A new study debunks the idea that the US spends more on healthcare because it doesn’t spend enough on social services

Courtesy ChenMed

The US spends almost double the amount on healthcare, compared to other high-income countries.
A new study published in Health Affairs looks into why this is. Some have suggested that a lack of investment in social services is the reason the US spends so much on healthcare.
But after conducting some research, the study debunked that theory and found that the more countries spend on social services the more they spend on healthcare services.
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The US spends a lot on healthcare, almost double the amount of other high-income countries, according to a new study published in the journal Health Affairs.

The statistic led Irene Papanicolas, a co-author on the study, to delve into the topic to see what makes the US spend so much more on healthcare.

The question she wanted to evaluate was whether a lack of investment in social services resulted in higher healthcare spending. The idea was that by spending less on social services, healthcare services must be used more, which in turn leads to more healthcare spending.

Figuring out why the US spends so much on healthcare

Using the latest complete data available from the Organisation for Economic Co-operation and Development, Papanicolas and the other four authors of the study wanted to see why the US was such an outlier compared to other wealthy countries. Some of the countries include Australia, Canada, Denmark, France, Germany, Japan, the Netherlands, Sweden, Switzerland, and the UK.

Other studies have evaluated this question as well. Last year, the Journal of the American Medical Association published a study on US healthcare spending concluding that the main reasons for high US healthcare spending were the prices of labor and pharmaceuticals, and administrative costs.

The Health Affairs study set out to address three three main questions. How does the US compare to other high-income countries in terms of its overall social spending? Is there any evidence that countries that spend less on social services have higher spending on health care? Is there any evidence that increases in social spending over time are associated with decreases in health care spending?

Courtesy of Health Affairs.

The US spends almost the same as other countries on social services

The results surprised Papanicolas, she said. On aggregate, the team discovered the US spends just one percentage point below the average, compared to other countries, on social services. The one percent difference is not enough of a reason to explain why the US spends so much on healthcare, she said.

"It was surprising," Papanicolas told Business Insider on the findings in the study. "People have preconceived notions that the US spends less on social programs on aggregate. We debunked our hypothesis."

For instance, when looking at the results in education, which is considered in this study to be part of social service spending, the US was above average. Papanicolas said that finding stood out.

The study makes the conclusion that there are other reasons as to why the US spends so much on healthcare, but it doesn’t identify them.

The study found a positive correlation between healthcare and social services spending. From 1980 to 2015, countries that spent more on social services also spent more on healthcare services.

But Papanicolas said, while the study showed that social service spending in the US was relatively on par with the other countries, that does not imply that the spending is sufficient. The study looked at social spending by both governments and private entities such as companies and individuals.

"This is not us saying social programs should not be invested in," Papanicolas said. "That’s not the takeaway to get from this study. We know by investing in social programs, health outcomes improve."

Here are some more key statistics from the study:

The US spent approximately 17% of its gross domestic product on the healthcare system. This is nearly twice as much as other high-income countries. The average healthcare spending across the OECD was approximately 8.8% of GDP in 2015.
The US spent 16% of its GDP on social services, which is slightly below the average of 17% from the other high-income countries.
There was also a significant difference in countries for public and private social spending. The Netherlands had the highest share of private social spending at 6.9 % of GDP. Across countries, the greatest proportion of both public and private social spending went to old age spending, making up 9.4% of GDP, on average. The US spent more than the average on old age spending, at 11.7%.
Education was the second-largest area for social spending, after old age spending. Across the other countries, education spending made up 5.2% percent of GDP, on average, and the US spent slightly more at 6.2%.

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