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Comparative Health Spending

By May 4, 2011Commentary

The problems of the United States’ health system are often highlighted by comparing our performance to that of other developed countries.  A new Kaiser Family Foundation report uses Organization for Economic Coordination and Development data to show that not only is our health spending already high on a per capita basis, but it is also growing more rapidly than that of most countries.   (KFF Report) The data is adjusted for purchasing power parity, is based on the local currency for each nation, and has growth rates adjusted for inflation, each of which adjustments can be controversial, but are ignored here.

Our per capita spending for 2008 was $7538 or over $2500 more per capita than that of the next highest country, Norway, and double that of most of the countries.  We also spend much more in comparison to our per capita GDP.  The growth rate in spending in the United States began to diverge from that of other countries in the mid to late 1970s and since 2000 the growth rate gap has widened.  (Anyone really think that there is no relationship between the initiation of the Medicare and Medicaid programs, which began in the late 1960s, and the ensuing ever-growing proportion of government spending for health care in the US and the overall rate of growth of spending?)

Our annual health spending growth rate since 1980, adjusted for inflation, has been around 4%, second highest among this group of developed nations.  Unlike the other countries with relatively rapid growth, however, we started from a high spending base.  In 2008, 16% of our GDP was spent on health care, and the next highest countries, France and Belgium, spent only around 11%.  Although public programs cover fewer people than does private insurance in the US, our public program expenditures alone were as much a percentage of GDP as that of most other countries, which rely almost exclusively on public programs.  We aren’t smart enough (although maybe smarter than most of our policymakers, which isn’t saying much) to understand all the economic ramifications of our health spending level or growth, but it doesn’t seem to be a good thing.

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