In part one of this three part series, John Dalton, Advisor Emeritus at BESLER, discusses data he examined comparing the cost and value of US healthcare to other developed countries.
Mike Passanante: Hi! This is Mike Passanante. Welcome back to the Hospital Finance Podcast.
Today, I’m joined by John Dalton. John is a senior advisor emeritus here at BESLER Consulting. John has joined us discuss a topic that he has delved on titled American Healthcare – Worst Value in the Developed World? This is part of a 3-part series that was written in the Garden State Focus and the subject of a lecture in the Philadelphia and New Jersey HFMA Annual Institute in October 2016.
That lecture provoked quite a bit of debate and discussion about how and whether American healthcare can close the gap with the rest of the developed world and attain the triple aim of better care for our patients, improved health in our communities and lower per capita cost of care.
John recently completed 13 years on the board of trustees of the St. Joseph’s Healthcare System where he chaired the strategic planning committee. He serves as honorary trustee at Children’s Specialized Hospital where he was a former board chair, and most recently was named by the New Jersey Hospital Association as its 2017 Hospital Trustee of the Year.
Welcome to the show, John.
John Dalton: Nice to be back with you again, Mike.
Mike: So, as I’ve mentioned, this is the first part of a 3-part series. And we’re going to start out at by looking at the relevant data.
So, John, what first prompted your interest in this subject?
John: Back in September 2008, I was part of an HFMA delegation to Russia. There were 23 of us from the US and five from the UK. So we spent four days meeting with our Russian colleagues, comparing notes, touring hospitals and clinics, discussing delivery models and funding mechanisms.
Among other things, I walked in with the US chip on my shoulder talking about US health quality indicators that the National Research Institute of Public Health in Moscow with a lot of pride and what I’ve seen us accomplish in US healthcare over the last 40 years.
To my surprise, when push came to shove, when we finished our four days, the Russians told us how much they admired our use of advanced technology by our skilled clinicians and very well-equipped hospitals. But they expressed a preference for the National Health System’s cost efficient delivery of high quality care.
That really, for me and the others in the delegation, was kind of a little bit of a shock. That American paradox became a continued area of interest for me.
Mike: And what rekindled that interest to come back and revisit this topic?
John: In February 2016, there was an article in Modern Healthcare. Actually, Modern Healthcare has a By the Numbers column at the back of each issue that I would always flip through and look at.
And that issue, they showed data for 22 of the developed countries in the world, including the US, all members of the OECD (Organization of Economic Cooperation and Development), what percentage of gross domestic product they were devoting to healthcare.
And for the first time, the table also showed by type of universal healthcare and the three different approaches.
That re-triggered my interest.
Here in the US, we certainly have the best equipped hospitals and we’ve got the most thoroughly trained physicians. But somehow or other, those two don’t mesh to produce high-quality, low-cost healthcare and value for American consumers.
So I decided to take a deeper dive.
Mike:So, let’s talk about some of the data that you did look at. The first things you do is you grouped the OECD countries. Can you tell us what the outcome looked like when you grouped those countries by type of approach to universal healthcare and what you found when you did that.
John: Sure! Basically, when you look at universal healthcare, there were three different approaches. There were some subtle differences among them.
One approach is called the two-tier approach. And that’s where the government provides or mandates catastrophic or minimum coverage for all, but then allows supplemental, voluntary insurance or fee-for-service care when the patient desires.
That includes five countries including France, Israel and the Netherlands who take that approach.
The second approach is called the insurance-mandate. And that’s where the government mandates that all citizens must purchase insurance with a private, public or not-for-profit insurer.
There, they were five countries in the table including Austria, Germany and Switzerland.
The third approach is the one we hear a lot about in the US, single payer. Under single payer, the government provides insurance for all and pays all expenses except for co-pays or co-insurance.
There were 11 countries listed on the table including Canada, Italy, Japan and the UK.
We had the data from the OECD. I went further and also pulled from the World Health Organization. That’s the authoritative source for key health indicators. I pulled the data on life expectancy at birth, infant mortality rates, child mortality rates and adult mortality rates to see how all these countries stacked up.
And what I did is I first arrayed them all on the table. I stretched out the worksheet. I made a worksheet that kind of stretched out what Modern Healthcare had shown. On the left, I put the healthcare percentage of GDP. On the right, I put life expectancy at birth. The percentage GDP, I had data from 2000 and 2013. From life expectancy, I had data from 1990 and 2012. So, different time periods but similar results.
And looking at that, unfortunately, the United States was at the bottom of the alphabet, and also, at the bottom of the barrel in terms of results.
So, the next step I took was to aggregate the data by type of approach and use those three types of approaches and compare that to the US. And those findings were kind of interesting.
Mike: John, that’s a disappointing result for the US. What did you decide to do next?
John: Well, as I’ve mentioned, I aggregated the data by type of approach to universal healthcare. And then, I looked at the key indicators.
So, the first thing I looked at was the life expectancy at birth and percentage of GDP. When I looked at that, the United States, from 2000 to 2013, in 2000, we were consuming 12.5% of GDP on healthcare. And that had gone up to 16.4% by 2013. And our life expectancy at birth had increased from 75 years in 1990 to 79 years in 2012 (so an increase of four years).
The other countries—in all 21 of the countries—life expectancy had increased from 76.6 years to 81.6 years, a 5-year increase. So we were behind at the start and further behind at the end.
Similarly, on the percentage of gross domestic product, the 21 countries averaged 7.9% in 2000 versus our 12.5%. And they increased to 9.6% in 2013. Looking at the three different approaches, the single payer countries had the best result.
Their healthcare percentage of their gross domestic product average 9.2%, lowest of all the groups. And their life expectancy at birth had increased to 81.8 years, same as the countries with two-tier system ahead of both the US and the countries with the insurance-mandate approach.
Next, I looked at infant and child mortality rates. Those two draw a lot of interest here in the US. We see a lot of press about them. The US’ infant mortality rates average 9.0 per thousand in 1990 and we dropped them by a third to 6.0 per thousand in 2012. It seems like good progress.
But we looked at the other 21 OECD countries, they started out ahead of us at 7.8 per thousand and dropped to 3.3 per thousand, a 60% reduction in infant-child mortality rates.
On the child mortality rate side, we started out 11 per thousand in 1990 and dropped to 7 per thousand in 2012, which is a 37% drop. However, the 21 OECD nations dropped from 9.5 per thousand to 4.1 per thousand.
Again, almost a 60% drop. So they were ahead of us at the outset and further ahead at the end of the day.
Then looking at the three approaches, insurance mandate, single payer and two-tier, once again, the single payer countries had the lowest infant-child mortality rates in 2012 and had the largest percentage reduction.
Looking at adult mortality rates, for males in 1990, the US was at 173 per thousand and dropped to 130 per thousand by 2012, about a 25% drop. The 21 OECD nations in the aggregate were at 141.4 per thousand in 1990. And it dropped to 89.9 per thousand in 2012, about a 36% reduction.
For females, our female adult mortality rate was 91 per thousand in 1990. It dropped to 77 per thousand in 2012. For the OECD countries in the aggregate, they started as 72.1 and finished at 49 per thousand in 2012. So we had a 15% drop in female mortality rate, and they had a 32% drop in female mortality rate.
Once again, when looking at the three types of approaches, the single payer countries in the aggregate had the lowest adult mortality rate, male, in 2012 at 86.8, and female, 45.6 per thousand in 2012. So, once again, the single payer countries produced the best outcome.
Mike: So, John, lots of statistics and information there. What did you conclude from all of this?
John: Several preliminary conclusions that need further examination, but clearly, despite our massive expenditures, the US healthcare system does not deliver reasonable value for the money. And the gap between us and the other OECD countries on key health indicators has been widening. That’s quite disturbing.
The surprising outcome to me was that the 11 countries with the single payer systems consume the lowest percentage of GDP on healthcare and yet they achieved the best results on each of the four key health indicators. That came as a shock to me.
The US also lags OECD countries in studies by the World Health Organization and the Commonwealth Fund (we’ll talk a little bit more about those later).
It’s little comfort. But when you compare the US with emerging market countries like Brazil, Russia, India, China, Mexico, et cetera, we do attain better results than them on the four key health indicators, but that’s not US exceptionalism.
So, the conclusion is that American healthcare is the worth value in the developed world.
It’s going to take a huge paradigm shift to close the gap with the other countries on those key health indicators.
Mike: John, what did some of the other studies show?
John: I also looked at some other reports. When I returned from Russia, the one that I had looked at was published by the World Health Organization in 2000. And it was their first and only attempt to look at the health systems throughout the entire world.
They ranked the health systems of 191 member organizations based on five factors. That included financial contribution, disability adjusted life expectancy, speed of service, protection of privacy and quality of amenities.
In that study, France ranked #1 in the world, followed by Italy. The US only ranked #37. We were behind Costa Rica and just ahead of Slovenia, Cuba and New Zealand.
However, the methodology that the World Health Organization used in that study provoked so much criticism from countries that weren’t highly ranked that they have not updated that study or used that methodology since. But it is the only one that I’m aware of that looks at the entire world in terms of their healthcare systems.
Another really good source for information on health policy and health throughout the world is the Commonwealth Fund based here in the US. I’m on their e-mailing list. For anyone interested in health policy, it’s a good one to be on.
They periodically compare the US-healthcare system with those of other developed countries (typically, 10 other countries). In their 2014 update entitled Mirror, Mirror on the Wall, How the US Healthcare System Compares Internationally, the US is last or near last among the 11 nations studied in the report on the three dimensions of access, efficiency and equity.
The United Kingdom ranks first, followed closely by Switzerland. That’s one worth looking at because they have a nice, little table here. It looks like something out of Consumer Reports where dark blue is good, light blue is bad and medium blue is in between. They list the countries—Austria, Canada, France, Germany, Netherlands, New Zealand, Norway, Sweden, Switzerland, the UK and the US. And going from left to right, at the right-hand side of both the UK and the US, the UK typically in dark blue and the US in light or medium blue. So it’s disturbing.
With per capita healthcare spending of only $3405 per person, the UK ranked #1 on 9 out of 12 factors that the Commonwealth Fund measured. The US ranked last on 4 out of 12 factors despite our spending of $8508 per capita. So that’s $5100 more than the UK.
So, clearly, we are not getting value for the money.
The Commonwealth Fund’s conclusion was that the US delivers “high cost care of mediocre quality,” noting that our per capita expenditures are $3100 higher than the average of the other 10 developed countries in the study.
We have a pretty steep mountain to climb to catch these folks.
Mike: And John, we’ve gone ahead and collected some of the slides that you used in your presentation. We’ll have those available on our website for anyone that wants to dig into this information a little bit more.
I’m very excited and looking forward to part 2 of this series where we’ll take a journey through France, Germany and the United Kingdom to explore their systems in more depth.
John, thank you so much for spending some time with us today.
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