American Sickness

Life expectancy vs. health expenditure, 1970 to 2022

The United States, on a per capita basis, spends more on healthcare than any other developed country in the world, yet Americans live longer than only eight other countries. According to a study in Health Affairs, the chief reason is not greater health care utilization, but higher prices.

In 2022, the United States spent an estimated $12,742 per person on healthcare — the highest healthcare costs per capita across similar countries. For comparison, Switzerland was the second highest-spending country with $9,044 in healthcare costs per capita, while the average for wealthy OECD countries, excluding the United States, was only $6,850 per person. And it was more than double the $4,559 the U.S. spent per capita on health care in 2000. Such comparisons indicate that the United States spends a disproportionate amount on healthcare.

This is not exactly shocking. Uwe Reinhardt, the late Princeton health care economist, came to the same conclusion in the well-known 2003 study, “It's the prices, stupid: why the United States is so different from other countries.”

To understand why life expectancy in the US is lower than these other countries, it makes sense to break the US population down into sub-groups and see if this observation holds universally or varies by group.

Life Expectancy in the US by Race

In 40 US states, Hispanic-Americans enjoy longer life expectancy than the global average from all countries in our data. For Asian-Americans, this is the case in 48 states.

Japan is the leader in nation-wide life-expectancy (see top of chart). In 42 US states, Asian-Americans have a longer life expectancy than that of Japan. The same is true for Hispanic-Americans in 25 states.

“It’s not that we’re getting more; it’s that we’re paying much more”

The amount of resources a country allocates for healthcare varies as each country has its own political, economic, and social attributes that help determine how much it will spend. Generally, wealthier countries — such as the United States — will spend more on healthcare than countries that are less affluent. As such, it helps to compare healthcare spending in the United States to spending in other comparatively wealthy countries — those with gross domestic product (GDP) and per capita GDP above the median, relative to all OECD countries.

Why do we do this?

Healthcare spending is driven by utilization (the number of services used) and price (the amount charged per service). An increase in either of those factors can result in higher healthcare costs. Despite spending nearly twice as much on healthcare per capita, utilization rates in the United States do not differ significantly from other wealthy OECD countries. Prices, therefore, appear to be the main driver of the cost difference between the United States and other wealthy countries. In fact, prices in the United States tend to be higher regardless of utilization rates. For example, the Peterson-Kaiser Health System Tracker notes that the United States has shorter hospital stays, fewer angioplasty surgeries, and more knee replacements than comparable countries, yet the prices for each are higher in the United States.

There are many possible factors for why healthcare prices in the United States are higher than other countries, ranging from the consolidation of hospitals — leading to a lack of competition — to the inefficiencies and administrative waste that derive from the complexity of the U.S. healthcare system. In fact, the United States spends over $1,000 per person on administrative costs — almost five times more than the average of other wealthy countries and more than it spends on long-term healthcare.

Percent of Population Without Health Insurance in US States

Does this Higher Spending Lead to Better Outcomes?

Higher healthcare spending can be beneficial if it results in better health outcomes. However, despite higher healthcare spending, America’s health outcomes are not any better than those in other developed countries. The United States actually performs worse in some common health metrics like life expectancy, infant mortality, unmanaged diabetes, and safety during childbirth.

A healthcare system with high costs and poor outcomes undermines our economy and threatens our long-term fiscal and economic well-being. Fortunately, there are opportunities to transform the healthcare system into one that produces higher quality care at a lower cost. For more information on potential reforms, check out the Peterson Center on Healthcare recommendations.

Life Expectancy in the US by Income

In general, higher income leads to longer life expectancy, but income has little effect for life expectancy of Hispanic-Americans.