Why America Leads the World in Health Expenditures


In the United States, consumers pay more for healthcare than in almost any other country in the world. Everything from procedures to the cost of prescription drugs in the states tend to be more costly, and many of the medical bills associated with health care are paid out of pocket by consumers. To add to this undesirable situation, life expectancy rates in the United States to do not reflect the large amounts of money that are spent on healthcare. In fact. life expectancy in the United States is, on average, about three years less than in countries in Europe. So why are medical expenses in the states so high?

Average Procedures Cost More

Many experts speculate that the reason the United States leads the world in health care is that many of the screening services and other routine procedures that most Americans are advised to take part of carry a much higher price tag than in other countries. A service like a colonoscopy, which is recommended for cancer screening in most patients of a certain age, can cost as much as five times more in the United States than it does anywhere else.

Insurance Companies, Technology Companies, and Medical Centers All Play a Role in Pricing

Some analysts have speculated that health care prices may be so high because the entities that negotiate them may actually be benefiting from driving up the costs of procedures and services. Manufacturers of expensive medical equipment used in screenings may attempt to push for pricier screenings of patients, while insurance companies may push for a price on medical care that allows for a higher payment from patients. Most vendors and service providers in the medical industry are for profit industries, so it is logical that they would seek to charge as much as possible for the services or goods they are providing.

Supply and Demand and the Medical Industry

The problem may be that while these entities are operating in a similar fashion to individuals in other areas of the private sector, they are not in fact truly working within a traditional “supply and demand” model. The rules of supply and demand dictate that supply should be effectively dictated by demand (or vice versa) in a process that allows the price of goods to meet a natural equilibrium. In the case of medical services, however, supply and demand do not organically dictate price. To begin with, demand is set at a somewhat unchanged level.

People need certain medical services to live, and there is little to be done to effect that. Because of this, demand seldom moves down. The only real way demand is generally affected in the context of the medical industry is to have it increased. This happens when physicians are encouraged to prescribe a certain drug or test to their patient. Because demand is much more likely to go up than down, the pricing of important medical procedures generally tends only to rise, with little chance of it regulating itself back down to a more average market price.

A Change in the Way Healthcare is Priced May Be Necessary

Currently, health care costs in the United States are so high that they represent 18% of gross national spending. This is somewhat troubling to many economic experts, who believe that if prices do not stop rising, they may soon comprise an even larger share of national spending. The push to lower medical costs has certainly been evident in the political world. Legislation like the Affordable Care Act seeks to make healthcare less expensive for consumers and may be the first step in a push to curb rising costs.