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Illustrating the Potential Impacts of Adverse Selection on Health Insurance Costs in Consumer Choice Models

Health Care Spending in the United States and OECD Countries 

Health spending is rising faster than incomes in most developed countries, which raises questions about how these countries will pay for future health care needs.  The issue may be particularly acute in the United States, which not only spends much more per capita on health care than any other country, but which also has had one of the fastest growth rates in health spending among developed countries.  Despite this higher level of spending, the United States does not achieve better outcomes on many important health measures.  This paper uses information from the Organisation for Economic Co-operation and Development (OECD) 1 to compare the level and growth rate of health care spending in the United States with other OECD countries.  In an increasingly competitive international economy, policymakers in the United States will need to be aware of how the health spending and spending growth in the United States compares to that of other nations.

It is reasonably well known that for some time the United States has spent more per capita on health care than other countries.  What may be less well known is that the United States has had one of the highest growth rates in per capita health care spending since 1980 among higher income countries.  Health care spending around the world generally is rising at a faster rate than overall economic growth, so almost all countries have seen health care spending increase as a percentage of their gross domestic product (GDP) over time.  In the United States, which has had both a high level of health spending per capita and a relatively high rate of real growth in that spending, the share of GDP devoted to health grew from 8.8% of GDP in 1980 to 15.2% of GDP in 2003 (Exhibit 5).  This almost 7 percentage-point increase in the health share of GDP is larger than increases seen in other high-income countries. 

This paper analyzes data on health spending and national income from the Organisation for Economic Co-operation and Development (OECD) countries with above-average per capita national income.  We exclude countries with relatively low per capita income because they have fewer resources to devote to health care and other necessities and do not provide a reasonable comparison for spending in higher income countries.2  We have provided footnotes where the OECD data show a break in series, indicating that the OECD data may not be comparable over the entire period that is being analyzed; Germany is excluded from the time series exhibits because its data are not comparable over the time periods due to reunification.3 The level of total health expenditure per capita is shown in U.S. dollars, adjusted for purchasing power parity (PPP).4  Data on growth rates and health care as a percentage of GDP are based upon the national currency of each country, with growth rates adjusted to remove the impact of general inflation. 5

Exhibit 1: Total Health Expenditures Per Capita, U.S. and Selected Countries, 2003

 

 

 

Exhibit 1 shows per capita health expenditures for 2003 in U.S. dollars purchasing power parity.  Health spending per capita in the United States is much higher than in other countries – at least 24% higher than in the next highest spending countries, and over 90% higher than in many other countries that we would consider global competitors.  Exhibit 2 shows that per capita health expenditures in the United States also were considerably higher than in the other analyzed countries in 1990.  Looking back further, however, while health spending per capita in the United States was higher than most other countries in 1970 and 1980, this was not as uniformly true as in the later period: Switzerland and Denmark 6 had spending levels comparable to the U.S. in the earlier period.7

Exhibit 2: Total Health Expenditures Per Capita, U.S. and Selected Countries,
1970, 1980, 1990, 2003

 

1970

1980

1990

2003

Australia

$252*

$691

$1,306

$2,886

Austria

193

770

1,328

2,958

Belgium

148

636

1,341

3,044^

Canada

299

783

1,737

2,998

Denmark

384*

927

1,522

2,743^

Finland

191

590

1,419

2,104

France

205

697

1,532

3,048

Iceland

163

703

1,593

3,159

Ireland

117

519

794

2,455

Italy

NA

NA

1,387

2,314

Japan

149

580

1,116

2,249e

Luxembourg

163

640

1,533

4,611^

Netherlands

NA

755

1,435

2,909e

Norway

141

665

1,393

3,769

Sweden

312

944

1,589

2,745

Switzerland

351

1,031

2,029

3,847

United Kingdom

163

480

987

2,317^

United States

352

1,072

2,752

5,711

*Value shown is for 1971. 

^Break in series; see “Comparability over time” at http://www.irdes.fr/ecosante/OCDE/411.html
eOECD estimate.

NA:  Not available.

Notes:  Amounts in U.S. $ PPP.  Germany is not included on this table because its data are not comparable over the time period due to reunification. 

Source:  Organisation for Economic Co-operation and Development. OECD Health Data 2006, from the OECD Internet subscription database updated October 10, 2006.  Copyright OECD 2006, http://www.oecd.org/health/healthdata.

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