High spending, poor outcomes: the health results of inequality in the US

A recent article in JAMA, “Health care spending in the United States and other high-income countries”, by Irene Papanicolas, Liana Woskie, and Ashish Jha, is the latest in the almost continuous series of articles on this topic that have been appearing for decades. The dramatic difference between how much we in the US spend (per this paper, the US spends 17.8% of GDP on “health care” compared to 9.6-124% for the other 10 highest-income countries—United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland, and Denmark) and our health outcomes (e.g., lowest life expectancy and highest infant mortality) continues to be striking. This information appears regularly, in one form or another, from reliable sources such as the Commonwealth Fund, the Kaiser Family Foundation and its Kaiser Health News. It is the subject of many academic studies and books by experts, such as “An American Sickness: How Healthcare Became Big Business and How You Can Take It Back”, the 2017 book by Elisabeth Rosenthal, now editor of KHN. I have addressed this topic extensively both in my book, “Health, Medicine, and Justice: Designing a fair and equitable healthcare system” (Copernicus Healthcare, 2015) and in many of my blogs (e.g., US Health Rankings remain low and #Trumpcare will make them worse!, June 18, 2017).

So what is new in this current study? Why is it important? As best as I can tell, it is the spin being put on it by a variety of commentators, and in articles that point out those aspects that seem to be different from what has been published before, such as in "Why Is U.S. Health Care So Expensive? Some of the Reasons You’ve Heard Turn Out to Be Myths” by Margot Sanger-Katz in the New York Times March 13, 2018. The original title of that article, preserved in the hyperlink URL, was “United States healthcare resembles rest of world”, an amazingly hard claim to make given the data that the study itself presents. The Sanger-Katz piece manages to do this by both cherry-picking some data points, including that “…the United States sends people to the hospital less often, it has a smaller share of specialist physicians, and it gives people about the same number of hospitalizations and doctors’ visits... while its spending on social services outside of health care, like housing and education, looked fairly typical.” Maybe, but the important findings, even mentioned in the Times article, are not suggested by the headline, such as “The nation did rank near the top in its use of certain medical services, including expensive imaging tests and specific surgical procedures, like knee replacements and C-sections.”

The article in JAMA is accompanied by four editorial commentaries, taking different approaches; they are well and accurately analyzed by Don McCanne in the “Quote of the Day” piece he wrote on it. The most important is that by Howard Bauchner and Phil B. Fontanarosa, “Health Care Spending in the United States Compared With 10 Other High-Income Countries: What Uwe Reinhardt Might Have Said” (JAMA. 2018;319(10):990-992. doi:10.1001/jama.2018.1879, full text requires subscription). Reinhardt died a few months ago, but the authors do an excellent job of pointing out the important issues that he had already called attention to in previous articles, and would likely emphasize regarding this one.

Importantly, the article by Sanger-Katz goes on to say

There were two areas where the United States really was quite different: We pay substantially higher prices for medical services, including hospitalization, doctors’ visits and prescription drugs. And our complex payment system causes us to spend far more on administrative costs. The United States also has a higher rate of poverty and more obesity than any of the other countries, possible contributors to lower life expectancy that may not be explained by differences in health care delivery systems.

Let us look separately at these two, higher prices and high administrative costs, and high rates of poverty and obesity. Higher prices and higher administrative costs are, shock, a major reason that our medical care costs so much! The higher administrative costs, which the study estimates at 8% compared to 1-3% for other countries, are a huge driver; so are prescription drug expenses, $1443 per capita in the US vs a range of $466 to $939 in the other countries. What all this is about is profit. It is the elephant in the room in all these discussions. In the US, “healthcare” spending includes the enormous profits made by insurance companies, pharmaceutical companies, device makers, and providers (especially hospitals and health systems, as well as some very expensive specialists). This is money being taken out of the system, and is not about providing medical care, not to mention “health” care or certainly “health”. And while the study shows that US physicians (even primary care physicians, although this is very variable country to country) make more, this important graphic, recently updated, shows how much of this cost is related to the increase in the number of “administrative” personnel compared to doctors in the US over the last few decades. I first saw this graph in about 1995, and while the relative increase was huge

it is dwarfed by the phenomenal increase since then, as shown in the full graphic:

(Note that after the ACA went into effect, the uptick was even steeper.)

The other point identified by Sanger-Katz is that the US has a “higher rate of poverty and more obesity than any of the other countries”. These go hand in hand to some degree (the easy and cheap availability of calorie-dense low nutrition foods to poor people), but both are about blaming the victims. The higher rate of poverty is most important. The damning fact is that the US tolerates this and does not have, like other rich countries, social service programs in place to both decrease the rate of poverty and to mitigate its most malignant effects on health such as lack of food, housing, warmth and education. And, of course, health care, which is available either free or at prices people at different income levels can afford (much less for poor people) in those other nations. The US is very unequal economically; the growth in wealth has been so disproportionately to the top <0.1% that the three richest Americans now have as much wealth as the bottom half of our population. Our inequality-adjusted Human Development Index (HDI) is lower than most of the wealthiest nations of the world (#19).

Arguing that the fault in our cost and quality of healthcare is the result of higher poverty levels (and for the record, I don’t think that this is what either the study’s authors or Sanger-Katz is doing) is somewhat parallel to saying we have worse health because of our ethnic and racial diversity (which has been done). The important 2015 Case and Deaton study, which I have previously discussed (Rising white midlife mortality: what are the real causes and solutions?, November 14, 2015), showed increasing mortality for poor white non-Hispanic people. This was shocking, but it would be shocking even if it included Hispanics, or Blacks, or Native Americans. There is an old joke about the person who murders his parents and pleads for mercy because he is an orphan; this is pretty analogous to the issue of poverty and health.

Bauchner and Fontanarosa note that Uwe Reinhardt was very critical of insurance companies for having, on top of nearly 3% profit, 18% “operating costs” (only 79% was spent on actual health care) that included, among other things, “…marketing, determining eligibility, utilization controls (e.g., prior authorization of particular procedures), claims processing, and negotiating fees with each and every physician, hospital, and other health care workers and facilities. These operating costs are about twice as high as are the overhead costs of insurers in simpler health insurance systems in other countries.”

To say we have worse health status because we have more poor people is an indicting tautology; we should identify and address the causes of poor health which are mostly “upstream”, the social determinants, and very tied to poverty. Our healthcare dollars should be spent on delivering healthcare and not profits; our overall dollars should be spent on decreasing the impact of the tremendous economic and social inequities that exist in the US.

This is the way to both a more healthy and more just society.