A new report by the McKinsey Global Institute finds that $650 billion of a total $2.1 trillion in U.S. healthcare spending is above what would be expected in comparison with 13 peer Organization of Economic Cooperation and Development (OECD) countries, even when adjusted for wealth.
The report--titled Accounting for the Cost of U.S. Health Care: A New Look at Why Americans Spend More--finds that outpatient care, which includes same-day hospital visits, accounts for two-thirds of the spending above expected ($436 billion). Fueling this spending are a number of supply- and demand-related factors, including provider capacity growth in response to high outpatient margins; the judgment-based nature of physician care; technological innovation that drives prices higher rather than lower; demand growth that appears to be due to greater availability of supply; and relatively price-insensitive patients with limited out-of-pocket costs.
Elsewhere in the U.S. health system, drugs and health care administration represent additional areas where spending is above expected. Drug costs represent $98 billion, or 15 percent, of spending above expected, driven by higher prices and the use in the United States of a more expensive mix of drugs. Health administration costs represent $91 billion, or 14 percent, of total spending above expected, due in part to the system structure, but also to inefficiencies and redundancies that exist within the system.
Read the report.
