Why Does the U.S. Overspend on Health Care? One Simple Reason

elderly man in hospital bed
Fact: Despite all the advances in medical technology over the past century, during which the average life expectancy of Americans has grown by 30 years, 100 percent of Americans will still eventually die. But don't try to tell that to a sick person with a flush bank account.

According to figures from the Organization for Economic Cooperation and Development, the United States spends more money on health care per capita than any other nation on Earth -- nearly $7,300 per citizen in 2007 (the latest for which firm figures are available), of which nearly half was financed by tax dollars through programs such as Medicare and Medicaid. That's 87 percent more than Canada paid to give its citizens universal health care that year, and more than three times the expenditures in the United Kingdom.

And it gets worse. With an estimated $2.8 trillion expected to be spent on health care in the U.S. this year, we're on track to spend $8,920 per capita in 2013, a figure that could pass $14,000 per capita if health care spending rises to the expected $4.5 trillion in 2019.

Granted, much of this increase is a direct effect of baby boomers aging, and moving en masse onto the Medicare rolls. And, as a matter of fact, that's the crux of the problem: age.

It's No Fun Getting Older...

According to the Department of Health and Human Services' Agency for Healthcare Research and Quality, in 2009, 5 percent of Americans accounted for nearly 50 percent of health ncare spending in America. Breaking down the numbers even further, just 1 percent of Americans -- many, but not all of whom are elderly -- spent 20 percent of our health care dollars.

Now, you might think these numbers are a direct function of people getting sicker as they get older, and so incurring higher health care costs as they age. To a large extent, you'd be right.

According to one estimate, the U.S. government's Medicare program, which provides health insurance to the elderly, spends 30 percent of its money funding treatment of older patients in their final year of life. And arguably -- and sadly -- half of this money is probably wasted, spent on folks who despite all the extra treatments, will die within two months regardless.

...But It Sure Beats the Alternative

As for the question of the quality of our care ... judge for yourself. A recent report by The Economist's Intelligence Unit ranked 40 developed and developing-world countries on its morbidly named "quality of death" index.

The United Kingdom ranked No. 1. Fellow English-speakers Australia, New Zealand, and Ireland took the second, third, and fourth places, respectively. Canada, meanwhile, was tied with the U.S. for ninth place -- but at a significantly lower cost.

A Better Alternative?

Spending excessively in a vain attempt to prolong a life that's statistically certain to end in a matter of months -- regardless of how many resources are thrown at the situation -- doesn't seem particularly logical. And indeed, at some point the checking account is going to run dry. What then?

Canada and the U.K. are sometimes accused of "rationing" health care to deal with this problem. And again, rightly so.

The U.K.'s National Health Service, for instance, is known to practice "denials of costly treatments for life-threatening diseases" toward the end of patient lifespans -- a decision necessitated by "resource constraints." But that's not necessarily a bad thing.

Dr. Kathleen T. Unroe, formerly of the Duke University School of Medicine and now a professor at Indiana University's Department of Medicine, has suggested that one more economical -- and economically sustainable -- alternative to throwing money at incurable diseases might be "palliative care," which she described to Reuters as "a much more broad set of services for people with chronic, incurable diseases who have difficult-to-manage symptoms."

Dr. Jonathan Bergman of the University of California in Los Angeles, who ran a study on end-of-life care a few years ago, prefers a twist on the rationing concept: "We might be able to do a better job with end of life care and cut costs not by rationing care but by making it more rational ... We do these expensive things that may not improve someone's quality of life or the quality of death, but we do it anyway," Bergman told Reuters.

Maybe what we really need to do, therefore, is acknowledge the hard truth that 100 percent of human lives end in death -- and find a better, more affordable way to live with that fact.

Motley Fool contributor Rich Smith doesn't want to die either, but he especially doesn't want to die broke

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Lauren A. Taylor

I appreciate the author's by-line and perspective. Aging demography and seemingly limitless end-of-life care practices certainly are partially responsible for escalating costs. The author also comments briefly on the intensely medical focus of health care in this country, which is a theme that my co-author, Dr. Betsy Bradley, and I expand upon in out forthcoming book, The American Health Care Paradox (link below). Palliative care works to deliver great care, often at reduced costs, because it integrates a social and medical perspective - and this is what we suggest the broader system(s) strive to do as well. Common sense can work wonders!


October 21 2013 at 6:30 PM Report abuse rate up rate down Reply

I spent 2&1/4 Mil of insurance money keeping my late wife alive for 9 yr. after being diagnoised with stage 4 cancer. If you want to save money on health care, abort all new borns and in 100 years health care cost will be zero. I would have spent 100 Mil of insurance dollars to still have my beloved wife back. Even though" we will all die someday".

October 21 2013 at 11:55 AM Report abuse -1 rate up rate down Reply

What mac describes isn't America.

October 21 2013 at 7:22 AM Report abuse -1 rate up rate down Reply

Not to worry! Once the Death Panel provision of the Affordable care Act kicks in unless you are a millionaire or Nancy Pelosi if you are over 60 and seriously ill....you are outa here!

October 21 2013 at 7:05 AM Report abuse -1 rate up rate down Reply

The cost is because of greed. It cost less elsewhere because the cost is lower.

October 21 2013 at 5:07 AM Report abuse +4 rate up rate down Reply
1 reply to ROBERT's comment

Ummmm. Really? Thank you captain obvious. But wait....is it colder because the temperature is lower, or..?

October 21 2013 at 7:18 AM Report abuse -2 rate up rate down Reply

In the last month of my mothers life. We tried to figure out what was wrong. When she and her children knew that she could not survive we used the Denver Hospice. The place was wonderful. My mother, in her last days said " I could not have imagined anything more perfect".
The Hospice staff was a big part of that praise. Also all of her children and grandchildren visiting and treating her with the greatest respect was a beautiful thing. Her living and elderly brother and sister were able to vistit via Skype on qualtity lap top computers.
I hope that everyone treats their parents well at this time in their lives. I am so thankful for my wonderful brothers and sisters and all of their kids.
My mother was wonderful and is missed but to prolong suffering would have been wrong. Being honest to a person at the end of their life is important. My mothers doctors were great.

At another hospital for my uncle the situation was not as good. The Catholic hospital would not accept the prognosis for my uncles pancreatic cancer. They kept making him miserable, attempting to prolong his life with blood thinners and such. It was like pulling teeth trying to get an honest answer about what to expect. Once he got the picture he was ready to get out of the hospital and use home hospice to manage pain etc. He took care of his businesses and made a couple hundred grand in the stock market ( he like doing that) in his last days. Doctors need to be honest with their patients. Most people will make good decisions when they know the truth.

October 21 2013 at 3:43 AM Report abuse +2 rate up rate down Reply

Starting to see the pattern here, those people doing stupid or illegal things are NOT illegal immigrants, but full-blooded Americans, and they are keeping our health care cost high..

So now what do you want to do about guns, spousal beatings, illegal drugs, and vehicle abuse?

October 21 2013 at 2:35 AM Report abuse -1 rate up rate down Reply
1 reply to mac2jr's comment

Enforce the laws.

October 21 2013 at 8:26 AM Report abuse -1 rate up rate down Reply

There are tens of thousands of spousal and child beatings in the U.S.A., this too is raising the cost of medical care and if convicted of spousal or child abuse the perpetrator should be fined $5,000 the money to be used to help defer the cost of medical insurance through the PP&ACA

October 21 2013 at 2:33 AM Report abuse +2 rate up rate down Reply

There are nearly a million drug related hospital admissions in the U.S.A. each year, and many of these are not covered by insurance, thus each person admitted for illegal drug use should be fined $5,000 and that money used for fighting drug use and for offsetting the cost of the PP&ACA

October 21 2013 at 2:31 AM Report abuse rate up rate down Reply
1 reply to mac2jr's comment


October 21 2013 at 4:20 AM Report abuse +1 rate up rate down Reply

There are tens of thousands of dangerous drivers on the road today, they are TEXTING while driving, Drinking while driving, not paying attention while driving, misbehaving while driving etc., and they get into accidents of which the medical care systems have to clean up the messes. Usually at a cost to the rest of us in higher vehicle insurance rates, and higher medical rates.

Thus, anyone caught doing one of the above, or in an accident due to one of the above should be fined $5,000 the money to be used to help defer the cost of medical insurance through the PP&ACA

October 21 2013 at 2:29 AM Report abuse +1 rate up rate down Reply
1 reply to mac2jr's comment

But why is this necessary? Obama sold this to us as being revenue neutral, and even to reduce the deficit.

October 21 2013 at 8:28 AM Report abuse -2 rate up rate down Reply