A new study is busting myths about what’s driving healthcare spending in the US, which was almost two times the average for other high-income countries in 2016. The study authors say it’s not because Americans use more healthcare, or because our government spends less on social services that might support health. Rather, it’s the higher prices we pay for healthcare goods and services, including administration.
The study, which compares the US to 10 high-income countries, found:
- The US had similar rates of healthcare utilization compared to the other countries for all services except for MRI and CT scans, which were a bit higher.
- Administrative costs accounted for 8% of spending in the US but just 3% or less in the other countries.
- Pharmaceutical costs were 1.5 to 3 times higher per capita in the US.
- Salaries of physicians and nurses were higher in the US.
- The US has the highest spending on health overall, but is in the middle in terms of public spending on health.
- The US had the lowest life expectancy and higher infant mortality than the other countries.
- In terms of unhealthy lifestyle risk factors, US ranks 1st in obesity, but only 7th in alcohol and 10th in smoking
This study reinforces why employers need to look beyond strategies aimed at managing utilization to those that help maximize the value of health services their employees receive.
Some cost relief may be on the way, though not right around the corner. UnitedHealth Group CEO David Wichmann believes technology will help curtail healthcare costs in the longer term – the next 8-10 years. He sees opportunity in the $1 trillion in unmanaged costs in the fee-for-service system, and thinks we should see savings as technology enables the shift to value-based care.
But employers can support and accelerate savings opportunities now by adopting their own value-based care initiatives. Value is about providing care in the most efficient manner possible to achieve the outcome the patient desires. A network strategy is a key component and a great place to start. Employers should also explore ways to drive health plan members to higher quality care using digital tools, care navigators and care managers.
As the study makes clear, US employers are up against a big headwind when it comes to managing healthcare spending. It’s time to embrace disruption through new ideas and technologies. Achieving meaningful savings requires all of us to transform the way we interact with the healthcare system.