Health Care in The U.S. And The World, Part II: What do we spend the money on?

In Part I of this series, I showed that the US spends a lot more money on health care – now over 50% more as a percent of GDP than France and the other industrialized nations. Additionally, the U.S. is the only country in my data for which less than half of health care spending is publicly financed, with the balance coming primarily from employers and out-of-pocket.

But what do we spend the extra 5% of GDP? It’s apparently not doctors. While the number of doctors in the US has increased steadily, we still rank low in terms of doctors per capita:

France has the most doctors per capita, while the US edges out Canada, the UK, and Japan. It’s often alleged that the US has more specialists and less general practitioners than other countries, which might explain why we spend more money yet have fewer doctors to care for us, per capita – we’re buying high priced specialists (I haven’t found data on international comparisons of specialist:generalist ratio.)

If it’s not doctors then it must be hospital care, right? Again, no. While all nations have shed hospital beds, France still has substantially more beds than the US. The U.S. does have more hospital beds than Spain, Sweden, and Finland:

Perhaps our doctors are simply more efficient, able to care for more patients with fewer beds? As it turns out, France and Finland have increased their efficiency (i.e., using fewer beds to produce more discharges) over the last 15 years or so. In the U.S., however, changes in hospital discharges have basically tracked the changes in hospital beds.

A quick side note: the funny business you see with the UK lines in the last two graphs is most likely the result deregulation that took place in England in the 1990s (see, e.g., Propper et al., 2004).

Back to the subject at hand, while we spend a lot more on health care, we don’t have more doctors or more hospital beds, rendering rather dubious the claim that other nations are able to spend so much less on health care because they have shortages and long waiting lines (see yesterday’s post by Kash for more on this point.)

If our extra spending is not buying us more doctors, nor more hospitals, then perhaps it’s going to drugs. While it’s true that spending on pharmaceutical products increased from 8% to 13% of health care spending, that change occurred as total spending on health increased from 10% of GDP to 15%. Putting those numbers together, pharmaceutical spending increased from a bit under 1% of GDP to a bit under 2% of GDP. That 1% of GDP is a lot of money, but it accounts for at most a fifth of the increase in health care costs in the US over the last decade.

Also note that other nations, such as France, Canada, and Finland had similar increases in their pharmaceutical spending ratios, yet have not had nearly as dramatic increases in total health care spending.

Based on the data I’ve been able to find so far, there’s simply no readily apparent sense in which consuming more inputs (doctors, hospital beds, drugs) accounts for a large portion of the additional health spending in the U.S. Since spending equals price times quantity, this leads to the conclusion that the prices of health inputs are higher here than in other industrialized nations.

Still, that might be money well spent if our inputs are of higher quality, able to produce more or better health output. I’ll take a look at this issue in Part III.