Why is Health Care So Expensive in the U.S.?

The United States has the highest per-person health cost of any country on the planet, yet the lowest life expectancy among rich countries, as I've noted before. What's going on here? A story in today's NYTimes tries to tackle that question.

The United States spends almost twice as much on health care, as a percentage of its economy, as other advanced industrialized countries — totaling $3.3 trillion, or 17.9 percent of gross domestic product in 2016.

But a few decades ago American health care spending was much closer to that of peer nations.

What happened?

A large part of the answer can be found in the title of a 2003 paper in Health Affairs by the Princeton University health economist Uwe Reinhardt: “It’s the prices, stupid.”

That paper uses data compiled by Paris-based OECD and a review of their reports over the years reveals a consistent theme: We pay more for every health-related service and good than do people in other countries. Physicians and nurses and other medical and administrative personnel get higher pay than elsewhere. Drug companies charge more here than in foreign markets. And since we don't have a government-sponsored or mandated health care system, we have very expensive costs associated with health insurance, not to mention the legal system's profits from medical malpractice suits.

The reality is that there are so many influential people and organizations that profit from these high prices that the health care system is very unlikely to change much any time soon. This is a burden that we are going to continue to bear, for better or worse.