The Causes and Effects of EU and US Health Care Strategies

Explaining the Differences in the U.S. and European Health Care Systems

How can it be that the richest, most powerful nation on earth can tolerate 47 million uninsured, the highest health care costs per capita by far on earth, and health outcomes that put the United States well down in the ranking of developed countries? – Daniel Callahan

As the epigraph above indicates, Americans are spending more and receiving less in terms of the quality and accessibility of their health care compared to European nations that spend less – in some cases far less – per capita. Moreover, recent trends indicate that the disproportion between the U.S. and European nations continues to increase, indicating that there must be several factors that can account for these differences that have fueled these differences in the past and continue to cost Americans more of their tax dollars. The purpose of this paper is to review the literature to identify these factors and explain their implications for the health care systems in the U.S. and Europe, including the reasons for the higher costs of health insurance in the U.S. Following this review, a summary of the research and important findings concerning the differences in the U.S. and European health care systems is provided in the conclusion.

Overview of Health Care Systems in the U.S. and Europe

Comparing the respective amounts of taxpayer resources that are spent on health care by different countries requires an analysis of each country’s economic, political and social priorities, but it is possible to make some general comparisons based on recent and current trends in health care expenditures. For instance, according to the Peter G. Peterson Foundation (2022), “Generally, wealthier countries will spend more on healthcare than countries that are less affluent. As such, it helps to compare healthcare spending in the United States to spending in other comparatively wealthy countries — those with gross domestic product (GDP) and per capita GDP above the median” (How Does the U.S. Health Care System Compare to Other Countries 2).

By practically any measure, these costs are far greater in the U.S. than elsewhere, including affluent Western European nations. In fact, at present, health care expenditures in the U.S. average about $12,300 per individual, representing the highest per capita costs among Organization for Economic Co-operation and Development (OECD) nations (How Does the U.S. Health Care System Compare to Other Countries 3). As can be readily discerned from the breakdown of respective per capita health care costs in the U.S. and Europe depicted in Figure 1 below, the U.S. outspent every OECD nation by far, and even the second-highest rated country, Germany, spent just around $7,400 and the average for OECD nations (excluding the U.S.) is about $5,800 per capita. As the analysts at the Peter G. Peterson Foundation point out, “Such comparisons indicate that the United States spends a disproportionate amount on healthcare” (How Does the U.S. Health Care System Compare to Other Countries 5).

Fig. 1 – Health Care Costs Per Capita: U.S. versus OECD nations

Source: Peter G. Peterson Foundation (2022) at https://www.pgpf.org/sites/default/files/How-Does-The-U.S.-Healthcare-System-Compare-To-Other-Countries-chart-1.jpg

A valid argument could be made that this level of disproportionate spending is well worth the money if American health care consumers actually received top-notch health care and enjoyed a higher quality of life and longer life expectancies, but this is not the case. For example, male children who are born in the U.S. at present have an average life expectancy of 74.5 years, ranking the U.S. a dismal 47th in comparison with other OECD nations. Likewise, although women in the U.S. live longer with an average life expectancy of 80.2 years, women in the European Union have a life expectancy of 83.3 years (Life Expectancy 2023). It must also be noted that these differences in health care outcomes even apply to Eastern European nations that spend even less than their Western neighbors, underscoring the failures of the health care system in the U.S. to maximize the value of taxpayer dollars in terms of quality of life and life expectancy (Ginter 2010).

More troubling still, the infant mortality rate in the U.S., at 174th place, is among the worst in the entire world (U.S. People 2023). In addition, the disparities in life expectancy rates for African Americans compared to their European counterparts are also glaring, and these inequalities have been further exacerbated by the recent Covid-19 pandemic (Kanter et al. 2021). In sum, American consumers are not realizing the full bang for their health care buck as their European counterparts, an issue which is discussed further below.

Factors Accounting for Differences in the Costs of U.S. and European Health Care Systems

Given the high stakes that involved both in terms of the quality of life and the amounts of taxpayer resources that are allocated to health care services, it is reasonable to suggest that there are some fundamental factors that are involved which can account, at least in part, for the significant differences in the costs of health care in the U.S. compared to Europe. While there are a number of such differences, including administrative costs, provider reimbursement approaches, and the costs of medical malpractice insurance, among others, Callahan (2018) maintains that the main factor relates to the manner in which health care is funded. In this regard, Callahan reports that, “The primary difference is that the US system is heavily privatized, whereas the European systems are heavily government run or operated” (280).

In other words, the health care system in the U.S. has historically been profit-driven compared to the patient-centered funding strategies used by many affluent nations, including most especially European countries. Furthermore, there are also some profound historical differences between European countries and the U.S. in terms of their populations and the amount of time they have available to pursue optimal health care regimes. In this regard, Ginter emphasizes that, “European societies have been established for centuries, cherishing strong social values. The US is a much younger rapidly developing multi-ethnic community that derived its progress from adhering to traditions and principles of free choice” (215). This observation suggests that the strong profit motive that has fueled the differences in health care costs and outcomes between the U.S. and European countries are firmly entrenched and especially intractable to easy fixes.

Notwithstanding the “free choice” mindset that is prevalent in the U.S., the respective costs and outcomes described above also indicate that the prioritization of the health care needs of consumers by governments is a more cost-effective approach compared to America. Indeed, American hospitals and even outpatient clinics are notorious for charging exorbitant fees for the services they provide, especially to the fully insured whose carriers are forced to foot a large part of all of the bill. Nevertheless, because both health care systems share many of the same challenges, is it little wonder that both are experiencing mounting pressures to better respond to health care consumers’ needs in cost effective fashions (Callahan).

There are some other factors that are involved in this calculus, however, that must also be taken into account. For example, in the unregulated environment in the U.S., many Americans must rely on the cheaper medicines that are available in Mexico and Canada for their health care needs because these drugs are frequently more expensive domestically. In addition, powerful lobbyists from “big pharma” ensure that no substantive changes are made to their existing profit-generating business models (Allison 2019). By sharp contrast, nations in the European Union have a regulatory scheme in place that results in lower prices for the same medicines. In addition, a seminal study by Glaser (1991) found that health care consumers in the European Union have access to national health services, statutory health insurance, or the complete public financing of hospitals that are privately operated.

Further, despite the high-profile reports of the migrant problem in Europe, the U.S. has historically experienced far greater levels of immigrant influx compared to its European counterparts. Both the U.S. and European nations have laws on the books the require certain minimal levels of health care services in emergent situations, but the sheer numbers of uninsured immigrants who seek out medical care in the U.S. has driven costs up for everyone (Gray 2012). In response to this trend, some European nations have started allowing undocumented immigrants to purchase health insurance as well as implementing preventive care strategies to reduce future costs (Gray).

Similarly, the tens of millions of Americans who still lack affordable health care insurance despite efforts by federal and state governments to address this problem continue to place a major burden on the nation’s health care network. Some of the unseen but major costs that are involved in having so many uninsured Americans in need of health care services include the higher costs that result from delaying or cancelling medical care due to financial limitations. In addition, financial constraints are even discouraging many insured American consumers from receiving badly needed medical care, a trend that has been made even worse by relentless inflation in recent months (McMichen 2022). In fact, fully half of Americans have delayed medical or dental care since the onset of the Covid-19 pandemic and the full costs of these delays will be felt in the years to come (McMichen).

It is noteworthy, however, that the respective health care systems in the U.S. and Europe are confronted with many of the same challenges in delivering high-quality, timely services. In this regard, Callahan (2018) reports that, “Though the health care systems of the United States and the European countries are very different, they are being buffeted by similar problems: rising health care costs caused by aging populations, technology, and rising public demand and expectations” (280). These problems have assumed new importance and relevance for both the U.S. and European nations as their respective populations continue to age faster than younger cohorts are replacing them, and the significant costs that are associated with providing high-quality medical care for the elderly are well documented.