be 100% user pays. It’s hard to see the future.

        They also suggested a halt to the employer retirement contributions, they were due to rise to 12% in a few years time, now they are frozen at 9.5% until 2018 (ie the next govt’s term). Again, short sighted imo, they could have slowed the rise to 12% rather than freezing it.

        Reply
        1. save. spend. splurge.

          Oh yes, the French are definitely into health.

          I hope it just stays as a nominal fee rather than 100% payment. I doubt it will ever get to be 100%, people would riot.

          Reply
  3. Tania

    I was going to say the US is a very litigious society and I’m sure the cost of insurance has something to do with it but then there was that point about malpractice accounting for only 2% of it. I don’t know the answer but it’s definitely something I’d like to read more about. I do view the US as sicker created by our diet (compared to some European and Asian countries we don’t eat well). But I don’t know what the numbers actually say on that.

    Reply
    1. save. spend. splurge.

      I suspect that not eating well is definitely an issue. If you don’t eat well, you’re stressed, you don’t get enough sleep and you are tired all the time in need of an energy boost, sugar and/or medication (like sleeping aids) seems to be the quick-fix answer, which just perpetuates a neverending cycle of treating the symptoms and not the cause (e.g. good food and sleep).

      I too also thought that because the U.S. was extremely litigious that it HAD to be the difference between the cost of medicine there and in Canada or other places, but only 2%? That’s ridiculous.

      My other instinct was that they just charged a lot of money because they could. Once you’re given that leeway and can get way with it, perhaps they started to lose sight of what was reasonable: “That company is charging X amount! I have to raise my prices to keep in line!”

      Reply
    2. Potato

      @Tania: It wasn’t malpractice, it was “defensive medicine” that was less than 2% — American doctors order more diagnostic tests (particularly more MRIs) than Canadian or British doctors. That’s likely driven by malpractice, but malpractice costs may also be coming in to the higher hourly rate US doctors and nurses cost the system, and other areas.

      The control group on diet is Canada.

      One factor I haven’t seen much research on is population density and efficiency: in Canada we simply don’t have certain facilities everywhere. If you need quaternary care, you go to a big city for it; even some tertiary care you may have to travel for. Our system can dictate that on a top-down level to conserve resources and make efficiencies. However, in the US nothing stops a hospital from building capacity in small centres and charging more to make ends meet. The Mayo clinic, for all the great work they do, is situated in a small town of 100,000 people, over an hour from Minneapolis.

      But yeah, the evidence I’ve seen agrees with the video: the system is too fragmented to negotiate as well as our system, and on top of that adding a for-profit markup on its own adds costs and a ton of overhead to the insurance industry. The US insurance industry spends almost half as much money just fighting over what is and is not insurable, and the administrative burden of payment and reimbursement, as we do actually treating people.

      Reply
      1. save. spend. splurge.

        That’s what he said in the video too — American doctors order more MRIs and tests to avoid malpractice suits.

        That is true that we don’t have certain facilities everywhere. My parents have to travel to another city 2 hours away to get certain things done like prosthetics. Perhaps that’s where the efficiency comes in with universal healthcare.

        There’s one central location serving that area and the surrounding ones rather than building separate ones in each city. I know this is the case with prosthetics in certain areas, they simply don’t have the cash to build such specific medical centres for all the rural areas.

        I remember when I was on the healthcare system in the U.S., I learned that there were something called “networks”. You could only go to certain doctors if they were on your covered network, otherwise you had to pay out of pocket!! So if you wanted to see a specific doctor, you couldn’t unless he/she was in your network.

        I thought to myself: What utter nonsense. I should be able to see ANYONE I want and just submit the expense.

        Reply
  4. AdinaJ

    Of course nothing is 500% cheaper, but I think everything is still cheap enough to make a difference – if you exclude healthcare. Cars, houses, food, pretty much every other consumer good. I understand why some Americans don’t want to pay for universal care, fine. But why are their health care costs higher than ours? Why does something that costs $7 everywhere else cost exponentially higher there? When the general trend is for everything else to cost LESS in the US than elsewhere?

    Is the average/median wage in the US lower than in Canada?

    Reply
    1. save. spend. splurge.

      Because it CAN cost more.

      That’s the crux of the entire thing — the drug companies, hospitals, and healthcare companies are charging more because they can.

      It’s like two shops selling the same thing. One shop edges up its price just a little and the other says: But he’s making more money! I need to charge more too!

      On and on and on… without any regulation or checks, it escalates to the point of insanity, and it becomes normal to pay $124 for medicine that is only $7 elsewhere. If there are complaints you say: “Oh but that’s because they have universal healthcare and the government subsidizes them.. it’s not the same here”

      That, and as he mentioned there is no central negotiating body. You either want to buy the medicine to be cured, and go to the hospital to get better, or not. The price doesn’t change because there’s no one to help muscle the price on your behalf (e.g. universal healthcare bodies who can go from one company to another)

      Average/median wage in my experience is about the same as in Canada. Varies by industry, some pay more than others, but it’s about the same, if not lower, as their minimum wage is $8/hour versus our average of $10/hour.

      Reply
  5. tomatoketchup

    It’s because we have no campaign finance reform.

    Because certain interest groups can shovel vast amounts of money to bribe candidates who will do their bidding, very little meaningful change occurs. I would love to be able to practice under a simple, single payer system like what they have in every other civilized country, but I doubt that will happen during my working career. There are too many people with too much to lose (anyone associated with any private insurance company) to let something like that take place.

    Also, a smaller factor is defensive medicine. Half the lab tests I order, I order because I don’t want to get sued later on. Other societies aren’t quite so litigious.

    Reply
    1. save. spend. splurge.

      Two excellent points.

      I did suspect as well that change will come very slowly if at all, because the system is so deeply rooted in (rich) companies paying off officials, which makes those companies even richer with the laws being put in place to protect their interests, and so on and so on. Over decades of this happening, it will not take just one mandate from someone like Obama to change it, but decades to reverse or fix the problem.

      I agree with defensive medicine, but he said that lawsuits and defensive medicine only make up 2% of the difference in cost between the U.S. and the world.

      Reply
      1. tomatoketchup

        I’d be very curious to see how they came up with that 2% number. A medical records auditor with no medical training would have a very difficult time distinguishing which tests were ordered out of absolute necessity versus which tests were ordered to cover my ass just in case.

        Also, this excludes malpractice that occurs within the government run VA (Veteran’s Affairs) hospitals. If malpractice occurs at the VA, you can’t sue the doctor; you sue the United States of America. I’d bet that those patients have a fairly difficult time extracting damages from the federal government.

        Reply
        1. save. spend. splurge.

          I think he gives the references in his video if you want to head over there and check it out.

          Reply
  6. AdinaJ

    But Americans pay so much less than us for pretty much everything else. Why is healthcare, specifically, the outlier? It still kind of boggles my mind.

    Reply
    1. save. spend. splurge.

      @AdinaJ: Hmm.. “so much less”?

      I don’t know about that. Sure the shopping is cheaper, but it isn’t a necessity to buy clothes all the time (no matter what you and I think 😉 )… and food is cheaper but it isn’t 500% cheaper. It’s cheaper by maybe a few dollars here and there but not on the scale of healthcare.

      Everything is also cheaper because their taxes are lower and presumably the difference is to pay for healthcare if you want to… except the costs are so astronomical I don’t even know how people do it even with GOOD jobs.

      Healthcare is an outlier (I think) because the people who don’t want to pay for it (citizens and politicians) don’t want to subsidize those in lower income brackets by having to pay more in taxes especially if you are used to living in no-state-tax states like Florida or Texas.

      America is a country that is very much an independent, DIY, work hard and get rich on your own merit kind of country, and the idea of giving healthcare to people who presumably “haven’t worked for it” in some people’s eyes, galls them.

      That, and I suspect politicians (paid for by the government) and those who have money to pay for private healthcare as is (or have good jobs that allow them to have excellent healthcare), can afford to do so, are able to eat healthily, visit doctors and dentists regularly and avoid said diseases/problems, which contributes to their continuing good health….. So they don’t see a problem at all with the system of supply and demand.

      It’s the ones who are working at $8/hour who can’t afford healthcare or don’t have good jobs to get it through work, who are the ones that no one seems to care about or want to pay for.

      And healthcare is a need.

      If you don’t get treatment, you could die, and PERHAPS (I’m not saying this is right or that I condone it) those who can’t afford healthcare are not as quote on quote “important” to society as those who have good jobs and who can afford it.

      Kind of like survival of the fittest… in a sick, twisted sense.

      *shrug* I kind of see their point in a way.

      When I was paying for healthcare at work, I didn’t go to the doctor a SINGLE TIME. I had to remind myself to see a dentist and do all that because my health was in such good condition that all the money I was paying, was going to pay for OTHER people who weren’t taking care of themselves or who were just getting older.

      Still, I’d rather have universal healthcare and pay the $4000 a year to have it (and to have peace of mind), seeing as I know it would have cost quite a bit of money for me to have given birth in Toronto had I not had OHIP (Ontario Health Insurance Plan) as a citizen of Canada.

      I can’t imagine having to pay to have a baby even at the rates we are paying versus the ones in the U.S. to stay in a hospital if I didn’t have all this money saved to do so.

      The only things I pay for outside of universal healthcare are dental and vision, both of which I can control by brushing, flossing, buying contacts online and being careful with my health.

      Reply

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