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1、Why U.S. health care expenditure and ranking on health care indicators are so different from Canada’sA. H. G. M. SpithovenAbstract Compared to other industrialized countries, the U.S. spends most of all on health care.

2、 Nonetheless, the U.S. ranks relatively low on health care indicators. This paradox has been already known for decades. For example, the turning point comparing the U.S. and Canada was in 1972. Health expenditure as a

3、percentage of GDP was higher in Canada than in the USA from 1960 until 1972. Since 1972 expenditure on health care has been higher in the U.S. than in Canada (OECD 2005a, Health data 2005, fourteenth OECD electronic d

4、atabase on health systems, date of release June 2005, last update 04/26/2005). The present study integrates the dispersed literature on spending and health care rankings and adds some statistical analysis to these stud

5、ies. The evaluation of different factors influencing health care expenditure in the U.S. relative to other countries is restricted to a comparison with Canada. The U.S. and Canada are two countries that are sufficientl

6、y similar to make comparisons useful. The comparison of factors influencing health care expenditure in the U.S. and Canada in 2002 reveals that health care expenditure in the U.S. is higher than in Canada mainly due t

7、o administration costs, Baumol’s cost disease and pharmaceutical prices. It is not primarily inefficiency in health care production but the dominant prevalence for free choice and own responsibility that explains the p

8、aradox of high expenditure on health care and low ranking on health care indicators.Keywords Health care expenditure · United States · CanadaIntroductionHealth care outlays in the U.S. were equal to 14.6% of

9、 Gross Domestic Product (GDP) in 2002 (OECD 2005a). Compared to other industrialized countries, the U.S. had the highest spendingon health care, even though 14% of the population is uninsured in 2002 (NCHS 2004), wherea

10、s other industrialized nations have comprehensive health insurance. The relatively high expen- diture on health care implies neither that the U.S. provides more health care services than other countries do (Anderson e

11、t al. 2003) nor that the U.S. ranks high on health care indi- cators, such as infant, neonatal, perinatal and maternal mortality rates and life expectancy (Starfield 2000; OECD 2005a). Concerning mortality rates and li

12、fe expectancy, the U.S. performs worse than, for example, Canada (OECD 2005a). It is clear that the relationship between health care expenditure and health outcomes is complex (Nixon and Ulmann 2006).The paradox of poo

13、r health records coupled with relatively high health care expenditure in the U.S. in comparison to other Western countries has been known for decades (Newhouse 1993; Fuchs 2005). There is a large amount of literature co

14、ncerning health care expenditure. Health care rankings have been studied to a lesser extent.Not only the relationship between health care spending and health outcomes, but also the explanation of health care expenditure

15、 itself is complex. The explanation is multifactoral (e.g. Reynolds 1989; Karatzas 2000; Sato 2001; Anderson et al. 2003, 2005; Sager and Socolar 2005) and according to Bodenheimer (2005b) varies in different historica

16、l periods.This article integrates the dispersed studies on the topic by reducing the empirical esti- mates of variables contributing to the relatively high health care expenditure in the U.S. to a common denominator, GD

17、P. It concentrates not only on factors that give an upward bias to For example wage costs are also reflected in household expenditure on hospital care.Health care expenditure in the U.S. is 5% points of GDP higher than i

18、n Canada (for 2002). The variables listed in Table 1, which are causing higher expenditure in the U.S. than in Canada, explain between 3.01 and 4.88% points out of the total 5 point difference.This article starts with a

19、 snapshot of the American health care system. It is followed by a section dealing with supply factors such as investment, development of wages in relation to productivity, administration costs and other cost containing

20、institutions in health care, such as managed care, the gatekeeping function of the general practitioner and waiting lists in elective health care. It continues with a section dealing with demand factors such as income,

21、 age, life styles and institutions such as the “peace-keeping” role of America. The final section includes a conclusion and some discussion notes.1.The Canadian and the American health care systemCanada’s single-payer

22、health care system provides access to universal comprehensive cov- erage for medically necessary health care services. Single-payer coverage in Canada permits the use of global budgeting and rationing (Evans 2003). To

23、provide health care the different provinces contract directly with physicians and hospitals (Health Canada 2005). This system resulted in public expenditure on health of 69.7% of total expenditure on health care in Can

24、ada in 2002. The share of private funding of health care equals 30.3% of total expenditure on health care. Private funding is made up firstly by pocket payments, secondly by private insurance,and thirdly by other priva

25、te funds such as non-profit institutions serving households, philan- thropic and charitable institutions. Their share in total health care expenditure is 15.3, 12.7 and 2.3% respectively (OECD 2005a). The U.S. in contr

26、ast has a mixed-private–public system. Private health insurance in the U.S. is tax subsidized by Federal States. According to Enthoven (2003), federal tax subsidies undermine cost-consciousness in the market for privat

27、e health insurance. The employer based insurance system in the U.S. resulted in public expenditure on health care of 44.9% of total expenditure in health care. Private insurance covered 36.1% of health expenditure, wh

28、ile out-of-pocket payments represent 14.1%, and other private funds make up 4.9% of total health care expenditure in the U.S. in 2002 (OECD 2005a).America’s health care system is mainly privately financed through an emp

29、loyer based health insurance market (Rodriguez and Wiens-Tuers 2000). This employer based insurance market provides insurance coverage to about two-thirds of the population under 65 years of age. Insurance is universal

30、 for those over 65 years of age. In 1984 69.2% of the total population under 65 years of age obtained health insurance through their workplace, which decreased steadily (with a slight fluctuation in 1998) to 65.2 in 20

31、02 (NCHS 2004). The insurance provided to employees at the workplace is usually part of the compensation package. There is a tax incentive for this type of coverage, because health benefits are not treated as taxable

32、incomes. 14% of the population is uninsured in 2002.Health Maintenance Organizations (HMOs)4 and Preferred Provider Organizations(PPOs)5 are the main providers of medical coverage. Together they insured 62% of al

33、l full-time medical benefit participants in small private enterprises (less than 100 employees) in 1996, and 73% in medium and large establishments (100 employees or more) in 1997. This implies that most private healt

34、h insurance is provided through some form of managed care organization. The remaining part has medical coverage on a fee-for-service basis (NCHS 2004).Besides employer based insurance, medical coverage is provided by t

35、he government, through Medicare and Medicaid among others. Medicare is focused on the elderly and Med- icaid is focused on the poor.Finally, individuals can always choose private insurance themselves. This is an option

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