Why Does the U.S. Overspend on Health Care? One Simple Reason

Alamy Fact: Despite all the advances in medical technology over the past century, during which the average life expectancy of Americans has grown by 30 years, 100 percent of Americans will still eventually die. But don’t try to tell that to a sick person with a flush bank account.

According to figures from the Organization for Economic Cooperation and Development, the United States spends more money on health care per capita than any other nation on Earth — nearly $7,300 per citizen in 2007 (the latest for which firm figures are available), of which nearly half was financed by tax dollars through programs such as Medicare and Medicaid. That’s 87 percent more than Canada paid to give its citizens universal health care that year, and more than three times the expenditures in the United Kingdom.

And it gets worse. With an estimated $2.8 trillion expected to be spent on health care in the U.S. this year, we’re on track to spend $8,920 per capita in 2013, a figure that could pass $14,000 per capita if health care spending rises to the expected $4.5 trillion in 2019.

Granted, much of this increase is a direct effect of baby boomers aging, and moving en masse onto the Medicare rolls. And, as a matter of fact, that’s the crux of the problem: age.

It’s No Fun Getting Older…

According to the Department of Health and Human Services’ Agency for Healthcare Research and Quality, in 2009, 5 percent of Americans accounted for nearly 50 percent of health ncare spending in America. Breaking down the numbers even further, just 1 percent of Americans — many, but not all of whom are elderly — spent 20 percent of our health care dollars.

Now, you might think these numbers are a direct function of people getting sicker as they get older, and so incurring higher health care costs as they age. To a large extent, you’d be right.

According to one estimate, the U.S. government’s Medicare program, which provides health insurance to the elderly, spends 30 percent of its money funding treatment of older patients in their final year of life. And arguably — and sadly — half of this money is probably wasted, spent on folks who despite all the extra treatments, will die within two months regardless.

…But It Sure Beats the Alternative

As for the question of the quality of our care … judge for yourself. A recent report by The Economist’s Intelligence Unit ranked 40 developed and developing-world countries on its morbidly named “quality of death” index.

The United Kingdom ranked No. 1. Fellow English-speakers Australia, New Zealand, and Ireland took the second, third, and fourth places, respectively. Canada, meanwhile, was tied with the U.S. for ninth place — but at a significantly lower cost.

A Better Alternative?

Spending excessively in a vain attempt to prolong a life that’s statistically certain to end in a matter of months — regardless of how many resources are thrown at the situation — doesn’t seem particularly logical. And indeed, at some point the checking account is going to run dry. What then?

Canada and the U.K. are sometimes accused of “rationing” health care to deal with this problem. And again, rightly so.

The U.K.’s National Health Service, for instance, is known to practice “denials of costly treatments for life-threatening diseases” toward the end of patient lifespans — a decision necessitated by “resource constraints.” But that’s not necessarily a bad thing.

Dr. Kathleen T. Unroe, formerly of the Duke University School of Medicine and now a professor at Indiana University’s Department of Medicine, has suggested that one more economical — and economically sustainable — alternative to throwing money at incurable diseases might be “palliative care,” which she described to Reuters as “a much more broad set of services for people with chronic, incurable diseases who have difficult-to-manage symptoms.”

Dr. Jonathan Bergman of the University of California in Los Angeles, who ran a study on end-of-life care a few years ago, prefers a twist on the rationing concept: “We might be able to do a better job with end of life care and cut costs not by rationing care but by making it more rational … We do these expensive things that may not improve someone’s quality of life or the quality of death, but we do it anyway,” Bergman told Reuters.

Maybe what we really need to do, therefore, is acknowledge the hard truth that 100 percent of human lives end in death — and find a better, more affordable way to live with that fact.

Motley Fool contributor Rich Smith doesn’t want to die either, but he especially doesn’t want to die broke

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