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U.S. medical costs tops in the world by far

Americans pay more for health care per person than citizens anywhere else in the world, doling out half again as much in medical expenses each year as the second-highest-cost country, according to a new study. Americans also pay twice as much for prescription drugs than other countries that benefit from collective bargaining.
U.S. medical costs tops in world
Study: Malpractice, defensive medicine play tiny roles
By Kristen Gerencher, MarketWatch
July 12, 2005

SAN FRANCISCO (MarketWatch) -- Americans pay more for health care per person than citizens anywhere else in the world, doling out half again as much in medical expenses each year as the second-highest-cost country, according to a new study.

And contrary to popular belief and political rhetoric, malpractice lawsuits have little impact on those high costs in this country. Nor does the fact that people elsewhere end up on waiting lists for care that is in short supply do anything to hold costs down, according to the study published in the July/August edition of Health Affairs.

U.S. citizens paid $5,267 per person for health care in 2002, the study found, 53% more than any other industrialized country and $1,821 more than Switzerland, the nation with the second highest per-capita spending.

"What we said three years ago and still reiterate is, it's prices, stupid," said Dr. Gerard Anderson, lead author of the report and a professor at the Johns Hopkins Bloomberg School of Public Health.

"We pay for drugs, hospital stays and doctor visits 2 to 2 1/2 times as much as other countries pay."

While medical malpractice is a problem, its costs account for less than 1% of spending. And defensive medicine, where doctors run tests or do procedures to lower their chances of being sued, makes up no more than 9% of total spending, the study of spending in 30 nations found.

"The finding that litigation and waiting lists do not explain most of the higher U.S. health spending is perhaps not surprising considering previous research showing that the prices of care, not the amount of care delivered, are the primary difference between the United States and other countries," the authors wrote.

In 2001, the average malpractice award in the U.S. was $265,100. That was lower than Canada's $309,417 and the United Kingdom's $411,171 but higher than Australia's average payment per settlement or judgment of $97,014. All four nations had malpractice payments that represented less than 0.5% of total health spending.

But Canada, Australia and the U.K. are getting more litigious, and at a faster rate, Anderson said. Australia's average annual total malpractice payments from 1997 to 2001 increased by 28%, Canada's grew 20% and the U.K. rose 10% compared with a 5% increase for the U.S, the study said.

The presence of waiting lists for medical services didn't appear to account for much of the difference in spending either.

Spending in 12 countries with waiting lists for elective surgery was $2,366 per person compared with $2,696 per person in seven nations, not including the U.S., that said they didn't have substantial waits -

Medical services that require waiting lists comprise only 3% of U.S. health spending.

Drug costs and hospital stays

Americans also pay twice as much for prescription drugs than other countries that benefit from collective bargaining, Anderson said.

"They have a more uniform approach where all the insurers or all the purchasers of care get together and negotiate with the hospitals, with the pharmaceutical industry or the physicians," he said. "They have one block that's the negotiator whereas in the U.S. every insurance company is negotiating individually. It's not as powerful a negotiation."

Despite a widespread belief that Americans make frequent use of some of the best medical care in the world, they see doctors less often and spend 20% fewer days in the hospital than most other countries, Anderson said.

Americans checked in for 4.8 hospital days on average in 2003, down from 5 days in 1999 and 7.3 days in 1980, according to the Centers for Disease Control and Prevention.

"Our whole policy focus for the past 10, 15 years has been trying to reduce encounters, especially hospitalizations," Anderson said. "Why we're still focused as a country on reducing hospital days makes no sense to me."

Doctors' economic expectations after attending medical school also are vastly different in the U.S. compared with other nations because they begin their careers with a much bigger financial burden.

"In virtually no other country do you leave with an average $100,000 of debt," Anderson said. "In most other countries the debt a medical student has is either zero or very small."

"It's both a real difference and a perceived difference," he said. "A doctor feels like he or she is entitled to a very high salary because of this debt, but the reality is doctors make anywhere from $150,000 to $200,000 on average.... In no other country do they make more than $100,000."

Economic impact

Most industrialized countries saw their health spending increase more quickly than their total economic activity. Health spending rose to 14.6% of gross domestic product in the U.S. in 2002 from 13% in 1992 even as analysts credited managed care and cost sharing with holding it down, according to the study.

The gain of 1.6 percentage points was twice the median increase of other developed nations during that time.

Only two other countries spent more than 10% of their GDP on health care in 2002: Switzerland spent 11.2% and Germany spent 10.9% on medical expenditures.

Kristen Gerencher is a reporter for MarketWatch in San Francisco.

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