The USA Wastes $2 Trillion per Year on Healthcare … Here’s the Proof
Expensive & Inefficient
Anyone who is paying attention knows that US Healthcare is expensive and inefficient but until now we didn’t know exactly how much waste is built into the system.
In this analysis I will use 2019 as a baseline because it is pre-COVID and countries spent much more around the world, but in different degrees, which obscures the real numbers.
All the numbers shown below are official numbers reported by government agencies. They are based on the hypothesis that all developed countries in the world provide much less expensive healthcare to their citizens than the US and that there is no reason that the US could not do the same regardless of its size. In fact, size would give the US enormous buying power that smaller nations have, not to mention that much of the drugs used around the world are developed in the US with funding from the US taxpayer.
Baseline US Data
Year = 2019 (Pre-covid)
US GDP (2019) = $21.38T
US Spent 17.7% of GDP on Healthcare (2019)
$21.38T * 17.7% = $3.840T in Total US Healthcare Spending
US Population (2019) = 328.3M people
$3.84T / 328.3M = $11,696.62/Per Person
European Costs for Comparison
Each European country is equivalent in size to American states but they each have their own distinct systems for delivering Healthcare to their citizens.
For this analysis I was going to use the average of all European Union countries but, if you see on chart below, I found there was a significant difference after the Top 10 countries is relation to spending. For that reason I will use the average of per capita spending from the Top 10 EU countries that spent the most per person. If I used the average of all EU countries the bottom-line waste number would be significantly higher.
Multiply American Population by Average EU Healthcare Costs
328.3M Americans * $5,339 Average per capita EU Healthcare Costs = $1.753T
Subtract hypothetical Spend from Current US Healthcare Spend
2019 US Healthcare Spend: $3.84T
minus
Hypothetical yearly spending based on EU Costs: $1.753T
equals
2019 Healthcare Waste in US system: $2.087 TRILLION
There is absolutely no reason the US cannot reduce Healthcare Spending to be in-line with other developed countries.
Footnote for Non-American Readers
What many non-Americans don’t realize is that most money spent on healthcare is paid out-of-pocket through individual citizen’s savings. In nearly every other developed country in the world healthcare is funded by taxes. In the US it is mainly funded through health insurance premiums, co-pays, and savings and is the same regardless of income.
A hospital charges a minimum wage worker the same as the CEO if they have the same insurance plan from their company. It’s what economists would call a poll tax. In 2021 the average monthly health insurance premium for an individual is $541. The minimum wage is $7.25. A minimum wage worker would need to work ~75 hours to pay for a month of health insurance. The CEO making $1M/yr would need to work 0.006 hours to cover the premium.
The poor generally have their costs covered by Medicaid; and the elderly have most costs covered by Medicare. The middle-class, who have had 40 years of stagnant wages, and 40 years of healthcare costs rising at 10%/yr are bearing the full brunt of healthcare costs.
One accident or illness could bankrupt a family. And yes, Hospitals will sue people for unpaid medical bills, deny them future care, and garnish their wages if they can’t pay.
Conclusion
This article shows that there is $2 trillion in waste built into the US healthcare system. Though not covered in this article those costs are primarily extracted from the wages of the middle-class in the form of insurance premiums, co-pays, deductibles, medicaid & medicare insurance taxes, doctor fees at point-of-delivery, and drugs sold at monopoly prices.
The US for-profit Healthcare system is extremely expensive and the middle-class feels the full weight of it. Many Americans avoid seeing doctors, and calling ambulances, because the costs are not only enormous (think $3,000 for an ambulance ride to the hospital), but also unknown to the person until weeks after they need the medical care which makes it difficult to challenge the charges. In most cases people with insurance have to pay more when they actually receive medical care.
Think what other things that $2 trillion per year could pay for that benefit the middle-class:
* Universal Pre-K
* Child Care
* University Costs
* Elder Care
* Mental health and Drug Addiction Treatment
… but that is a topic for a different article.