Why Does the U.S. Spend More On Healthcare Than Other Countries?


This blog post is the third in the Supply, Demand and Medicine series on health care reform.

That question (or some variation of it) is something that my colleagues and I across the healthcare industry are asked all the time. It’s also something that we spend a lot of time studying.  

I wish the answer simply was that the quality of health care in the United States is much better than anywhere else, and therefore it should cost more. Unfortunately, that doesn’t appear to be the case. Texas in particular, which is a top ten state in terms of health care spending, consistently ranks near or at the bottom in the country in outcomes and access, according to the federal Agency for Healthcare Research and Quality.

In reality, there are many reasons behind the high costs of health care. But one of the biggest factors is waste. Donald Berwick, M.D., the highly respected former Administrator of the Centers for Medicare and Medicaid Services, estimates that 20-30 percent of health care spending is waste.

Some studies have put the number even higher:

Estimates of Waste in the U.S. Health Care System
for 2011 by Category (in $ billions)

Low Middle High
Failures of care delivery 102 128 154
Failures of care coordination 25 35 45
Overtreatment (too much care) 158 192 226
Administrative complexity 107 248 389
Pricing failures 84 131 178
Fraud/abuse 82 177 272
Total 558 910 1263
Percentage of total health care spending 21% 34% 47%

Source: Journal of the American Medical Association “Eliminating Waste in US Health Care”

If we’re ever going to get health care spending under control, while at the same time improving quality of care, we’re going to have to reign in the amount of waste in the system.

As Dr. Berwick puts it, “Blunt, unfeeling cuts in health care benefits, coverage, or payments are one way to bring health care costs under control, but they are not the right way. Far better is to identify the many ways in which health care wastes money doing things that do not help patients and, too often, hurt them.”

While precise definitions may vary, I and many others, believe that at its core, waste in health care is any cost that does not bring some value to the patient.

The bulk of waste falls into three general categories: too much care, too little care, and wrong care.

The good news is that there are things patients and providers can do to eliminate waste across all these categories.

1.  Too Much Care: When Less is More

It may seem counterintuitive, but too many tests and too much health care can actually be harmful to a patient’s health, not to mention waste tens or even hundreds of thousands of dollars.

How? Consider the following case:

A patient visits a physician’s office with lower back pain. Upon a thorough physical examination, the physician can find nothing neurologically wrong, and the patient has no underlying medical or neurological condition that could be causing it.

According to most guidelines, the correct course of treatment is prescription medication to relieve pain or inflammation and possibly some physical therapy.

In nearly every case, this low-tech, straight-forward approach leads to recovery within a few weeks.

However, all too often, even if a physician isn’t able to find something upon initial physical examination, an expensive MRI scan is ordered.

In fact, some physicians will not even examine the patient until after an MRI is done. That’s one reason a national effort to reduce the specific use of imaging for uncomplicated low back pain has become part of the “Choosing Wisely” campaign begun by the American College of Physicians.

But beyond the cost of this complex imaging procedure, there is another, more serious problem with ordering the test. MRIs are so precise that if 10 healthy people without any low back pain have an MRI scan on their back, in four out of 10 cases the scan would yield a “radiologically abnormal” result—that is, a scan that doesn’t look exactly like a text book “healthy” back (perhaps a slight misalignment or protruding disk).

So by ordering an MRI for routine lower back pain, there is a good chance that the cause of the lower back pain will be misdiagnosed as something structural when its actually not.

This could lead to major surgery and months of rehabilitation and recovery, when a generic prescription and stretching exercises would have relieved the pain in days or weeks.

Solution: While advanced medical technologies are wonderful, they must be used properly by physicians and patients. Sometimes the easiest solution is the best solution and “more is not better.”

2.  Too Little Care (and Failure of Coordination)

The U.S. health care system also is burdened with waste due to a lack of preventive care and a failure to educate patients on caring for themselves.

For example, besides saving lives, catching cancer early through screening tests such as colonoscopies and mammograms can save the health care system money. When cancer is caught early, simpler treatments may suffice, translating into lower cost.

More common than cancer though is high blood pressure. It is the leading cause of stroke and heart attacks–life threatening and incredibly costly conditions.

Several years ago, a study conducted among HealthTexas Provider Network (HTPN) clinics, Baylor Health Care System’s physician provider group, found that half of patients with high blood pressure (defined as greater than 140/90) were not taking medication to control it.

Solution: The physicians launched an initiative to educate all HTPN providers on the importance of identifying elevated blood pressure, prescribing inexpensive generic antihypertensive medications, and assuring that patients are consistently taking their medicine as prescribed.

The result is that today, over 76 percent of those patients with high blood pressure are now controlled, reducing their chances of stroke and heart attack.

3.  Wrong Care – a Failure to Deliver Quality

Errors in the care setting add billions of dollars annually to the nation’s health care tab.

Two major examples are: less than reliable hand hygiene and central venous line hospital-acquired infections.

An infection in a central line, a type of IV inserted deep into a major vein, can add a week to a patient’s hospital stay and costs on average $25,000, not to mention it can potentially be lethal.

Hospital-acquired infections are extremely expensive, but are largely preventable through even simple practices, such as proper hand hygiene.

Solutions: Today, there is hand sanitizer in or right outside every patient room at Baylor, as well as the entrances to many of our facilities, so that clinicians and visitors can keep their hands clean. And we are compulsive about how we properly insert and care for central lines.

Today, absolute sterile precautions are required for inserting such a line at a Baylor facility, and consequently, such infections are becoming a rarity.

Besides efforts to reduce hospital-acquired infections, Baylor has many other methods to prevent errors while administering medication, performing medical tests and procedures, and monitoring a patient’s status. These not only improve quality, but reduce waste.


Waste is prevalent in many care settings. While some think that changes in payment mechanisms will spur waste reduction, just keeping these three categories of waste in mind and allowing professionals to shoulder the responsibility and opportunity to identify and reduce waste can be an even bigger step in the right direction.

About the author

More articles

Dr. Couch currently serves as President of the Baylor Scott & White Quality Alliance, an integrated network of more than 3,700 physicians, 43 hospitals, 31 surgery centers, 29 skilled nursing facilities, 10 home health agencies, three hospices and additional points of care aligned with Baylor Scott & White Health.

Leave a Reply

Why Does the U.S. Spend More On Healthcare Than Other Countries?