Wednesday, May 19, 2010

US health expenditures

The US has the highest percentage of health expenditure in OECD countries. The finding is surprising given the fact that the role of government in US health care delivery is among the smallest in the world. However, health insurance in the US is conducted through insurance companies and not directly between the patient and health-care provider. Such interaction creates the third party payer problem. Much of the health insurance in the US is provided through employer mandates. Such a scheme entitles employers to buy health insurance on behalf of employees via insurance company. The scheme, due to the lack of direct payment, creates the so called moral hazard, giving employees incentives not to provide themselves with full insurance coverage. Average American spends $7.250 on health per year, which is more than two and half times the average expenditure in the OECD ($3.000).

The US health-care reform should focus on deregulation of health insurance market across the country. The provision of free interstate health insurance market would force insurance companies to cut predatory premiums and end insurance denials to their customers. In addition, health-care reform should encourage out-of-pocket payments given the fact that these payments are strongly correlated with overall health conditions. Switzerland enjoys one of the highest life expectancies in the world alongside very high out-of-pocket payments for health care. The US should move in the direction of elimination of employer provided health insurance. This step would gradually reduce the size of health expenditures and would also contribute to the reduction of the number of uninsured.

Health Expenditures in the OECD
Source: OECD (2010)

1 comment:

  1. Nice post...I look forward to reading more, and getting a more active part in the talks here, whilst picking up some knowledge as well.. HealthMD