The most expensive health care system in the world

The U.S. spends more on health care than all the other wealthy democracies in the world. But in spite of all that spending, life expectancy in the U.S lags behind that of its peer countries. And many Americans struggle to pay for health care.

A January 9, 2020 Bloomberg “Prognosis” podcast delved into some of the reasons why health care costs so much more in the U.S. than in other countries. Two Harvard T.H. Chan School of Public Health experts—Austin Frakt, senior research scientist in the Department of Health Policy and Management, and Ashish Jha, K.T. Li Professor of Global Health—were interviewed for the podcast.

One reason for high health care costs in the U.S. is that the country never set limits on payments for new treatments, such as MRIs, organ transplants, or new drugs. “Other countries responded by putting in brakes into the system,” said Jha—but the U.S. didn’t.

Another driver of increased costs is that the health care system got more complicated, with insurance companies requiring patients, doctors, and hospitals to work harder to prove that particular treatments are necessary.

Said Frakt, “Behind the scenes is a huge army of people who are managing how the hospital and doctors are going to be paid for those services. And that’s extremely complicated, because exactly how they get paid depends on our particular insurance. And my insurance is different from your insurance.”

A third reason for high U.S. health care costs is that the health care industry—insurance companies and hospitals—became more consolidated, and more powerful. “They can command more market power, they can command higher prices,” said Frakt. “That’s going to drive your premiums up.”

Listen to the “Prognosis” podcast: Yes, the U.S. Health-Care System Is Broken. But It Doesn’t Have to Be