Why America Really Spends So Much on Healthcare

Once upon a time, President Obama was fighting to get the Affordable Care Act through Congress. The original version of the bill is pretty different than what was eventually passed and signed into law, despite what a lot of Republicans will tell you. Not long after starting this blog, I started getting tons of requests to write about health care reform, and so I did. And in that blog I said something that confused a lot of people and had them asking me a lot of questions. I said that I supported the law but I did not think it would be as effective because it did not go far enough. With the law now back in the lime light, I figured it would be time to explain exactly what I meant by what I said.

While the Affordable Care Act is a step in the right direction to keep health care premiums down, it does nothing to touch true health care costs. This is something that I was really hoping the ACA would do, but didn’t and that is the whole reason I said it did not go far enough. So lets unpack why health care is so high in America.

The first thing to note is that per capita, America pays more in tax dollars on health care costs than every other nation in the world. We pay more than Canada and the United Kingdom combined. Do you understand exactly what that statement means? You, as an American citizen, pay more tax dollars on health care costs than a citizen in Canada or the United Kingdom (or a vast number of other countries for that matter). What do you get in return for those tax dollars? Essentially nothing. What does a Canadian get for the taxes he pays, which remember is less than you? Health insurance. Just keep that in mind when thinking about how stupid Canadians are for liking their socialist healthcare.

So why does the United States spend so much more on health care than all these other countries? It’s quite simple really…everything costs more here. Think that’s too simple to be the real reason? Follow me…a total knee replacement in the United States will cost you around $40,000. In Canada it would cost you around $20,000. In the United Kingdom it would cost you around $14,000. If you are having a heart procedure such as a bypass, you’ll pay about $21,000 in the United States. In Canada, the same procedure would be about $10,000. You can go on and on and across the board, everything costs more in the United States than other places in the world. And despite popular belief, it isn’t because we have “the best doctors in the world.” Okay, to be fair, we probably do. But honestly if you or I are having a knee replacement done, we are probably going to get whoever is the local surgeon, not the very best surgeon in the country. Also, many Canadian doctors (and doctors all over the world) come to America and attend the same medical schools as the doctors in your neighborhood so they are probably as equally qualified as yours.

Lets look at it another way. If you have surgery in America, does that mean you have a greater chance at living than if you have surgery in another country? No. Just look at the health outcomes in America. They are no higher than they are in other countries. So it isn’t as if you have cancer that you can come to America and pay triple the cost for what you would pay in the United Kingdom but would live three times longer. You are probably going to live about the same length and just pay three times the cost. Facts back that up.

But the main question is WHY do things cost more? There is really one answer that can basically sum this up. The United States does not collectively negotiate pricing for health care products and medicines like other countries do. Let’s look at the knee replacement example again. Over one million Americans have knee replacement surgery every year. Lots of companies know these figures and start making knee replacement parts and then sell them for virtually whatever they want to. One gets purchased and put into your knee for whatever cost it may be, and you or your insurance company gets the bill. In the United Kingdom, however, they would tell each company that makes knee replacements that if they will make a strong, quality knee replacement that is also cheap, they will be given a contract as the sole provider of knee replacements for every single American that needs one over the next year. What does this do? It forces companies to drop prices. If they think they will sell 10,000 knee replacements a year, they may price them at $15,000. If they get a contract to sell one million knee replacements in a year if they drop the costs, they can cut the prices down to $5,000 and still make more money than they would have before.

Now, we actually do have an example right here in the United States where we collectively bargain for lower costs for medical devices and prescriptions drugs: the program that does this is Medicare. If you compare costs between Medicare and non-Medicare procedures, Medicare is cheaper across the board in virtually every circumstance.

So because the Affordable Care Act does not do anything to force collective bargaining on medical and pharmaceutical companies, health care costs are going to continue to rise. So why wouldn’t politicians want to do something to stop the rising costs? Because most politicians, Democrats and Republicans alike, take in huge campaign donations from these companies to turn the other way.

So this is why I said the Affordable Care Act does not go far enough. It is also why health care costs will continue to rise, forcing premiums to continually rise, whether everyone has insurance or not. So until legislation gets passed that tackles the heart of the problem, we are never going to see health care costs in this country at reasonable levels.



One thought on “Why America Really Spends So Much on Healthcare

  1. By the way, I’m well aware that there are plenty of other reasons for costs to be higher such as doctors making more, malpractice suits, etc., but I simply wanted to point out the single biggest factor driving up costs.

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