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

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elderly man in hospital bed
Alamy
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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543 Comments

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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!

www.theamericanhealthcareparadox.com

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

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
willypfistergash

What mac describes isn't America.

October 21 2013 at 7:22 AM Report abuse -1 rate up rate down Reply
cshae89546

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
ROBERT

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
willypfistergash

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
ronstriathlon

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
lwa100

Smith is 100% correct. We are all sure to die. If you follow the logical path of the article, then why provide health care at all?

October 21 2013 at 2:14 AM Report abuse -1 rate up rate down Reply
republicanslostagain

George Will a conservative columnist describes the republican party today as being weird and paranoid.


brackalabama,.......is a perfect example.

October 21 2013 at 1:39 AM Report abuse +2 rate up rate down Reply
Llord Eevil

The news never gets it. Every country in the world uses either people shopping or price controls. Government paid systems have to use price controls. Countries without the resources use people shopping. The US uses the less of those 2 main economic mechanics than any country in the world. Insurance negotiating with hospitals is not that effective because they can't walk and go somewhere else and because the market is reduced to a handful of insurance companies (purchasers) at each healthcare entity.

October 21 2013 at 12:48 AM Report abuse +1 rate up rate down Reply
hsmith433

I GUESS WHEN YOU READ THIS REPORT THAT YOU HAVE TO BELIEVE THEY DON'T HAVE BABY BOOMERS IN THE UK OR CANADA ? YOU KNOW THAT THEY DON'T HAVE IS HEALTH INSURANCE COMPANIES !!!! THINK ABOUT IT THATS THE MAIN REASON THE COST IS HIGH THE INS COMPANIES HAVE TO GET THIER 30% ON EVERY $ SPENT ON MEDICAL NEEDS.

just now Report abusePermalinkrate uprate down

October 21 2013 at 12:27 AM Report abuse +5 rate up rate down Reply