Treating health care as a commodity has not driven costs lower

Assuring effective health care to a population is a challenge for every society. As care options become more complex — and expensive — the challenges increase.

In the U.S. both the organization and the financing of health care are perennial issues in public discussions, political campaigns and among social policy researchers. Basically there are two distinct but intimately related concerns — providing access to care and paying for that care. There is widespread agreement that when folks are sick or injured they should receive appropriate care. Disagreements emerge, however, in deciding how to pay for that care.

I believe it is instructive to look at the experience of other wealthy developed countries that have similar challenges. Doing so is actually quite sobering.

Using data from the Commonwealth Fund, a respected independent research organization, we can compare U.S. experience with that of Sweden, Australia, France and Canada. These countries differ significantly in aspects of culture and geography. They do, however, all guarantee health care to 100% of their population. They spend approximately $5,000 per capita (ranging from $4,965 to $5,447). In the U.S., the expenditure is $10,586 per capita and approximately 10% of the U.S. population have no form of health care coverage. Life expectancy in each of these countries exceeds that of the U.S. — 82 years (ranging from 82.0 to 82.6), compared to a U.S. average of 78 years. Recently the U.S. life expectancy has actually gone down.

An area of particular concern in the U.S. is maternal mortality — death related to child birth. In a modern society birthing mothers should not be dying. Nonetheless, maternal mortality in the U.S. is higher than in any of these countries and it has gotten worse. U.S. rates currently are three times higher than Canada, four times higher than the U.K. and 10 times higher than Australia.

In some areas U.S. performance is quite good. Outcomes in the treatment of acute myocardial infarction (heart attack), stroke and some types of cancer in the U.S. are significantly better than in comparable countries.

A troubling feature of care in the U.S. is that all too often there is inadequate coordination between different parts of the care system. This leads to inefficiency and often poorer results. To further complicate the situation, patients, fearing high costs, often put off seeking care. Delayed care increases the risk of both poor outcomes and increased expenditures over the long run.

A contributor to high costs that has gotten relatively little attention is the complexity of U.S. administrative and billing procedures. Providers (physicians, hospitals, therapists, etc.) have to document — and often justify — every service provided. Commonwealth Fund estimates are that administrative outlays account for as much as one-third of all health care expenditures. No other comparable country comes close to that rate.

There are differences between countries in patient populations, utilization of technology, etc. Researchers, however, have concluded that the single biggest difference between the U.S. and others is that prices charged in the U.S. are substantially higher.

How did all these problems develop? I believe that a major factor is that we have, with a few exceptions, consistently treated health care as a commodity to be bought and sold in the same manner as other consumer goods. The underlying belief has been that traditional market forces will ensure efficiency, effectiveness and cost control. It has not worked.

A clear example of this failure is right here in South Dakota. In eastern South Dakota we have intense competition between two major health systems. Given that, traditional market analysis would predict that our costs would be competitive. The reality is quite the opposite. In November 2022, Forbes magazine listed South Dakota as having the most expensive health care in the nation.

Yes, there is intense competition but it is not focused on price. Competition is primarily on range of services, etc. In fact, some folks fear low cost care will be inferior even though lower cost can be a sign of just the opposite — prompt diagnosis, appropriate intervention and avoidance of complications.

The U.S. population — our families, friends and neighbors — deserve effective and efficient health care delivered at an affordable cost. We clearly are not there. We need careful analysis coupled with serious policy discussions free of the polemics which tend to dominate today’s discussions. We have a long way to go. But, it is important that we start.