In part 1 of our healthcare special, analyst Ben Nye and social media intern Chris Annunzio discussed the recent JAMA (Journal of the American Medical Association) report which focused on the high costs of healthcare in the United States. The report collected data from 10 other high-income countries, and made comparisons based on those findings.
As we conclude with part 2, Ben and Chris discuss the reasoning behind the higher-priced market in the United States.
The common perception of healthcare in the United States may be one of "better access and utilization". Compared to other developed countries, it's easy for Americans to think they have the best healthcare system in the world. In many categories, this is simply not true.
When we look at the total % of GDP spent on healthcare, the United States far outranks the other 10 high-income countries. The United States spend 17.8% of total GDP on healthcare, which soars above the average of 11.5%.
In addition, when we look at where the money is actually spent, the contrast in perception versus reality starts to come into focus. In the United States 8% of healthcare costs go to administrators, compared to the average of 1-3%. Coupled with all of the other factors, Ben Nye summarizes:
"So, we're paying service providers more. We're paying more for procedures and tests. We're paying a ton more on drugs...and probably the greatest kicker of them all is administrative costs."
- Ben Nye
With no end in sight to the rising costs of healthcare in the United States, a likely outcome is the "too big to fail" mentality. So, how does America combat a system that is not so consumer friendly?
"The only way you solve [this problem] in such an opaque system is if you have a really strong person, or really strong entity, negotiating prices on a lot of this....You have no buying power in the current scenario.....you don't want to be forced to buy healthcare without having some power levied in the opposite direction."
If you'd like to read the full report from JAMA, you can find it here.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.