NCPA - National Center for Policy Analysis


November 13, 2007

The United States spends far more on health care than other countries.  Surely this puts the United States at a competitive disadvantage, doesn't it?  No: It's the other way around, says John R. Graham, director of health care studies at the Pacific Research Institute.

America's high productivity gives us the ability to spend more on health care, especially the latest treatments and technologies, than other developed nations that labor under forms of socialized health care.

According to Robert L. Ohsfeldt and John R. Schneider of the American Enterprise Institute:

  • Health spending increases at a constant rate of about 8 percent for every $1,000 increase in gross domestic product per capita.
  • For example, if GDP per capita rises from $30,000 to $31,000, health spending increases by $232.
  • But if GDP per capita rises from $40,000 to $41,000, health spending increases by $500.
  • Thus, because Americans earn so much more than people in other countries, it naturally follows that we spend more on health care, says Graham.

Consider four countries whose health-care systems are often held up as admirable alternatives: Canada, Germany, France and Great Britain.  Certainly, the United States spends significantly more on health care than those countries do, but these nations also earn significantly less income per person.

Look at it this way: Even after paying for our health care, Americans have far more money left over than their neighbors to spend on other goods and services.  It works out to about $8,000 more than the average German or Frenchman, and about $4,000 more than the average Canadian or Briton.

Crusaders for "universal" health care allege that America's unique lack of government-mandated coverage is a handicap to the nation's competitiveness.  Given America's superior economic performance, however, it is a uniqueness we should not rush to abandon, says Graham.

Source: John R. Graham, "The Health Cost Myth," Wall Street Journal, November 13, 2007.

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