Overview
This lecture reviews rising health care spending globally, with a focus on the U.S., analyzing drivers of cost, system inefficiencies, and ongoing policy debates to improve insurance coverage and reduce expenses.
Global Health Care Spending Trends
- Global health care spending doubled in two decades, reaching $8.5 trillion in 2019 (9.8% of global GDP).
- U.S. health care spending has risen faster than inflation, now making up nearly 20% of U.S. GDP.
- U.S. spends about twice as much per person on health care compared to other wealthy countries.
U.S. Health Care System Structure and Outcomes
- U.S. system is cure-driven, not prevention-focused, increasing overall costs.
- Access to care varies by insurance status, location, and provider network.
- Despite higher spending, U.S. has lower life expectancy and poorer health outcomes than peer countries.
- U.S. health care users access a similar amount of care as in other wealthy nations but pay more per service.
Key Cost Drivers and Systemic Issues
- Hospitals, physicians, and clinical care account for over half of U.S. health spending.
- High prices, not high usage, are the main reason for elevated U.S. health care costs.
- Fragmented insurance coverage leads to inconsistent costs and access to preventive care.
- Cost shifting occurs when unpaid bills are offset by raising charges for insured patients.
Insurance Coverage and Affordability Challenges
- Over 11% of Americans were uninsured in 2020; coverage disparities are significant.
- 51% of Americans delayed or skipped care due to costs, rising to 63% for lower-income households.
- 46% of insured adults struggle with out-of-pocket expenses.
- Lack of universal coverage contributes to higher costs and worse outcomes.
Pricing Transparency and Market Limitations
- Patients rarely know actual health care costs beforehand, limiting price-based decision making.
- Insurance involvement and narrow networks make prices opaque for both patients and doctors.
- Most care is billed fee-for-service, incentivizing more procedures (provider-induced demand).
- Defensive medicine and malpractice fears contribute to unnecessary testing.
Policy Solutions and Reforms
- Proposals include Medicare for All (single-payer) and expanding the Affordable Care Act.
- The No Surprises Act (2022) protects consumers from unexpected bills from out-of-network providers.
- Bipartisan pushes exist for increased price transparency, like posting prices online.
- Researchers continue investigating the root causes of high U.S. health care spending.
Key Terms & Definitions
- Fee-for-Service — A payment model where providers are paid for each service delivered.
- Provider-Induced Demand — When providers order more services than necessary for financial reasons.
- Cost Shifting — Practice of charging more to insured patients to cover unpaid bills from others.
- Universal Coverage — A health care system ensuring all citizens have health insurance.
- Narrow Networks — Insurance provider networks with limited choices of doctors or hospitals.
- No Surprises Act — U.S. law preventing unexpected medical bills from out-of-network providers.
Action Items / Next Steps
- Review the main differences between U.S. and other nations' health care systems.
- Read more about the No Surprises Act and recent policy proposals.
- Prepare to discuss cost drivers and potential reforms in class.