Americans Subsidize the World’s Medical Costs – Fair?

by Darwin on October 14, 2012

The United States has the most expensive health care in the world. In 2010, the combined cost of public and private spending on medical care came to $8,233 per person in the United States.

Putting the high price of medical spending in terms of GDP gives a true comparison. In the United States, 18.2% of the GDP is dedicated to health care. Runners up Switzerland and France spend only 12.3% and 12% of their GDP, respectively.

Why is American health care so expensive?

Some would argue the costs are the result of profit motive. American hospitals, insurance companies, and health care providers are private. The rest of the world has socialized their health care, cutting out the middlemen and reducing costs.

But how much of these savings can be attributed to the socialization of health care services? Very little. In fact, the high cost of medical care in the United States can be directly tied to the low cost of health care around the world.

Take a look at these charts, which show the cost of popular prescriptions in the United States vs. the world:

In the best case scenario, Americans pay twice as much for popular prescription drugs. In the worst case, we pay five times more. Prescription drugs are not the only medical goods where this cost disparity exists. Prices in the United States are always higher for any medical good than in any other global market.

How the World Screws the US on Health Care

The key difference between American medical care and the medical care in foreign countries is not profit motive. It is not a public or private model, nor is it the role of health care insurance companies. The sole difference between American health care and health care around the world is the role of government in setting prices.

In other countries governments negotiate prices for every medical good from hospital beds to prescription drugs. They lowball on prices, paying for only part of the true cost of research and development. Americans then pay for the remainder.

Americans have an effective agreement with the rest of the world to “split the bill.” After prices have been shopped and negotiated overseas, Americans get their much higher price. Whatever medical companies give up overseas they make up in the United States, where there are no price ceilings, and where there are no negotiations over medical prices.

In short, the world consumes the same steak dinner that we do, but they pay a hamburger price. Americans pay for the full cost of their steak dinners, plus extra to cover everyone else’s dinner.

America Should Play Hardball

The Affordable Care Act does not get to the root of the problem. It takes already high prices and spreads them around, doing nothing to actually make American health care less expensive. It makes health care less expensive for some Americans by transferring the burden to other Americans.

Moving costs around makes health care less expensive for some people, not everyone. Why not try to lower costs for everyone? Here’s a simple start: let’s play hardball. As Americans who have overpaid for health care for decades, we should start undercutting the rest of the world.

Why should Americans pay more so Canadians, the Swiss, and the French can pay less? Why do we, as Americans, insist on making Americans pay more so that we can continue to subsidize the rest of the world?

 

Does anyone else think we should ask the rest of the world to pay its fair share?

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