USA Medical Care

Rising Healthcare Costs Compared to EU

Let’s face it! Medicare cost in the USA is ever increasing, and the trend is worrying. In 2016, the USA was spending twice as much per person compared to wealthy EU nations. According to the U.S. federal government sources, Americans expenditure on Medicare was $3.65 trillion in 2018.

Back in the 90s, the USA was a healthcare model. Other countries wanted to emulate the USA medical system, but over the years, the USA has gradually lost its grip and is currently ranked at position 37. France and San Marino lead with the best healthcare systems.

France has a universal healthcare system financed by government national health insurance. Its healthcare expenditure is less than 15% of its GDP. The France government fully controls health insurance. In the USA, on the other hand, there is still a lack of a universal Medicare system and private entities control healthcare.

Lack of a comprehensive health system is a risk to Americans lives. Coincidentally, a study conducted by the Harvard Medical School linked lack of medical coverage to over 45000 annual deaths.

The statistics shared above make you wonder, where is the USA losing track? Despite massive investments in healthcare, the current healthcare expenditure is 20% GDP. Why is the cost so high yet the quality of healthcare is not a reflection of the spending?


The real reasons healthcare is expensive in the USA


High Administrative Costs

Today, in the USA, Health care facilities spend a quarter of their annual budget on administrative costs. According to the Centre for American Progress, more than $218 billion is spent annually above budget estimation.

Spending such an amount only on administrative functions is not reasonable. Sadly, most of the expenditure goes into billing, and insurance related processes (BIR) costs, that is, claims filling and processing.

If only the government could go fast and create a universal health care system, perhaps the cost could reduce. It is worth noting that, a single payer healthcare system will lead to less manipulation of insurance premiums by multiple medical insurance providers.


Higher Payments for Medical Services

Did you know that the fees for the Service Model is still dominant in the USA? Meaning, physicians and medical practitioners get reimbursed based on the number of services they procure.

FFS is one of the oldest medical systems, and it leads to an increase in healthcare costs and the provision of substandard services as physicians focus on quantity.

The Affordable Care Act, which you know as “Obama Care” was a glimmer of hope for most Americans as it eliminated such fees. However, the current Trump administration is against the act and the future of universal Medicare for Americans looks dim.


Fewer Regulations to Control Costs

It is now two years since Trump came into power, and there are barely any significant steps noted in healthcare.

One colossal mistake, the USA makes is letting market forces influence healthcare prices. Additionally, most stakeholders do not want to chip in funds and reduce spending.

The government has to take an aggressive approach and save low and middle-income Americans who can no longer afford Medicare.


High Cost of Pharmaceuticals and Prescription Drugs

The price of drugs and pharmaceuticals is three times costlier in the USA than in the EU. One of the causes of these high rates is inadequate government regulations.

Although stakeholders like The U.S. Pharmaceutical Research and Manufacturers of America (PhRMA) still deem price comparisons as inaccurate, it is evident that medicine prices are high in the USA.

For instance, out of the 34 country members of the Organisation for Economic Co-operation and Development (OECD), only the USA lacks proper legislation and control of pharmaceuticals, and only in the USA are the prices of medicine too expensive.


Impact of Technology on Healthcare Prices

With technology, production of new drugs and medications is simple, storage and access of big data are possible, and healthcare operations are efficient. But, despite its benefits, technology has been the significant driver of healthcare costs. Medical technology is contributing to approximately 50% of annual costs increases.

There is no doubt that the USA is a leader in technology. In the future, it is expected that medical innovations will drastically reduce medical costs. Perhaps, the dialogue around medical technology should revolve around controlling the costs involved. Since technology is dynamic, current and future innovations in the USA should be focused on reducing recurring and unavoidable costs.



If the USA wants to reduce medical expenses, it has to take control of healthcare through legislation. Creation of universal health and a single-payer health care system are more viable ways of addressing the cost problem. Moreover, the systems will help in controlling community hospitals, which have turned into profit churning machines at the expense of Americans’ health.