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Rutgers professor discusses U.S. health care costs compared to other high-income countries

Compared to other member countries in the Organization for Economic Co-operation and Development, primary care office visits can be 30-70 percent higher in the U.S.  – Photo by

Health care costs in the United States are significantly higher compared to other high-income countries that are members of the Organization for Economic Co-operation and Development (OECD), said Michael Gusmano, professor in the Department of Health Behavior, Society and Policy and director of the Health Systems and Policy concentration.

“With regard to physician fees, studies have found that the price of primary care office visits can be 30-70 percent higher in the U.S. than other OECD countries,” he said. “The price of specialty care visits can be 70-120 percent higher.”

In many OECD countries, hospital and physician fees are negotiated annually between insurance funds and provider representatives in the context of the country’s national health care budget, which is set by the government, Gusmano said. 

The U.S. does not have this same set of uniform fees, so each public and private payer has to participate in their own negotiations with hospital and provider groups, he said.

“Although Medicaid fees are quite low, the federal government has not used its power to negotiate fees for the Medicare program that are comparable to other OECD countries,” he said. “Private insurance companies usually pay fees that are even higher than Medicare.”

Gusmano said nearly all countries that have national health care insurance systems use the fee-for-service (FFS) payment model, in which health care providers receive payment for each service performed. All countries with national health care insurance have lower costs compared to the U.S., he said.

While FFS is comparable to the practices of the U.S., there are some key distinctions, Gusmano said.

“The main differences are that other countries: one, use a single fee schedule, even if there is a multi-payer system, and two, these fees are negotiated annually or semi-annually between the insurance funds and the provider groups,” he said.

Gusmano said one of the biggest mistakes U.S. policymakers make regarding cost control is the assumption that volume drives spending.

“In other words, many U.S. policymakers (and academics) assume that the U.S. spends more on health care than other countries because Americans use more health care services,” he said. “This is incorrect.”

Gusmano said this assumption has resulted in many policies focusing on ways to change the incentives of consumers so they will demand less care or on regulations designed to try and eliminate unnecessary care.

While there is a large amount of unnecessary care in the U.S., he said it has not been shown to be more apparent compared to other countries. Gusmano said the biggest factor in higher health care spending is price, but this factor has received the least attention.

He said that if the U.S. were to expand health insurance coverage without taking price into consideration, the government would have to either reduce spending in other areas, raise taxes, increase borrowing or do all three. While there may be some support for this, Gusmano said, it is likely to be limited.

“Furthermore, opponents of universal coverage would use the increases to claim that government health insurance programs are inefficient and unaffordable,” he said. “International evidence does not support this claim, but that would not influence the national debate.”

Gusmano said there is good reason to believe that the lack of universal coverage in the U.S. limits access to health care for many people. Despite adopting and implementing multiple government-funded health care programs, he said millions of Americans are still underinsured or uninsured altogether. 

“Expanding insurance is an important public health goal, but because resources are finite, it is important (to) reduce the cost of expanding this coverage to secure longer-term political support for a national health insurance system,” Gusmano said.

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