The Myths of Health Care Costs

What accounts for the rising and unusually high costs of health care in the United States? If you ask the typical American—or member of Congress—he or she is likely to respond with one of four popular “myths” about U.S. health care.

The first myth is that Americans receive more and better care than do citizens of other more developed nations. On average, however, the reverse is true. For example, despite our high health costs, Americans see doctors fewer times each year and can’t afford needed care more times per year than do citizens of most devel- oped nations, as Figures 8.1 and 8.2 show. And as Figure 8.3 shows, despite those higher health costs, life expectancy in the United States is lower than in numerous other developed nations.

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The second myth attributes our high health care costs to our unique propen- sity for filing malpractice suits. Malpractice suits can raise prices because doctors have to pay malpractice insurance premiums and they may believe they have to engage in defensive medicine—performing tests and procedures primarily to protect themselves against lawsuits. Researchers estimate, however, that defensive medicine accounts for only a small percentage of total U.S. health care costs, and so changing the malpractice system would not significantly reduce the use of un- necessary tests and procedures.

The third myth attributes our rising health care costs to our aging population. Yet the population of the United States is no older than that of any of the other wealthy nations, and economists have found no relationship between the age of a nation’s population and its health care costs.

The fourth myth is that health care costs are so high in the United States be- cause of our advanced technologies. Although these technologies certainly play a role in health care costs, technologies (other than pharmaceutical drugs) account for only a small fraction of all health care costs. Moreover, the same technologies exist in the other wealthy nations without producing equally high health care costs. Thus, the mere existence of technology can’t explain these costs.