American Exceptionalism: Healthcare Edition
The U.S. healthcare system is unique in a lot of ways… but perhaps the most unique aspect is that it’s really, really expensive.
The U.S. has a uniquely expensive healthcare system, with per capita spending that far surpasses any other OECD country. But the worst part isn’t even that we spend more. The worst part is that we spend more and get less. We get fewer years of life, and those years are often marked by poorer health and chronic disease.
Our system is characterized by significant inequities, with disparities in access to care and health outcomes falling along socioeconomic, racial, and gender lines. We're paying a premium for a healthcare system that struggles to deliver consistent, high-quality care to all of its citizens.
Why is healthcare so expensive in the US?
When we talk about why healthcare is so expensive, people tend to point blame at big pharma and health insurers. And yes, those stakeholders contribute to our expensive system. But the reality is actually a perfect storm of demographic, economic, and systemic factors:
An aging population. Older individuals typically require more frequent and more extensive medical care, resulting in higher per capita healthcare expenditures. People aged 55+ account for 30% of the population, but 56% of total health spending.
Chronic disease. The rise in chronic health conditions also contributes to increased healthcare costs, as managing these conditions often requires ongoing, sometimes lifelong, medical care.
Administrative costs. The administrative costs associated with managing our healthcare systems are significantly higher than in other countries that have simpler, more unified health care systems. Administrative costs account for 25% of total hospital spending, compared to 12-20% in peer countries.
Defensive medicine. Fear of malpractice lawsuits often leads doctors to order extra tests and procedures to protect themselves from potential legal action.
Lack of price transparency. In many cases, patients and providers do not know the cost of treatments until after the service has been provided, which can lead to high and unpredictable costs.
A reactive vs proactive approach. Much of our healthcare system is focused on treating diseases and conditions after they occur (what some call a “sick care system”) rather than focusing on prevention (a true “health care system”).
80/20 rule. The 80/20 rule (aka the Pareto principle) states that for many outcomes, roughly 80% of consequences come from 20% of causes. In healthcare, spending is extremely concentrated at the top with the top 1% accounting for 24% of healthcare spending, and just 5% accounting for nearly half of all health spending.
Technology. And finally, the adoption of new medical technologies and treatments, while often improving care quality, tends to increase healthcare costs. While I am a huge fan of innovation in healthcare, these new products typically come with high development and implementation costs, which are passed along to consumers.
Medical debt: the #1 reason for bankruptcy in the US
Medical debt deepens inequity and the healthcare affordability crisis in our country. Seventy seven percent of American households are in debt, and from 2017 to 2021, there were over three million personal bankruptcy filings.
Medical bills are the most common reason for bankruptcy. And medical debt remains a barrier for many in securing economic stability and good health, especially for marginalized communities.
There’s a stigma around debt and bankruptcy, like some moral failing or irresponsibility of the person. But the truth is, for the majority of cases, people are forced to decide between debt and their health. They’re paying for their medications. Or a life-saving surgery. Healthcare is so expensive in this country. Americans simply can’t afford it.
The iron triangle of healthcare: cost, accessibility, and quality
In my MPH program, we talked a lot about the iron triangle.
Cost refers to the expenses related to the delivery of healthcare services. Healthcare systems aim to minimize costs to both the patient and the system as a whole, while still providing effective care. High costs can be a barrier to care for many individuals and can put financial strain on the healthcare system.
Accessibility represents the ease with which individuals can obtain needed care. It involves factors such as the ability to pay for services, geographical distance to providers, wait times, and availability of services. A major goal of any healthcare system is to make services readily accessible to all who need them.
Quality refers to the standard of care provided. Quality can be measured in many ways, including patient outcomes, patient satisfaction, and adherence to evidence-based practice guidelines. High-quality care involves providing services that are safe, effective, patient-centered, timely, efficient, and equitable.
The "iron" aspect of the triangle comes into play when considering the interrelationship and potential trade-offs between these three dimensions. For instance, enhancing the quality of care with advanced treatments could drive up costs. Conversely, lowering costs might impact the quality of care or its accessibility. The Iron Triangle of Healthcare concept underscores the inherent challenges faced in healthcare reform and the need to balance these three critical aspects to achieve a successful and sustainable health system.
Quality problems in healthcare: overuse, underuse, and misuse
Problems with underuse, overuse, and misuse of medical services contribute to issues in healthcare systems, and unfortunately all exist at the same time.
Underuse of healthcare is when patients do not receive the care they need. This might be due to financial barriers, lack of access to healthcare providers, or a lack of awareness or understanding about health. For example, 44% of Americans say they didn’t go to a doctor when they were sick or injured in 2017 because of cost. And about a quarter of adults say they or a family member have not filled a prescription, cut pills in half, or skipped doses of medicine in the last year because of the cost. This underutilization can lead to poorer health outcomes and can often result in more expensive emergency care down the line.
Overuse of healthcare refers to the provision of medical services that are unlikely to benefit the patient or could potentially cause harm. Overuse is a significant issue, especially in systems where a fee-for-service payment model is dominant. Evidence suggests that higher spending is not necessarily correlated with better outcomes. In fact, there is often no correlation between spending and quality (just look at the chart above), indicating that unnecessary services might be driving up costs without improving patient care.
Misuse of healthcare involves errors in medical care that lead to patient harm. Despite the advancement in medical technologies and knowledge, medical errors are the third-leading cause of death in the U.S. after heart disease and cancer. Misuse also refers to other issues, such as misdiagnosis, inappropriate or ineffective treatments, and avoidable complications, all of which can harm patients and increase costs.
Despite the advancement in medical technologies and knowledge, medical errors are the third-leading cause of death in the U.S. after heart disease and cancer.
Addressing underuse, overuse, and misuse of healthcare is hard. It requires system-wide changes to healthcare delivery, including better education for providers and patients, the implementation of evidence-based guidelines, quality measurement and improvement efforts, and changes to how we pay for healthcare.
Let’s redefine American exceptionalism in healthcare
The issue of high and rising healthcare costs is a uniquely American problem. Despite our abundant resources, technological innovation, and high spending on healthcare, we are confronted with a system that is plagued by inefficiencies, systemic disparities, and often underwhelming outcomes.
The paradox of high expenditure with relatively poorer health metrics compared to other developed nations underscores the need for transformative changes within our system. From addressing administrative inefficiencies, the practice of defensive medicine, lack of price transparency, and a largely reactive rather than proactive approach to health, America's journey to an equitable, efficient, and affordable healthcare system is rife with challenges, yet imbued with potential for meaningful progress.
Perhaps the same American exceptionalism that underscores these problems also provides the key to our solutions. We possess a history of innovation and entrepreneurship, along with a willingness to invest in healthcare.
Let’s redefine American exceptionalism in healthcare. It can become a symbol not of high costs and inefficiencies, but of quality, accessibility, and affordability. Let’s shape a healthcare system that is exceptional for all the right reasons.