Double for Health Care: The USA

Why? The U.S. spends twice as much for health care

According to a Marketplace report, “Health care in the United States costs a lot of money. In fact, we, as a country, spend twice as much as other wealthy nations. And we’re collectively less healthy than many others.”

If this is true? How have we gotten here? And what can we do to get out of this mess?

Dr. Ashish Jha, Director of Harvard’s Global Health Initiative flipped conventional wisdom with a recent study.

Why does health care cost more?

According to the study, the U.S. spends twice as much, primarily due to our healthcare prices. Everything from drugs,  to tests, to medical professional salaries – the U.S. ranked much higher.

Other countries have two mechanisms to counter these prices:

  • There is government price setting to keep costs low and constant.
  • The markets are more efficient.

Dr. Jha notes that the U.S. does both of these things poorly. Firstly, Medicare does a poor job of price setting and secondly, our markets are pretty inefficient because providers have the market power, rather than the consumers.

What about pharmaceuticals?

The study also goes into pharmaceuticals. Comparable drugs are approximately three times more expensive in the U.S. than in the other Western countries. This is in part because the U.S. is the innovator and creator of these new drugs, hence taking on the costs of research and development.

There are two components to keep in mind:

  • Generic Drugs: We have high prices for generic drugs due to regulatory limitations – policy changes could rectify this. Generic drugs account for approximately 80% of the pharmaceutical market in the U.S.!
  • New Drugs: Cutting prices could hurt innovation, which is likely not worth the savings.

Dr. Jha calls for a “uniquely American solution” to solve our current issue where the U.S. spends twice as much as other nations.  Borrowing a plan from another nation would not fit our specific needs, but policy change and enforcing anti-trust laws, could increase marketplace competition ultimately making healthcare more accessible and affordable to the average American.


Listen to the full report on Marketplace here: