The United States spends a much higher percentage of its GDP on health care than other developed countries.But is that increase in spending due to an increase in the price of medical services provided, or an increase in the amount of care provided? The “price or quantity” question has been around for a whileHowever, the OECD is cautious in providing some estimates in its latest report. Health At a Glance 2023: OECD indicators (November 2023).
The main challenge when comparing health care prices across countries is that the quality of certain types of health care definitely differs. For example, consider comparing „number of hospitalization days.“ In the U.S. health care system, hospitalization is often a highly intensive medical experience, with much of the subsequent recovery occurring at home. In other countries, expensive technology is used only part of the time and can lengthen hospital stays. So when we say that hospital days in the United States are more expensive, we are actually saying that „days of hospital“ have different meanings in different countries. To compare health care prices, you need to compare (at least broadly) the same services. Additionally, you need to compare the US dollar with other currencies.
The OECD sought to compile a fair comparison of health care prices across countries. The U.S. hospital sector (which accounts for about 30% of health care spending in most countries) uses an „input“ measure of costs based on the salaries of hospital workers. For other aspects of health care, and hospital care in other countries, we use a „output“ measure of price per service (or per drug) provided.
This is the result of an OECD indicator, which estimates that the price level in the United States is 43% higher than the OECD average.
Conversely, if we know that total expenditure is the product of price and quantity, and if we know the overall disparity in expenditures and differences in price levels between countries, we can account for fundamental differences in the amount of medical care. You can guess. Using this method, the OECD’s estimates of health spending in each country are as follows:
Although the OECD has a well-deserved reputation for carrying out these types of calculations as carefully as possible, it should be noted that the methodology here is necessarily imperfect. For example, differences in administrative costs from country to country or differences in the types of technology available from country to country cannot be fully captured here.
Given these well-documented concerns, it is interesting to note that the United States spends more on health care per capita than any other country. Remember, this number is after adjusting for the high cost of healthcare in the United States. People in Germany and France receive about the same amount of health care as people in the United States, but at about half the price level. Conversely, other countries with similar high healthcare price levels as the United States, such as Switzerland and Norway, have much lower per capita healthcare spending.
Therefore, the U.S. economy is the only economy near the top of both the price and quantity rankings of health care, which contributes to the high share of health care in the U.S. economy compared to other countries. . Of course, every dollar the United States spends on health care is a dollar of revenue received by someone in the health care industry, so changing this dynamic is very difficult.