Where Are the Cost Controls?

The U.S. health system stands alone in its lack of basic cost control laws.

April 8, 2016

The U.S. health system stands alone in its lack of basic cost control laws.

1. The United States, unlike many developed nations, does not have aggressive government-monitored cost-control regimes in providing healthcare.

2. This applies especially to the 49% of Americans who are insured via private employer-based healthcare plans.

3. The U.S. government does not use its demand-side/purchasing power to negotiate national prescription drug prices on behalf of consumers.

Healthcare: A “Just The Facts” Series

U.S. Healthcare: On the Costly Edge

Where Are the Cost Controls?

Beyond “Obamacare”: The Uncovered Population

4. There is also no U.S. prohibition on TV advertising for drugs, unlike every other country in the world except New Zealand.

5. As a result, U.S. drug prices are often one-third higher, if not double and beyond, than in countries such as Canada, Germany or Australia.

6. Medicare, the U.S. single-payer public insurance system for seniors and the disabled, covering about 13% of the U.S. population, also has a largely non-negotiated pricing system that has been criticized for lack of transparency and inflated pricing.

7. Countries such as Germany manage to keep annual increases in health insurance costs limited, in contrast to the average increase of 5% registered in the United States over the past 10 years.

8. The 2010 U.S. health reform law included some (mild) new cost-control provisions. Private insurers must spend 80% of money gathered from premiums on providing actual healthcare services, rather than on overhead, marketing and executive compensation.

9. A proposal for a publicly-run health plan to provide market competition as a cost control method did not make it into the final 2010 law.

10. In 2012, the health sector spent about $270 million on campaign contributions and other campaign activities in the United States. The insurance sector spent tens of millions, too.

Sources: The Globalist Research Center, The Commonwealth Fund, Kaiser Family Foundation, WHO, CNN and Forbes

Takeaways

The U.S. health system stands alone in its lack of basic cost control laws.

The U.S. government does not use its purchasing power to negotiate prescription drug prices.

Worldwide, only New Zealand and the United States allow TV advertising for prescription drugs.