Nearly two years ago, I attended a forum about the United States’ health reform at the University of Tokyo. Among the participants were American public health officials, professors and medical students. We were discussing the reasons why the United States’ health system is much more expensive than in other countries. For instance, among all OECD members, the United States bears the highest health expenditure, mounting to 17% of its GDP. It also has the highest health expenditure per capita —$8,000 USD, adjusted for purchasing power parity (PPP). However, despite this large influx of resources, the quality of health services is variable and not superior to other industrialized nations.
We talked about some possible reasons why the American health system is the way it is.
One likely explanation is the high cost of prescription medications. It seems reasonable that one way to improve healthcare coverage would be to regulate market prices of these medications. However, legislators have attempted this task before, and have failed: the economic and political climate of the US hinders stronger price fixing on pharmaceutical products.
We also discussed the important role of high wages of medical doctors and other health care professionals in increasing the cost of health services.
American medical practitioners are paid far more than their counterparts elsewhere in the world. When American medical doctors’ (general practitioners or GPs) income is compared to that of their Canadian fellows (in USD PPP), the former earn 40% more; this figure soars to 160% when compared to Finish doctors, even while Finland and Canada provide better healthcare overall for their patients. Actually, American physicians (GPs) bear the highest wage among all OECD countries, with U.S. specialists occupying the second position after the Netherlands.
I remember asking one of the attendees, a medical doctor in the U.S., why they can’t regulate the fees charged by health practitioners. I still remember her answer, which was surprisingly blunt: ‘We medical doctors have to pay high fees for mal-practice insurance; we’re also pressured to charge high professional fees in order to offset the price of medical school.’
She was right on both fronts in addressing the problem of regulating healthcare professionals’ fees: 1) a compensation/lawsuit culture prevalent in the U.S., and 2) an extremely high cost of medical education.
The lawsuit culture in U.S. also affects medical practitioners, creating an atmosphere of ‘defensive medicine’. This in turn, has shaped a market niche that enables insurance companies to charge enormous figures against mal-practice. Unfortunately, modifying this culture implies changing the mindset of large segments of society, which may take a long time.
The high cost of medical education in the United States is also striking. When compared to other OECD countries, tertiary education in USA ranks as the most expensive, with an average cost of more than $6,000 USD a year. In contrast, in most OECD nations this figure is below $1,500 (in several countries, the education is free). In fact, studying medicine in the United States is among the most expensive degrees in the world. A typical student has to pay between $35,000 to $50,000 USD a year. Since studying medicine takes 4 years, the total adds up to $140,000 to $200,000 USD – not including living expenses, the cost of studying for a previous bachelor degree, or the cost of a future residency. To compensate this high price tag, several universities and organizations provide some kind of financial aid; however, this assistance rarely covers all expenses, leaving students with considerable debts that take years to pay off.
Therefore health care reform in the U.S. should address these two main fronts: offsetting the lawsuit culture that pervades the medical practice and reforming how medical education is financed. Although difficult to achieve in the short term, these changes would not only affect health care but also would have a positive impact on the American society as a whole.