U.S. Health Care: Are We Getting the Best Bang for Our Buck?

Nov. 12, 2013

health careA new study out today in the journal JAMA revisits the topic of whether or not the U.S. health care system – which now accounts for almost one-fifth of the nation’s economy – is delivering the best value in terms of health outcomes.  The paper also overturns several widely held beliefs about the factors responsible for growth in health care spending. 

URMC’s Ray Dorsey, M.D., M.B.A., and Benjamin George, M.P.H. helped author the study which tackled massive sets of data from both government and private sources to paint a vivid picture of trends in U.S. health care from 1980 to 2010. 

The study shows that:

  • In 2011, the U.S. health care industry – which includes payers, manufacturers, and providers – employed 15.7 percent (21 million people) of the national workforce, with expenditures of $2.7 trillion, or almost 18 percent of U.S. GDP – double the share of GDP in 1980;
  • With an average annual growth rate of 2.9 percent per year, health care expenditures increased faster the any other industry between 2000 and 2010;
  • Government funding for healthcare has increase from 31.1 percent in 1980 to 42.3 percent in 2011;
  • Health care costs have tripled in real terms over the past two decades; however, the average rate of increase has declined consistently since the mid-1970s and sharply over the last decade.

Despite the significant increase in resources devoted to health care, many measures of outcomes – including life expectancy at birth and survival rates for many diseases – show the U.S. trailing much of the rest of the developed world.

The study also contradicts several common assumptions about what factors are driving the growth health care expenditures. For example, since 2000:

  • The price of professional services, drugs and devices, and administrative costs, not demand for services or aging of the population, produced 91 percent of cost increases;
  • Personal out-of-pocket spending on insurance premiums and co-payments have declined from 23 percent to 11 percent;
  • While chronic illnesses account for 84 percent of health care expenditures, the majority of these costs are not associated with treating the elderly.  Chronic illness and trauma among individuals younger than 65 years account for about 66 percent of total U.S. expenditure.

The authors contend that reconciling the current system’s conflicting incentives, policies, interests, and expectations is the “chief challenge of the next decade” if the nation is going to achieve the integration and other changes necessary to improve outcomes and savings. 

You can read the full study at the JAMA website.