The United States currently ranks highest in health care spending among the developed nations of the world. According to data released by the Organization for Economic Co-operation and Development (OECD) in 2018 (the latest for which figures were available), the U.S. rate was a staggering $10,000 per capita. Luxembourg had the second-highest health care budget, with expenditures at $8,000 per capita; Switzerland and Norway round out the top three, spending $7,000 per capita each.

Key Takeaways

  • Healthcare spending is a critical expense for most nations and their citizens in order to stay healthy and cared for.
  • The U.S. continues to spend the most on healthcare per person, even though health outcomes and quality of care is not often ranked highest.
  • Many European countries follow the U.S. in healthcare spending, but the big difference is most of that cost is subsidized by the government while the U.S. relies on costly, private health insurance plans.

Countries Spending Most on Healthcare

The following 2018 list ranks the top 18 in terms of spending on healthcare per capita according to the OECD.

  1. United States
  2. Switzerland
  3. Luxembourg
  4. Norway
  5. Germany
  6. Sweden
  7. Netherlands
  8. Denmark
  9. France
  10. Austria
  11. Japan
  12. Ireland
  13. Belgium
  14. Iceland
  15. Canada
  16. United Kingdom
  17. Australia
  18. Finland

U.S. Healthcare Spending

The situation was roughly the same five years ago back in 2012. OECD data listed the U.S. as the country with the largest health care spending, sitting at $8,745 per capita. Compare this to Turkey, which spent $984 per capita on health care in 2012 and $1,193 in 2017 – one of the lowest of any developed country.

Despite the U.S. government having the highest health-care budget, much of the cost is not publicly financed, but instead comes from personal expenditures and those related to private health insurance. Countries such as Norway (which spends the fourth most) have socialized much of their medicine. With its surplus from oil derivatives, Norway finances much the country's social medicine and expenditures through its Government Pension Fund (though of late more costs have shifted to private sources). The point is, Norway still remains one of the healthiest nations despite spending a significant amount less than the U.S. does on health care ($6,351 per capita).

The U.S. spends more on its health care budget in pure dollars per capita as well as based on its gross domestic product (GDP). However, comparing the amount paid based on GDP result in slightly different rankings. The U.S. and Switzerland are again in the top two spots, spending 17.15% and 12.25% of GDP respectively. Third place goes to France, with 11.45%, followed closely by Germany, with 11.27%.

Cartoon

No matter how you parse it, there is no denying that the U.S. spends more on health care by a wide margin. The size of this gap can be explained largely by the fragmented network of health insurance in the U.S.: Multiple payment types and insurance companies exist, each offering different services. This lack of federal oversight contrasts with that of other nations, whose governments impose oversight that, by setting benchmarks for pricing and services, establishes a national standard of care.

Rising Health Insurance Premiums

For most people, the rising cost of health insurance premiums lies at the center of concerns about rising health care costs. According to the National Conference of State Legislatures (NCSL), the average annual premium for family healthcare coverage rose nearly 5% in 2018 to $19,616. The average increase in premium costs in 2018 for people on a private plan or a healthcare exchange was $201. The two most-cited reasons for these increases were government policy and lifestyle changes.

Government programs like Medicare and Medicaid have increased overall demand for medical services—resulting in higher prices. In addition, as noted above, increases in the incidence of chronic conditions like diabetes and heart disease have had a direct impact on increases in the cost of medical care since the two diseases alone are responsible for 85% of health care costs and almost half of all Americans have a chronic illness.

Higher insurance premiums are only part of the picture. Americans are paying more out-of-pocket than ever before. A shift to high-deductible health plans (HDHPs) that can impose out-of-pocket costs—including deductiblescopays and coinsurance—of up to $13,300 per family have added greatly to the cost of health insurance. In fact, between 2006 and 2016, out-of-pocket costs for Americans with employer-sponsored health coverage rose faster than the costs that their insurers paid.

Inefficiency and Lack of Transparency

Thanks to a lack of transparency and underlying inefficiency, it’s difficult to know the actual cost of healthcare. Most people know the cost of care is going up, but with few details and complicated hard to decipher invoices, it’s not easy to know what they are paying for. The Wall Street Journal reported about one hospital that discovered it was charging more than $50,000 for knee-replacement surgery that only cost between $7,300 and $10,550. If hospitals don’t know the true cost of a procedure, patients may have difficulty shopping around. When it comes to overall transparency, a New England Journal of Medicine (NEJM) survey showed that only about 17% of care professionals believed their institutions had either “mature” or “very mature" transparency.

Patients Avoiding Care

Rising costs have created another casualty: People who skip medical care altogether. They do so not because they are afraid of doctors, rather, because they're afraid of the bills that come with healthcare. A poll by the West Health Institute and NORC at the University of Chicago revealed that 44% of Americans refused to go to a doctor due to cost concerns. About 40% of those surveyed said they skipped a test or treatment for the same reason. In many cases, those who refuse treatment even have medical insurance. The result of delaying or avoiding treatment is obvious, eventually the care required will be even more expensive.