Drug Costs May Not Solely Drive Increasing US Health Care Spending


Administrative costs and surgical procedures may contribute significantly to overspending on health care in the United States.

Countless studies have established that Americans spend much more on health care than Europeans. It is believed that higher costs for prescription drugs in the United States may be the main reason for this discrepancy.

Although drug costs are a major contributor, excessive use of imaging and surgical procedures are also significant factors in American overspending on health care compared with Europe, according to an editorial published by JAMA.

Related Coverage: Top 8 Specialty Drug Categories Driving Spending in 2018

The author found that Americans annually spend $9403 on health care, while Germans only spend $5182 per year. American health care spending is nearly double that of other developed countries, according to the article.

Despite drug costs drawing a significant amount of attention, the volume of health care purchases also differs greatly.

“There are twice as many caesarean deliveries per capita in the United States compared to the Netherlands, for example,” said article author Ezekiel J. Emanuel, MD, PhD. “That difference in volume clearly is a major contributor to the overall spending discrepancy—$62 per capita for caesareans in the US vs $9 in the Netherlands.”

Dr Emmanuel also highlighted the fact that administrative costs were a large contributor to health care overspending in America.

In the United States, administrative costs accounted for $752 per-capita compared with $208 in the Netherlands, according to the study. Dr Emmanuel said that policies should be focused on reducing spending in this area, as the funds could be better allocated.

The editorial also discussed a recent analysis published in JAMA that compared health expenditures in the United States to those in other wealthy countries. The analysis revealed that spending is nearly double in the United States compared with the other countries.

The top cost driver of spending is the high volume of costly surgical procedures, such as caesareans, knee and hip replacements, coronary artery bypasses, and angioplasties, according to the editorial. Recent data suggest that Americans spend up to 6 times as much on these procedures than other countries.

“Just the top 25 of these high-margin, high-volume procedures, with cost differences of $20 to $40 per capita, explains approximately 20% of the per-capita health care spending difference between the US and other high-income countries,” Dr Emanuel said.

Dr Emmanuel noted the second most significant driver of spending is administrative costs, which are up to 5 times higher per-capita in the United States compared with peer countries.

Thirdly, medical imaging is also a high-volume procedure that drives costs.

“CT scans alone account for $220 in annual per-capita spending in the US, compared to $23 per-capita in the Netherlands for example,” Dr Emmanuel wrote in the editorial.

The fourth main driver of American spending is prescription drugs. Americans spend $1443 per-capita on drugs compared with $566 for Swedes. This was the only driver that was related to higher costs rather than higher volume, according to the editorial.

Physician salary in the United States is also much higher compared with peer countries; however, per-capita spending is not significantly different due to a lower volume in America. This was not one of the main drivers of health care spending, according to the article.

“There are just 2.6 physicians per 1000 citizens in the US, whereas in Germany the ratio is 4.1 per 1000 and in Sweden 4.2 per 1000,” Dr Emanuel said. “The difference in per-capita spending on doctors’ salaries accounts for only 4% of the overall health spending gap.”

In total, surgical procedures, administrative costs, excessive medical imaging, and prescription drugs account for two-thirds of per-capita spending and should be targeted through policies, according to the article.

Dr Emmanuel shared ideas of potential policies, including government regulation of drug costs, shared decision making between physicians to reduce costs, Medicare-style reference pricing to reduce procedure costs, and automated record-keeping.

Even a small reduction in spending in these areas could result in large savings, according to the article.

“If we in the United States could lower the prices and per-capita volumes of our CT scans, MRIs, and just the top 25 high-volume-high-price surgical procedures to those of the Netherlands, for example, we would see savings of about $425 per capita, or a total of $137 billion,” Dr Emanuel said.

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