The United States spends more per person on health care than any other nation in the world—without obvious evidence of better outcomes. Over the next decade, average annual health spending growth is expected to outpace average annual growth in
38 Paul D. Mango and Vivian E. Riefberg, “Three imperatives for improving US health care,” McKinsey Quarterly December 2008.
GDP by almost 2 percentage points.39 Available evidence suggests that a substantial
share of US spending on health care contributes little to better health outcomes. Multiple studies have found that the United States spends about 30 percent more on care than the average Organisation for Economic Co-operation and Development (OECD) country when adjusted for per capita GDP and relative wealth.40 Yet the
United States still falls below OECD averages on such health care parameters as average life expectancy and infant mortality. The additional spending above OECD trends totals an estimated $750 billion a year out of a national health budget in 2007 of $2.24 trillion—that’s about $2,500 per person per year (Exhibit 13). Age, disease burden, and health outcomes cannot account for the significant difference.
Exhibit 13
A comparison with OECD countries suggests that the total economic potential for efficiency improvements is about $750 billion
SOURCE: Organisation for Economic Co-operation and Development (OECD)
Per capita health expenditure and per capita GDP, OECD countries, 2007
$ purchasing power parity (PPP)
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 Estonia United States United Kingdom Turkey Switzerland Sweden Spain Slovak Republic Poland Norway New Zealand Netherlands Mexico
South Korea Japan
Italy Ireland Iceland Hungary Greece Germany Czech Republic Chile Canada Belgium Austria France Australia Per capita GDP SloveniaIsrael
Per capita health expenditure
Finland Denmark
~$2,500 per capita
The current reimbursement system does not create incentives for doctors, hospitals, and other providers of health care—or even their patients—to optimize efficiency or control costs. As currently constructed, the system generally pays for procedures without regard to their effectiveness and necessity. Significantly slowing the growth of health care spending will require fundamental changes in today’s incentives. Examples of integrated care models in the United States and beyond demonstrate that, when incentives are aligned and the necessary enablers are in place, the impact of leveraging big data can be very significant (see Box 6, “Health care systems in the United States and beyond have shown early success in their use of big data”).
39 Centers for Medicare and Medicaid Services, National Health Expenditure Projections 2009–2019, September 2010.
40 These studies adjust for relative health using purchasing power parity. For more detail, see Accounting for the cost of US health care: A new look at why Americans spend more, McKinsey Global Institute, December 2008 (www.mckinsey.com/mgi); Chris L. Peterson and Rachel Burton, US health care spending: Comparison with other OECD countries, Congressional Research Service, September 2007; Mark Pearson, OECD Health Division, Written statement to Senate Special Committee on Aging, September 2009.
Box 6. Health care systems in the United States and beyond have shown early success in their use of big data
The fiscal pressures imposed by rising health care costs have motivated the creation of a promising range of pilot programs in the United States and beyond that use big data and its analytical and management levers to capture real medium- and long-term value. Examples of such innovations include: The Department of Veterans Affairs (VA) in the United States has
successfully demonstrated several health care information technology (HIT) and remote patient monitoring programs. The VA health system generally outperforms the private sector in following recommended processes for patient care, adhering to clinical guidelines, and achieving greater rates of evidence-based drug therapy. These achievements are largely possible because of the VA’s performance-based accountability framework and disease-management practices enabled by electronic medical records (EMR) and HIT.
The California-based integrated managed-care consortium Kaiser Permanente connected clinical and cost data early on, thus providing the crucial dataset that led to the discovery of Vioxx’s adverse drug effects and the subsequent withdrawal of the drug from the market.1
The National Institute for Health and Clinical Excellence, part of the United Kingdom’s National Health Service, has pioneered the use of large clinical datasets to investigate the clinical and cost effectiveness of new drugs and expensive existing treatments. The agency issues appropriate guidelines on such costs for the National Health Service and often negotiates prices and market-access conditions with PMP industries.
The Italian Medicines Agency collects and analyzes clinical data on the experience of expensive new drugs as part of a national cost-effectiveness program. The agency can impose “conditional reimbursement” status on new drugs and can then reevaluate prices and market-access conditions in light of the results of its clinical data studies.
1 Merck was granted FDA approval to market Vioxx (rofecoxib) in May 1999. In the five years that elapsed before Merck withdrew Vioxx from the market, an estimated 80 million patients took the drug, making it a “blockbuster” with more than $2 billion per year in sales. Despite statistical evidence in a number of small-scale studies (analyzed later in a metastudy), it took more than five years until the cardiovascular risks of Vioxx were proven. In August 2004, a paper at an International Pharmacoepidemiology meeting in Bordeaux, France, reported the results of a study involving a large Kaiser Permanente database that compared the risk of adverse cardiovascular events for users of Vioxx against the risk for users of Pfizer’s Celebrex. The study concluded that more than 27,000 myocardial infarction (heart attack) and sudden cardiac deaths occurred between 1999 and 2003 that could have been avoided. Taking 25 milligrams per day or more of Vioxx resulted in more than three times the risk of acute heart attacks or sudden cardiac death compared with Celebrex use. On September 30, 2004, in what many observers called the largest drug recall in the history of medicine, Merck pulled Vioxx from pharmacy shelves.