Countries spending the most on health care

Ashley C. Allen | 24/7 Wall St.

The United States currently spends more per person on health care than any other developed country. Health outcomes in the U.S., however, are among the worst.

Despite weak health spending growth worldwide, a number of countries still had substantial health care budgets as of 2012. Based on data released by the Organization for Economic Co-operation and Development (OECD), the U.S. led the developed world in 2012, spending $8,745 per capita on health care. Turkey, by contrast, spent just $984 per capita, the lowest among developed countries. 24/7 Wall St. reviewed the countries spending the most on health care per person in 2012.

According to the report, "Higher health sector prices explain much of the difference between the U.S. and other high-spending countries." Higher health care prices in the U.S. are partly the result of the greater use of medical technology. Another reason is the fragmented insurance system, which does not have a centralized price setting mechanism. By contrast, many European countries — which mostly have a centralized health care system — have placed limits on health care prices, or their growth..

In an interview with Luca Lorenzoni and David Morgan, health economist and head of health accounts at the OECD Health Division, the two discussed the differences in the health care systems. Lorenzoni explained that the U.S. is an outlier in terms of the complexity of its health system, which employs diverse insurance programs, payment systems, and a wide range of services.

Pharmaceutical spending is a major component of health care expenditure among more developed countries. Six of the countries spending the most on health care spent more per capita on pharmaceuticals and other medical non-durables than the OECD per capita expenditure of $498.

Drug expenditures, however, have been falling in recent years. According to Morgan, a slowdown in pharmaceutical spending partly explains the recent decline in health care spending growth across OECD member states. Increased share of generic drugs, due primarily to the expiration of major patents, explains the bulk of the decline in pharmaceutical spending.

Not surprisingly, there are also relatively high numbers of medical professionals for the OECD member nations that spend the most on health care. All but one of the 10 countries had considerably more nurses than the 8.8 nurses per 1,000 people across the OECD. Austria, Norway, and Germany also had more than four physicians per 1,000 residents in 2012, versus just over three per 1,000 residents in the OECD.

National health care systems are designed to improve residents' health, and by and large — especially when compared to countries outside the OECD — larger health budgets lead to better health outcomes. However, among OECD nations, this relation is not clear. "We cannot explain higher spending in terms of higher quality health care," Lorenzoni said. The highest expenditures do not necessarily mean residents are the healthiest.

Life expectancies in the countries with the highest per capita health expenditures were just in line with the OECD average of 80.2 years. Life expectancies at birth in the U.S. and Denmark were actually lower than the average for OECD member states, at 78.7 and 80.1 years, respectively.

Other health outcomes were also not meaningfully linked to health spending. Obesity, for example, was exceptionally high in several countries spending the most on health. More than 35% of Americans and 25% of Canadians were overweight in 2012, both among the highest in the OECD.

Many of these countries also displayed a number of unhealthy habits, which may drive up health spending. Seven of the countries with the highest health expenditures, for example, consumed substantially more alcohol than the average for the OECD.

Looking at OECD countries allows for comparison between different health care systems. One significant difference is whether health expenditures come predominantly from public or private sources. In eight out of the 10 highest spending countries, public health expenditure — funding from government sources — accounted for more than 70% of total spending on health. While public spending has grown in the U.S. at 4.8% annually in recent years, its share of total health spending remained at just about 50%.

There are disadvantages to this system. "In the U.S. health care system, insurance coverage is very much linked to employment," Lorenzoni said. This means that during economic crises, the public sector plays a larger role in overall health care spending because it must act as a buffer for people who lose their jobs and health insurance.

In contrast to the U.S., continual budget problems and calls for fiscal austerity in Europe have been shrinking the portion of health expenditures from public sources amidst economic downturns. According to the OECD report, recessions disproportionately affect publicly funded health care systems, evidenced by shrinking health care expenditures in Europe since 2009.

Based on figures for the 34 developed countries that are members of the OECD from its 2014 Health Statistics Report, 24/7 Wall St. identified the 10 countries with the highest health expenditure per capita. Data from the OECD are from 2012. We also relied on the OECD's recently published report in The Lancet: "Health-Care Expenditure and Health Policy in the U.S. Versus Other High-Spending OECD Countries." Included in the OECD's report were a number of statistics on health spending and costs, as well as data on smoking rates, alcohol consumption, obesity, and life expectancy.

These are the countries spending the most on health.

1. United States

> Health expenditure per capita: $8,745

> Expenditure as a pct. of GDP: 16.9% (the highest)

> Pct. obese: 28.6% (the highest)

> Life expectancy: 78.7 years (8th lowest)

The U.S. spent $8,745 per person on health care in 2012, roughly $2,500 more than Norway, the second highest spender per capita. On average, OECD countries spent $3,484 per capita on health care. The U.S. also dedicated 17% of its GDP to health care, the highest in the OECD. Like the rest of the developed world, U.S. health spending has risen in recent years. Between 2000 and 2012, health expenditures grew at an annualized rate of 3.9%, largely driven by public sector health expenditure, which grew at an annualized rate of 4.8% over the same period. While most OECD country health systems were funded disproportionately by public sources, health care spending in the U.S. was divided evenly between public and private entities. Despite spending the most, the U.S. had one of the lower life expectancies among OECD countries. And while Americans believed they were healthy — 90% reported that they were in "good" health — 28.6% of respondents reported they were obese, the highest rate in the OECD.

2. Norway

> Health expenditure per capita: $6,140

> Expenditure as a pct. of GDP: 9.3% (16th highest)

> Pct. obese: 10.0% (2nd lowest)

> Life expectancy: 81.5 years (10th highest)

While only one country spent more on health on a per capita basis, Norway's health care spending as a percent of GDP was in line with the OECD average of around 9.3%. This was likely due to Norway's exceptionally high GDP of nearly $55,000 per capita last year, the second highest among OECD nations. Perhaps due to the country's well-funded health care system, residents were relatively healthy. Norwegians 15-years or older drank considerably less than their fellow residents in other OECD nations, consuming just 6.2 liters per capita. And just 10.0% reported they were obese in 2012, also among the lowest in the OECD. Norwegians were also among the world's happiest, rating their lives 7.7 on a scale of one to 10 on average, second only to the Switzerland.

3. Switzerland

> Health expenditure per capita: $6,080

> Expenditure as a pct. of GDP: 11.4% (4th highest)

> Pct. obese: 10.3% (3rd lowest)

> Life expectancy: 82.8 years (3rd highest)

Unlike many countries in the OECD, health care expenditures in Switzerland were not significantly affected by the economic crisis. This was likely due to a high proportion of health expenditures coming from private sources — 34% — which tend to remain relatively stable during economic downturns. Government spending accounted for just 34% of GDP last year, the second lowest among OECD nations. The strength of the Swiss economy likely contributed to the Swiss having the highest life satisfaction score among OECD countries.

4. Netherlands

> Health expenditure per capita: $5,099

> Expenditure as a pct. of GDP: 11.8% (2nd highest)

> Pct. obese: 12.0% (6th lowest)

> Life expectancy: 81.2 years (15th highest)

As is the case in all the countries with the highest health care expenditures, the Netherlands has an exceptionally strong economy. The country's GDP per capita was estimated at $41,711 in 2013, higher than all but a handful of OECD nations. The Dutch government paid the vast majority of health care costs, with nearly 86% of all spending coming from public sources in 2012, the highest proportion in the OECD. Much of these resources likely contributed to a robust medical profession. In 2012, there were 12 nurses per 1,000 residents and 14.7 medical graduates per 100,000 residents, both among the highest rates in the OECD.

5. Austria

> Health expenditure per capita: $4,896

> Expenditure as a pct. of GDP: 11.1% (6th highest)

> Pct. obese: 12.4% (8th lowest)

> Life expectancy: 81.0 years (tied-16th highest)

Austria apportioned 11.1% of its GDP to health care expenditures in 2012, the sixth highest proportion in the OECD. Slower health care expenditure growth in Austria was likely the result of declining pharmaceutical costs, which came after the government reduced the value added tax on medicines by 50% in 2009. Austrian medical schools graduated 19.6 doctors per 100,000 residents, the most of any country in the OECD. Many of these doctors likely remain in Austria, as the country has the second highest physician density in the OECD. The higher proportion of doctors could increase the country's health expenditures in the future. Austrians' poor health habits may also be driving up costs. Smoking rates were more than two percentage points above the OECD average rate, and obesity rates have increased from 9.1% in 1999 to 12.4% in 2006. While this was not among the highest obesity rates, the startling growth in self-reported obesity has experts worried about future cost containment.

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