Bloomberg: Data Show US Devotes Disproportionate Resources to Healthcare with Lackluster Results

Maklay62 / Pixabay

Maklay62 / Pixabay

The U.S. healthcare system remains among the least-efficient in the world, ranking 50th out of 55 countries in 2014, according to a Bloomberg index that assesses life expectancy, healthcare spending per capita and relative spending as a share of gross domestic product. Expenditures averaged $9,403 per person, about 17.1% of GDP, that year–the most recent for which data are available–and life expectancy was 78.9. Only Jordan, Colombia, Azerbaijan, Brazil and Russia ranked lower.

The U.S. has lagged near the bottom of the Bloomberg Health-Care Efficiency Index since 2012 Click To Tweet

The U.S. has lagged near the bottom of the Bloomberg Health-Care Efficiency Index since it was created in 2012. Hong Kong and Singapore–consistently at the top–are smaller countries with less diverse populations. Their governments also play a stronger role in regulating and providing care, with spending per capita averaging $2,386 and longevity averaging about 83 years.

The U.S. system “tends to be more fragmented, less organized and coordinated, and that’s likely to lead to inefficiency,” said Paul Ginsburg, a professor at the University of Southern California and director of the Center for Health Policy at the Brookings Institution in Washington.

The index reflects the first full year of Obamacare. While the U.S. Affordable Care Act expanded access to health insurance and provided payment subsidies starting on Jan. 1, 2014, its impact on life expectancy will take a while to gauge. That’s partly because health care isn’t the only influence on longevity.

“It has to do with how we eat, how we live, poverty and inequality, and social support,” said Jon Oberlander, a professor of health policy at the University of North Carolina at Chapel Hill School of Medicine.

Life expectancy still is a way of measuring how well, overall, a country’s medical system is working, which is why it is used in the index, according to the Bloomberg report.

Obamacare’s impact on cost per capita also is difficult to assess for 2014. Healthcare expenditures started moderating in 2010 because of the economic recovery and insurance-policy changes in the private sector, Oberlander said. Over time, expanding coverage through Obamacare could boost spending “because we know that insured people use more services than uninsured people,” Ginsburg said.

Cuba and the Czech Republic–with life expectancy closest to the U.S. at 79.4 and 78.3 years–paid much less on health care: $817 and $1,379 respectively, per capita. Switzerland and Norway, the only countries with higher spending than the U.S.–$9,674 and $9,522–had longer life expectancy, averaging 82.3 years. Chile, the first Latin American economy to join the Organization for Economic Cooperation and Development, is the only country from the continent to have ranked among the top 10, and its life expectancy, at 81.5 years, was the highest.

Rankings for several nations have changed substantially over time because of increased spending relative to the slow pace of improvement in life expectancy. Sweden fell to 27 in the latest index from 14th in 2009 as per-capita spending rose by more than 50%. Saudi Arabia dropped 20 spots to 38th as its spending increased by almost 80%. Bloomberg calculated an inferred ranking back to 2009 for comparison purposes.

Greece moved up nine spots to 13th, as life expectancy rose by one year and per-capital spending fell almost 40% to $1,743 from $2,879. The country is in the midst of an economic crisis that has wiped away about a quarter of its GDP.

Steve’s Take: Earlier this week I wrote a Take about the now, widely disseminated pricing practices of Mylan NV (Amsterdam) for its EpiPen emergency allergy product. Its retail price for the standard two-pack here in the U.S. reached $608–before the outcry and resulting Congressional investigation on Capitol Hill. A recent analysis by the consumer watchdog Public Citizen found that the same EpiPen two-pack costs $69 in the United Kingdom, $181.81 in Canada and $210.21 in Germany, according to Reuters.

I offer Mylan’s pricing practice for the EpiPen as one of the primary reasons the US ranks so low on the Bloomberg index. Over here, until the outrageously high price for the product came to the full light of scathing media coverage, the $608 price was accepted as “the price.”

So why would the US tolerate the $608 price when the UK pays just $69, or 90% less, for the same product? Because the UK government (and most others) bargains on behalf of its citizenry for the best price, and even at $69, Mylan still makes a profit on the EpiPen. Our system just doesn’t operate in such manner.

Buttressing the conclusions of the Bloomberg Health-Care Efficiency Index, the Brookings Institute issued a report a year ago also finding that, relative to other affluent countries, the United States devotes disproportionate resources to health care with disappointing results.

It says, “Complex insurance rules and distorted market signals create massive inefficiencies, frustrated patients, and providers burdened by excessive paperwork. Recognizing these problems, entrepreneurs are increasingly applying information technology to healthcare equipment, monitoring, treatment, and service delivery, creating a sector known as digital health. These technologies, once embedded and distributed around the country, hold the potential to substantially alter the efficiency and quality of health care through the better generation, processing, and use of information; the reduction of overhead costs; and the empowerment of patients.”

A recent analysis by the Congressional Budget Office projects that the annual federal budget shortfall will go from $520 billion in 2018 to $1.2 trillion in 2026, largely due to growth in spending on healthcare and retirement programs. The number of people age 65 and older has more than doubled from 50 years ago, with Medicare currently totaling about 3% of GDP. Unless something endemic in the existing economics of our healthcare financing changes, we can expect to move even lower–possibly to rock bottom–on the Bloomberg Index.

So where do we start?

Brookings concludes that, “The need for health care presents the United States, in particular, and all aging countries more broadly, with a massive economic challenge: how to preserve and improve health without devoting excessive resources to the healthcare sector.Technology is already providing an important role that will increase as a means to confront these challenges. Venture capital activity  in digital health has increased substantially in recent years and is absorbing a larger share of total deals and dollars invested in the United States.”

Only time will tell if digital health companies will fulfill their promise of increasing the quality and efficiency of health care, but there are promising signs that they will at least make a significant contribution. In addition, the economic landscape of the private/public payer system for healthcare in the US is shifting as large insurers flee Obamacare and workers with private insurance see their deductibles skyrocket.

Steve's Take: Will digital health companies increase the quality and efficiency of health care? Click To Tweet

That actually leaves the US government in a stronger bargaining position with industry for its products and services because it will bring more Medicare, Medicaid and Obamacare business to the table. Does that mean we can expect to see a price of $69 for the EpiPen, like the UK gets now? Probably not. But we also won’t be seeing a $600 price tag either.

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