The cost of health

Not too long ago I had a health insurance scare. My provider denied a claim and I was left shivering over a $600 bill for all of two not-that-special doctor’s visits.

I appealed the claim denial and got a happy ending, though it got me thinking. If I were uninsured (like 17.1% of Americans) and had any sense of the cost, there is no question I would have foregone this doctor’s visit completely. I would have felt uneasy about whether I was truly ill or well, but I also would have been able to spend what was 3/4 of my monthly income at the time on more pressing needs like food.  In a country with as much wealth as the U.S, access to health services should not be cast as a liability to be “insured” to varying degrees depending on the benevolence of your employer or state government  – no! – but rather as a right.

I wondered how the U.S compares to other countries in terms of health care costs (private and public) and also health outcomes. Below I look at each country’s per capita expenditure on health in terms of purchasing power parity (PPP) – or current international dollars – rather than as US dollars through market exchange rates to account for “cost of living”, ie the fact that local currency equivalent to a U.S dollar can buy larger/smaller baskets of goods in different countries. The data I use is from the World Bank’s data catalogue for over 170 countries around the world and represents the year 2010 – the most recent year for which a relatively complete dataset was available.

To a certain extent, the more a country spends on heath care, the better the health of its people.

This is intuitive – health services cost money and are needed at some point to keep us all healthy and alive. But health, or at least a useful indicator of it (life expectancy at birth) is subject to the economic law of diminishing returns:

There are countries shelling out as little as 1/3 of the highest per capita spenders and achieving equal or better average life expectancies. There are many reasons why life expectancies may differ between two countries that spend the same on health care, though a contributing factor pervading many examples is likely that some systems are simply more cost-efficient than others. In fact, some are vastly inefficient…

The U.S spends the most per capita on health of any other country.

That lone dot trailing on the far right of the graph above? that’s us. The U.S spent 8,354 international dollars per capita on health in 2010. This is 25% more than the runner-up spender, Luxembourg, at 6,695 dollars. The U.S is also the country that spends the highest percentage of its GDP PPP on health care: 17.89%. The majority of countries spend under 6%. However, the U.S appears relatively modest in the percentage of health care expenditures that come out of the pockets of its citizens: only 12% (beating Canada, where 15% of health expenditures are out-of-pocket!). Though given the huge amount of money spent by the U.S on health, I think it’s most illuminating to compare health costs with other countries in absolute numbers rather than percentages. After all, Canada’s per capita health care expenditure ($4,410 PPP) is just over half of the what the U.S spends – so a slightly higher percentage out-of-pocket still translates to a lower cost burden for Canadians ($646 PPP per capita).

Granted, it’s not like this spending is all for naught. Life expectancy in the U.S is relatively high: 78.24 years, putting it in the 90th percentile among the 172 countries for which 2010 life expectancy data was available. The U.S is beaten out by 30 other countries with higher life expectancies, and only 3 of these countries have greater wealth (in terms of higher GDP PPP per capita – this includes Norway, Singapore, and Luxembourg). It is clear that for its spot as #1 spender on health care, the U.S isn’t delivering in terms of superior health outcomes – especially with rising rates of heart disease, diabetes, and other illnesses related to overweight and obesity. And as described above, citizens are shouldering much of these exorbitant costs from their own pockets.

Indeed, only three countries exceed the per capita dollar amount ($985 PPP) coming from US citizens’ pockets to pay for their health care:  Switzerland, Singapore, and Greece. See the map below for a complete worldview.

2010 citizens out-of-pocket health care costs per capita (international dollars)*

When comparing health expenditures to health outcomes, such as life expectancy at birth, it is again helpful to revisit relative spending rather than absolute dollars. For example, using the percentage of health care costs coming out of pocket for each country, I found a negative relationship with life expectancy. Thus, the more that a country’s health costs come from its citizens’ pockets, the lower the average predicted life expectancy. When modeled with a regression line, this relationship holds true with a correlation coefficient of -0.34.  Not too shabby in the social sciences at least.

Of course, average expected life expectancy at birth is not the tell-all meter for health in any given country. The quality of those years matters, which is why I’m trying to get my hands on recent data for disability-adjusted life years (DALY). At the moment it seems that DALY data is only available for 2004, and so I’ll have to hold off on that analysis for now…or do a 2004 retrospective!

I’ll wrap up by encouraging you to play around with the great web mapping applications of the World Health Organization and World Bank, where you can compare the performance of countries across the world on indicators related to health, economics, the environment, and more.

*The mapped variable Out-of-pocket health care costs PPP per capita was obtained by the following manipulations of variables obtained from the World Bank’s data catalogue:

(GDP PPP per capita) * (% of GDP spent on health care) * (100% – % of health care costs that are publicly funded) * (% of private health care costs that are out of pocket)


About katosulliv

Transportation, mapping, and cities enthusiast.
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