The key drivers behind U.S. healthcare spending may surprise you

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Researchers found that prices of labor and goods, including pharmaceuticals and devices, and administrative costs appear to be the main drivers of healthcare spending in the United States. (Image: pasja1000)

The United States remains the leader in the free worldof per capita healthcare spending. But a new study that looks at the main drivers of healthcare costs finds that common explanations for healthcare spending may be wrong. 

The study, published in the Journal of the American Medical Association, finds that the U.S. spends nearly twice as much as 10 high-income countries on medical care and performed less well on many population health outcomes. The median per capita spending in the U.S. was $9,403. Sweden was second-highest at $6,808. The United Kingdom was the lowest, at $3,377.

But researchers from the Harvard T.H. Chan School found that the notions that the U.S. spends money on too many doctor visits, hospitalizations, procedures and specialists, and spends too little on social services that could mitigate healthcare needs—may be wrong. Instead, they found that prices of labor and goods, including pharmaceuticals and devices, and administrative costs appear to be the main drivers of the differences in spending.

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“We know that the U.S. is an outlier in healthcare costs, spending twice as much as peer nations to deliver care,” senior author Ashish Jha, K.T. Li professor of global health at Harvard Chan School and director of the Harvard Global Health Institute said in a study announcement. “In addition, the reasons for these substantially higher costs have been misunderstood: These data suggest that many of the policy efforts in the U.S. have not been truly evidence-based.”

RELATED: Americans with employer-sponsored insurance are spending more on healthcare, despite using less

Study findings contradicted common beliefs about high spending. Researchers found the U.S. actually has lower rates of physician visits and days spent in the hospital than other nations.The primary care versus specialist mix in the U.S. is roughly the same as that of the average of other countries. Only 19% of total healthcare spending in the U.S. is spent on inpatient services—among the lowest proportion of similar countries.

Although the U.S. does spend a little less on social services than other countries, it is not an outlier. And overall, quality of care in the U.S. isn’t markedly different from that of other countries, and in fact excels in many areas. For example, researchers found the U.S. appears to have the best outcomes for those who have heart attacks or strokes, but is below average for avoidable hospitalizations for patients with diabetes and asthma.

RELATED: CMSHealthcare spending growth slowed in 2016; per capita spending topped $10K

Healthcare spending has moderated in recent years, with a 4.3% increase in 2016, according to data from the Centers for Medicare & Medicaid Services, which cited the influence of the Affordable Care Act. It is unknown whether the chipping away of the ACA by the Trump administration will impact that trend in the coming years.

But the study found that outcomes didn’t correlate to the outsized spending. The U.S. average life expectancy of 78.8 years was lower than that of the other countries, which ranged from 80.7 to 83.9 years. And while all the other countries provided healthcare coverage to 100% of its residents, the U.S. reached only 90%.

Instead, the U.S. spends more on administrative costs, such as planning, regulating and managing health systems and services compared with other countries.  And per capita spending for pharmaceuticals was $1,443 in the U.S., compared with a range of $466 to $939 in other nations. The U.S. also pays higher salaries for doctors. The average salary for a general practice physician in the U.S. was $218,173, while in other countries the salary range was $86,607-$154,126.