Why Are U.S. Healthcare Costs So High?

4536 WordsMar 24, 201419 Pages
Why Are U.S. Health Care Costs So High? Overview of the High Cost of Health Care 12/9/2013 Alaska Pacific University MBA 63600 Health Service Systems and Policies Fall 2013 Why Are U.S. Health Care Costs So High? According the Department of Health and Human Services, total health care spending in the U.S. reached $2.3 trillion in 2008, or $7,681 per person. As a share of GDP, healthcare expenditures set a new record of 16.2 percent. That’s double the 8.1 percent share of GDP in 1975, and it is triple the 5.2 percent share of GDP in 1960. (Perry, 2010) Last year in 2012, total U.S. health care spending hit $2.807 trillion, or $8,948 per person. (Geisel, 2013) Its rate of increase has been relatively low since 2009, at…show more content…
(OECD, 2013) The OECD suggests a few explanations for the lower gains. First, it highlights "the highly fragmented nature of the US health system, with relatively few resources devoted to public health and primary care, and a large share of the population uninsured." Second, it notes the US has a higher calorie consumption per capita and obesity rates, higher consumption of prescription and illegal drugs, higher deaths from road traffic accidents, and higher homicide rates than many nations. Finally, it suggests socio-economic conditions — in particular a more prominent rich-poor divide than other countries — could be to blame. (Souppouris, 2013) How Do We Know the U.S. Spends Too Much? Growth in spending in other sectors of the economy is usually viewed more favorably than in health care. When people buy more cars, TVs, food, etc., this is usually a good sign of economic activity. That’s because these sectors operate in a free market. The free market determines how much goods and services are consumed based on economic ability. However, the health care industry does not operate in a free market today. The U.S. health care industry is roughly a 50/50 split between private industry and government financing. Therefore, other sources are used to determine if we are spending too much. One way is to compare U.S. spending to other countries (as mentioned in the previous section). Another way is to measure the
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