U.S. vs. European Health Care Systems: Cost and Outcome Gaps

Introduction

"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 this epigraph 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 grow, suggesting that several persistent factors are driving these differences 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. A summary of the research and important findings is provided in the conclusion.

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

Comparing the amounts of taxpayer resources 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 general comparisons based on recent and current trends in health care expenditures. 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. 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). The U.S. outspent every OECD nation by a wide margin; even the second-highest-spending country, Germany, spent only 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 note, "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).

A valid argument could be made that this level of disproportionate spending is worthwhile if American health care consumers actually received superior health care and enjoyed longer life expectancies, but this is not the case. For example, male children 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). Notably, these differences in health care outcomes even apply to Eastern European nations that spend less than their Western neighbors, underscoring the failures of the U.S. health care system 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 value of their health care expenditures as their European counterparts are.

Factors Accounting for Differences in Health Care Costs

Given the high stakes involved — both in terms of quality of life and the amounts of taxpayer resources allocated to health care services — it is reasonable to identify the fundamental factors that account, at least in part, for the significant differences in health care costs between the U.S. and Europe. While there are a number of such factors, including administrative costs, provider reimbursement approaches, and medical malpractice insurance costs, Callahan (2018) maintains that the main factor relates to how health care is funded. As Callahan explains, "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 U.S. health care system has historically been profit-driven compared to the patient-centered funding strategies used by many affluent nations, and most especially European countries. 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 had to develop optimal health care systems. As Ginter emphasizes, "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 fueling differences in health care costs and outcomes between the U.S. and European countries is firmly entrenched and especially resistant to easy fixes.

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

There are other factors that must also be taken into account. For example, in the relatively unregulated U.S. environment, many Americans must rely on cheaper medicines available in Mexico and Canada because the same drugs are frequently more expensive domestically. In addition, powerful lobbyists from "big pharma" ensure that no substantive changes are made to 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. A seminal study by Glaser (1991) also found that health care consumers in the European Union have access to national health services, statutory health insurance, or the complete public financing of privately operated hospitals.

Furthermore, despite high-profile reports of the migrant crisis 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 requiring certain minimal levels of health care services in emergency situations, but the sheer numbers of uninsured immigrants seeking medical care in the U.S. have driven up costs for everyone (Gray 2012). In response, some European nations have begun allowing undocumented immigrants to purchase health insurance and have implemented preventive care strategies to reduce future costs (Gray).

Similarly, the tens of millions of Americans who still lack affordable health insurance — despite efforts by federal and state governments to address the problem — continue to place a major burden on the nation's health care network. The hidden but significant costs of having so many uninsured Americans include higher costs that result from delayed or cancelled medical care due to financial limitations. Financial constraints are also discouraging many insured American consumers from seeking badly needed care, a trend made worse by relentless inflation in recent years (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).

Conclusion

The research showed that the high cost of healthcare in the United States is disproportionate to that of other affluent Western European nations, averaging about $12,300 per individual — significantly higher than any other OECD nation. Despite these substantially higher spending levels, health care outcomes in the United States remain inferior, with lower life expectancies and higher infant mortality rates compared to European counterparts. The research consistently identified the manner in which health care is funded as a primary difference between the two systems: the U.S. health care system is heavily privatized, while European systems are primarily government-operated or otherwise publicly funded. The research also showed that the prioritization of consumers' health care needs by European governments is a more cost-effective approach, but the strong profit motive that has caused many of the differences in costs and outcomes between the U.S. and European countries is longstanding and difficult to change.

Finally, it is reasonable to conclude that little real progress will be achieved in reforming the U.S. health care system unless and until the powerful lobbies that have protected the private sector's financial interests are confronted directly and the political will to effect meaningful changes becomes a reality.

Works Cited

Allison, Bill. "Big Pharma Lobby Group Spent Record Amount as Reform Push Grows." Bloomberg, Jan. 2019, p. 1.

Callahan, Daniel. "Europe and the United States: Contrast and Convergence." Journal of Medicine & Philosophy, vol. 33, no. 3, June 2018, pp. 280–93.

Ginter, Emil, and Vladimir Simko. "Health Differences between Populations of the United States of America and the European Union." Central European Journal of Public Health, vol. 18, no. 4, Dec. 2010, pp. 215–18.

Glaser, W. A. "Paying the Hospital: American Problems and Foreign Solutions." International Journal of Health Services: Planning, Administration, Evaluation, vol. 21, no. 3, 1991, pp. 389–99.

Gray, Bradford H., and Ewout van Ginneken. "Health Care for Undocumented Migrants: European Approaches." Issue Brief (Commonwealth Fund), vol. 33, Dec. 2012, pp. 1–12.

"How Does the U.S. Health Care System Compare to Other Countries." Peter G. Peterson Foundation. 2022. Available: https://www.pgpf.org/blog/2022/07/how-does-the-us-healthcare-system-compare-to-other-countries.

Kanter, Jeremy B., Deadric T. Williams, and Amy J. Rauer. "Strengthening Lower-income Families: Lessons Learned from Policy Responses to the COVID-19 Pandemic." Family Process 60, no. 4 (December 2021): 1389–1402.

"Life Expectancy." World Data. 2023. Available: https://www.worlddata.info/life-expectancy.php.

McMichen, Grady. "The Coordinated Exploitation of the United States Government by the Healthcare Industry." Journal of Law & Health, vol. 36, no. 1, Dec. 2022, pp. 34–62.

"U.S. People." CIA World Factbook. 2023. Available: https://www.cia.gov/the-world-factbook/countries/united-states/#people-and-society.