Health Care Spending in the United States and OECD Countries
January 2007 

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 Denmark⁶ 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

Exhibit 3 shows the average annual growth rates for per capita health spending for the analyzed countries, adjusted for inflation in each country.⁸  The U.S. average annual growth rate (4.4% from 1980 to 2003) was the second highest among the countries analyzed. The combination of a relatively high level of per capita health spending in 1980, and a relatively high level of growth in that spending between 1980 and 2003, resulted in the very high level of health spending per capita that we see now in the U.S. relative to other countries. For example, while Switzerland, Sweden, and Denmark had levels of per capita health spending roughly comparable to the U.S. in 1980 (Exhibit 2), they had much lower average annual growth rates in health spending than the U.S. over the 1980 to 2003 period.⁹  Other countries with relatively high average annual growth rates over the 1980 to 2003 period (e.g., Luxembourg, Norway, Ireland) started the period at relatively low levels of health spending per capita relative to the U.S.  Annual increases in per capita health spending slowed in the U.S. between 1990 and 2003, but even that growth rate (3.6%) equaled or exceeded the rates in more than half of the analyzed countries over the period.

Exhibit 3
Average Annual Growth Rates in Total Health Expenditures Per Capita,
U.S. and Selected Countries, 1980 to 2003; 1990 to 2003

Another way to look at relative health spending is to look at how much of a country’s national income it spends on health care.  Exhibit 4 shows that in 2003, health expenditures in the U.S. equaled 15.2% of GDP, at least three percentage points higher than for any other country in the analysis.  The U.S. has committed a higher share of GDP to health care than most other nations since at least the 1970s, although there were several other countries with comparable levels in 1970 and 1980 (Exhibit 5).  Since that time, health spending as a share of GDP has grown in the U.S. relative to other countries in the analysis. Between 1980 and 2003, the U.S. share of GDP devoted to health grew by 6.4 percentage points, more than 2 percentage points more than any of the other countries analyzed (Exhibit 6).

Exhibit 4
Total Health Expenditures as a Share of GDP, U.S. and Selected Countries, 2003

Exhibit 5
Total Health Expenditures as a Share of GDP, U.S. and Selected Countries, 1970, 1980, 1990, 2003

Exhibit 6
Percentage Point Change in Total Health Expenditures as a Share of GDP, U.S. and Selected Countries, 1980 to 2003; 1990 to 2003

After a brief respite in the mid-1990s, significant annual increases in health care spending over the past few years have refocused U.S. policymakers on the impacts that rising health care costs have on businesses and individuals and on federal and state budgets.  Compared to other developed nations, the U.S. spends more on health care per capita and devotes a greater share of its GDP to health.  Since 1980, the U.S. also has had among the highest average annual growth rates in per capita spending on health care.  Despite this relatively high level of spending, the U.S. does not appear to provide substantially greater health resources to its citizens,¹⁰ or achieve substantially better health benchmarks, compared to other developed countries.¹¹ This growing gap between health spending in the U.S. and that of other developed countries may encourage policymakers to look more closely at what people in the U.S. are getting for their far higher and faster growing spending on health care.

1. The data for this issue brief are from the Organisation for Economic Co-operation and Development, OECD Health Data 2006, from their Internet subscription database, updated October 10, 2006.  See http://www.oecd.org/health/healthdata.  

2. We are presenting information for countries with 2003 GDP per capita above the OECD average of $26,564.33 U.S.$ PPP (data as of May 3, 2006). 

3. OECD indicates that a “break in series” may be indicated when, for example, there are changes in a country’s reporting system; see “Comparability of time” at http://www.irdes.fr/ecosante/OCDE/411.html.

4. Total health expenditure is defined at http://www.irdes.fr/ecosante/OCDE/411000.html.  The PPP adjustments, which are done by the OECD, take into account the purchasing power of different currencies, and are calculated by looking at the cost of an identical basket of goods in each currency. 

5. Specifically, the OECD adjusts nominal health expenditures based upon a general economy-wide price index for the country.  The data used here to calculate growth rates have been adjusted to reflect the year 2000 GDP price levels for each country.  The OECD notes that health care inflation may be higher than economy-wide inflation, so the adjusted amounts may not eliminate all of the impacts of health care price inflation.  See “Comparability over time” at http://www.irdes.fr/ecosante/OCDE/411.html. 

6. Per capita health spending for 1970 was not reported for Australia or Denmark, so the 1971 reported levels ($252 and $384, respectively) are shown in the table; U.S. per capita health spending in 1971 was $387.

7. Although excluded because of comparability of data over time, Germany (West Germany) also had relatively high spending in 1970 ($269) and 1980 ($960). 

8. The growth rates reflect changes in health spending levels in each country based on its own currency and adjusted for inflation, so all figures are in Year 2000 National Currency Units (NCUs).  These growth rates will differ from the apparent growth that could be calculated from Table 1, which is based on U.S. dollars adjusted for purchasing power parity. 

9. One reason for the slower growth in Switzerland may be the very slow growth of its economy over the period, where real GDP per capita grew at an average annual rate of 0.8% between 1980 and 2003, about one-half of the 2.0% average annual growth rate in real GDP per capita in the U.S. over the period.  This would not explain the slower growth in health spending per capita in Sweden or Denmark, which had annual growth rates in real GDP per capita of 1.7% over the period.

10. Gerard F. Anderson, Bianca K. Frogner, Roger A. Johns, and Uwe E. Reinhardt, "Health Care Spending And Use of Information Technology in OECD Countries,” Health Affairs, Vol. 25, No. 3 (May/June 2006): 819-831.

11. Ibid.