Why your healthcare costs so much

[Music] many years ago a witty public servant made a remark that seems to get more relevant every day the official said everyone is entitled to their own opinions but not their own facts when it comes to the endless debate about health care costs in the US there's no shortage of opinions about why it cost so much and there are loads of theories about why health care spending per capita is nearly double in the u.s. what it is and other similar economies around the world but what makes this question so vexing is that all of these opinions and theories seem to come with their own facts many experts believe the basic reason for higher health care costs in the u.s. is over utilization of services they have numbers to prove it others blame underinvestment and social spending they have numbers too still others believe the basic problem lies with the health care workforce too many specialists not enough primary care physicians today have numbers to prove their theories of course they do and often the data is quite good but in many cases this data seems to exist in a vacuum without a broader context to make it meaningful like how to metrics in the u.s. compared to figures in other countries so I decided to take a comparative approach I wanted a more data-driven and nuanced understanding of all factors driving health care costs and so where do you begin I decided to look at 10 other countries who are high spenders in health care fortunately there was plenty of existing data to draw on from sources like the Commonwealth Fund and the OECD so osed that's the Organisation for Economic Cooperation and Development 36 Member States mostly European but also the US first I wanted to look at things like health care spending I wanted to see how the u.s. stacks up across the other countries I wanted to get a sense of how much expenditure comes from private sources and public sources and well proportion goes to impatient outpatient and long CAIR then I wanted to look at how much things like in labor cost and other inputs and then to look at things like access to care quality of care and utilization rates and finally to get a sense of how that spending translates into what we care about most health outcomes so big picture first what does the u.s. get for the extraordinary amount of money it spends on health care our outcomes better do people live longer are they more likely to survive after an operation well the picture is mixed on the downside u.s. life expectancy is 78 point 6 years that's 2 years less than the OECD average and recently life expectancy in the US has been declining and when we take into account levels of ill health in the population the u.s. looks even worse countries like France and Switzerland have fewer debts in their populations from causes where timely and effective medical care can save lives on the other hand the US has excellent acute care and deploys the latest medical technology in ways that can have a meaningful impact on people's lives so while Americans are more likely than their counterparts in other countries to have a heart attack they're also more likely to survive after treatment and the same is true for stroke so now that I had a baseline for outcomes my team and I decided to turn to all of those popular theories about what's driving healthcare costs and see how well they held up to the data we started with utilization many people believe Americans overuse the health care system many people believe US doctors run up costs by practicing defensive medicine that they prescribe unnecessary tests and hospitalized people who don't really need it just to avoid a lawsuit that the fee-for-service payment system incentivizes overuse but what does the data say taken as a whole the u.s. is about average that means weigh about average on certain things like the number of MRIs above average on others like the number of knee replacements and below average on things like the number of visits to the doctor or the number of hospitalizations per year next we looked at social spending would the US spend less on health care if the government invested more in social spending this too is a popular theory in some quarters it sounds reasonable but the data suggests otherwise first the u.s. actually doesn't spend that much less on social spending than other countries the u.s. spends 16 percent of their GDP on social programs the OECD average is 17 percent second there appears to be a positive relationship between health care spending and social spending that means that the more a country spends on social programs the more they spend on health care why likely because if you're a country that values spending on something like health care you also value spending it on education and housing now we come to the narrative about over specialization the argument runs that if the US had a better ratio of primary care physicians to specialists patients would be more likely to go see their primary care doctor instead of going to see the specialist which costs more but here this hypothesis also runs counter to the data when we look at the total number of doctors within the country we find that per capita the US has fewer numbers of physicians than the OECD average and the story is similar for nurses when we look at the breakdown of primary care physicians to specialists we estimate that about 57% of doctors in the US are specialists that's about average as compared to a group of similar countries where we could get comparable data so for a country that spends so much on health care the overall number and mix of doctors and nurses looks pretty similar to other countries what about administrative complexity the US has a highly fragmented stem 880 private insurers with about half of spending coming from private sources and the rest from public sources this means that providers have to deal with different sets of benefits and different levels of claim denial risk and of course 880 different sets of forms could this administrative complexity and fragmentation explain some of the difference in health care spending the answer depends in part on how you define the cost of administration the OECD estimates that about 8% of healthcare costs go to administration that's more than double the percentage spent in other high-income countries for example countries like Switzerland and the Netherlands spend half as much on health care bureaucracy despite also having insurance based systems and when we take into account indirect costs like time spent we estimate that 30% of every health care dollar in the u.s. goes to administration the exact figure depends on exactly what's included but either way the u.s. spends a lot more on administration than other countries but kid minute can administrative costs all alone explain the difference between oacd costs and u.s. costs no it cannot 15 years ago a well-regarded US economist ube Reinhardt echoed the Clinton campaign slogan it's the economy stupid llueve announced that if you really want to understand why health care costs in the US are so high it's the price is stupid now to a non economist this might sound like circular thinking high costs are the result of high prices a bit like saying rain is caused by precipitation aren't they all the same thing prices costs rain precipitation well I can't speak for meteorologists but to an economist no they are not the same thing cost is the amount of money it takes to produce a good or service price is the amount the seller decides to charge forcing the buyer to pay that amount the buyer has no control over cost the seller may have some control over cost but has a lot of control over price so when economists say high costs are the result of high prices what we mean is buyers have to pay a lot because sellers are in the position to charge a lot so how does all of this translate into data when we look at costs and prices in US healthcare it probably won't surprise you to learn that across the board the US has some of the highest prices for medical goods services and labor drugs of course pressed or a cholesterol-lowering drug cost eighty six dollars in the US that's more than double what it costs in other similar countries u.s. prices are higher in other categories as well US primary care physicians are paid just over two hundred thousand dollars per annum which versus closer to $100,000 in other high-income countries CT scans cost more than double in the US as do MRIs colonoscopies and a host of other procedures the price difference between the US and other countries even gets covered in stories that get featured everywhere from the National Enquirer to the Economist when Prince William and Kate Middleton the Duke and Duchess of Cambridge had their baby the Royal baby was delivered in what the Economist called a luxurious private maternity ward in London now the cost of delivering a baby in a luxurious private maternity ward in London $8,900 I live in London and I can personally vouch that it is not a cheap City what do you think the average cost for a normal delivery of a healthy baby is in the US The Economist reported ten thousand eight hundred dollars in some communities it's arguably much more now when it is cheaper to deliver the Royal baby in a luxurious private maternity ward in London than it is to deliver a healthy baby in the United States we have a price problem but high prices need to be understood in the context of what that price buys in some instances higher prices in the US do you mean Americans will get access to the light latest medical devices and medicines more quickly but that is not always the case high price does not always mean higher quality MRI machines in Geneva are every bit as good as those in Boston but the u.s. price is three times as high and this price disparity holds true for almost every category of medical good and service that we could find data for but let me tell you finding price data in healthcare is difficult and that points to another reason why healthcare costs are high it is easier for sellers to charge higher prices when buyers cannot find out what the prices are now when I look back at the results of our study I have to admit that some of the findings really surprised me I was shocked to learn that the u.s. spends more per capita on social programs than countries like Canada and Australia and this was also one of the findings that we got the most feedback on many people strongly believe that social spending drives healthcare spending or at least that it strongly influences it now when you show data that suggests otherwise some people think what you're saying is social spending isn't worth it but that is not at all what I believe and it's not what the data suggests personally I support robust social spending on things like education housing and family care they're important because they improve health outcomes and indeed social outcomes but we should invest in social programs because we care about society not because we think it will lower health care costs the data suggests otherwise so where does this leave us if we can't get control of healthcare costs by investing more in social programs or by pushing for less utilization or by producing more primary care physicians what can we do what will actually work to curb healthcare spending based on our research here's how we diagnose the problem the US healthcare system is deeply dysfunctional for three main reasons first lack of data on prices and lack of cost transparency second decreasing competition with little price regulation and third a system that is fragmented and administrative leak complex at least we know this much when it comes to US health care were all entitled to our own opinion and sometimes we can even agree on certain facts no single study has all the answer and there will always be new studies with new facts but when you compare the u.s. to other countries one fact comes into sharp relief the US health care system today is on an unsustainable trajectory but at the same time I believe we are starting to see three fundamental prescriptions for the problems of price decreasing competitiveness and administrative inefficiency the first prescription is about encouraging real price transparency in health care for patients and providers buyers in any other industry wouldn't tolerate blank price tags and there's no reason why they should tolerate it in health care the second prescription goes out to US government agencies like the FTC and the Department of Justice and it's about enforcing antitrust laws and health care for example hospital mergers are on the rise fewer providers means less competition less competition with little price regulation and little price transparency means high prices that keep rising the third prescription is about improving administrative efficiency there's a lot of low-hanging fruit here such as billing that smart and faster and streamlining the credentialing process when the US healthcare system becomes more efficient wasting less on administration and with more price transparency we will go a long way towards having a system that's more rational and sustainable that we and future generations can live with so is that a fact or an opinion I leave that up to you [Applause]

Channel: TEDMED

Views: 13,527

Rating: 4.9553905 out of 5

Keywords: Irene Papanicolas, Harvard School of Public Health, London School of Economics, LSE, Harvard, Chan School of Public Health, TEDMED 2018, TEDMED Talk, TEDMED Talk 2018, healthcare spending, price transparency, healthcare administration, overutilization of health care, OECD countries, sustainable health, US healthcare, healthcare spending abroad, data driven health, health outcomes, primary care physicians, specialized care

Id: ZXCqHOFFMOc

Length: 16min 31sec (991 seconds)

Published: Tue Jul 30 2019