It's Still The Prices, Stupid

Why The US Spends So Much On Health Care, And A Tribute To Uwe Reinhardt

Published in: Health Affairs, Volume 38, No. 1 (January 2019). doi: 10.1377/hlthaff.2018.05144

Posted on RAND.org on October 17, 2019

by Gerard F. Anderson, Peter S. Hussey, Varduhi Petrosyan

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A 2003 article titled "It's the Prices, Stupid," and coauthored by the three of us and the recently deceased Uwe Reinhardt found that the sizable differences in health spending between the US and other countries were explained mainly by health care prices. As a tribute to him, we used Organization for Economic Cooperation and Development (OECD) Health Statistics to update these analyses and review critiques of the original article. The conclusion that prices are the primary reason why the US spends more on health care than any other country remains valid, despite health policy reforms and health systems restructuring that have occurred in the US and other industrialized countries since the 2003 article's publication. On key measures of health care resources per capita (hospital beds, physicians, and nurses), the US still provides significantly fewer resources compared to the OECD median country. Since the US is not consuming greater resources than other countries, the most logical factor is the higher prices paid in the US. Because the differential between what the public and private sectors pay for medical services has grown significantly in the past fifteen years, US policy makers should focus on prices in the private sector.

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