Global Healthcare Spending

1. Healthcare Spending in the U.S.

Healthcare spending is a key aspect of national budgets across the globe, but the United States stands out due to its exceptionally high healthcare spending.

did you know

Despite spending more on healthcare than any other nation, the U.S. does not consistently achieve the best health outcomes compared to other high-income countries.

It is helpful for healthcare leaders to understand the healthcare spending in the U.S. compared with that of other developed nations, focusing on the differences in total expenditures, the allocation of resources, the structure of healthcare systems, and the implications for health outcomes.

According to the World Health Organization (WHO), U.S. healthcare spending reached approximately $4.3 trillion in 2021, which accounts for nearly 18% of the country’s gross domestic product (GDP) (the monetary value of all finished goods and services made within a country during a specific period). GDP provides an economic snapshot of a country, used to estimate the size of an economy and its growth rate (OECD, 2023). This is far higher than the healthcare spending of other countries.

hint

Although other developed nations spend less on healthcare overall, many have similar or even superior health outcomes, challenging the idea that higher spending directly leads to better health.

term to know

Gross Domestic Product (GDP)

The monetary value of all finished goods and services made within a country during a specific period. It provides an economic snapshot of a country, used to estimate the size of an economy and its growth rate.

2. Healthcare System and Funding Differences

A major factor influencing healthcare spending is the structure of a country’s healthcare system. In the U.S., healthcare is a mix of public and private funding, with heavy reliance on private health insurance for those not eligible for government programs like Medicare or Medicaid. The private insurance market, which is often employer-sponsored, has contributed to the rising costs of healthcare in the U.S. Administrative costs and insurance premiums are relatively high compared to other countries. The U.S. also has a large for-profit healthcare industry, including hospitals and pharmaceutical companies, which further drives up costs.

In contrast, many other high-income countries have nationalized or heavily regulated healthcare systems that offer universal coverage.

EXAMPLE

The United Kingdom's National Health Service (NHS) is publicly funded through taxes and provides healthcare to all residents, regardless of income or employment status.

Other countries, like Canada and France, have mixed public-private systems, where the government guarantees universal coverage but allows for some private healthcare options. These systems tend to have lower administrative costs, more centralized control over healthcare resources, and a greater emphasis on preventive care, which can help reduce overall spending.

3. Studying Other Countries’ Healthcare Spending

The contrast in healthcare spending and outcomes between the U.S. and other countries raises important questions about the efficiency and effectiveness of the U.S. healthcare system. One key consideration is whether the U.S. could achieve better outcomes by reallocating resources, emphasizing preventive care, and streamlining the healthcare system to reduce administrative costs and inefficiencies. Some policymakers advocate for reforms that would introduce a single-payer or public option system to reduce costs and improve access.

At the same time, advocates of the current U.S. healthcare model argue that the country's healthcare industry encourages innovation and provides patients with more choices and access to cutting-edge treatments. However, the high costs associated with this system often lead to disparities in access, with low-income individuals and those without insurance facing significant barriers to care.

Looking at the systems and spending of other high-income countries can be an interesting lesson in options, best practices, and possible opportunities.

think about it

As you explore the spending and outcomes of other countries, keep in mind that, as of the most recent data, the life expectancy in the United States is approximately 77 years (OECD, 2023).

3a. Germany

Germany’s healthcare system is characterized by a universal, multi-payer model that combines statutory health insurance (SHI) with private insurance options. The country spends around 11–12% of its GDP on healthcare, which is lower than the United States but higher than many other European nations (OECD, 2023). Germany's system is primarily funded through payroll taxes, with individuals contributing a percentage of their income to SHI, while higher-income earners can opt for private health insurance. This system provides comprehensive coverage for all residents, including access to preventive care, specialist treatment, and hospital services.

key concept

Despite spending less than the U.S., Germany consistently achieves high health outcomes, such as a high life expectancy (around 81 years) and low infant mortality rates (OECD, 2023). The focus on preventive care, efficient service delivery, and equitable access to healthcare has contributed to these positive health indicators, demonstrating that higher spending does not always correlate with better outcomes.

3b. The United Kingdom

The United Kingdom's healthcare system, the National Health Service (NHS), is publicly funded through taxation, allowing it to provide universal coverage to all residents. Healthcare spending in the UK accounts for about 10% of GDP, which is lower than that of the United States and many other high-income countries (OECD, 2023). The NHS offers comprehensive services, including preventive care, general practitioners, specialist treatment, and hospital care, all free for their citizens. Despite relatively lower spending compared to other developed nations, the UK achieves strong health outcomes, including a high life expectancy (around 81 years) and low mortality rates from preventable diseases (OECD, 2023).

key concept

The focus on accessible, affordable care, alongside preventive measures and cost control, has contributed to the UK’s efficient use of healthcare resources. However, challenges such as funding shortfalls and increasing demand for services remain, which sometimes affect waiting times and service availability. Nevertheless, the NHS model demonstrates that universal access and efficient management can lead to favorable health outcomes.

3c. Canada

Canada’s healthcare system operates as a publicly funded, single-payer model, with the government providing universal coverage for all residents through provincial and territorial health insurance plans. The country spends approximately 11% of its GDP on healthcare, which is notably lower than the United States, yet it consistently achieves favorable health outcomes (OECD, 2023). Healthcare services, including doctor visits, hospital care, and preventive services, are covered by the public system, although some services like prescription drugs and dental care may require additional private insurance or out-of-pocket payments.

key concept

Canada’s health outcomes are strong, with a life expectancy of around 82 years and relatively low rates of infant mortality and preventable deaths (OECD, 2023). The emphasis on universal access to care, preventive health services, and efficient management of resources contributes to these positive outcomes. While there are challenges such as wait times for certain elective procedures, Canada’s healthcare system successfully balances equitable access with cost containment, demonstrating that lower spending can still result in high-quality health outcomes.

3d. Japan

Japan’s healthcare system combines universal coverage with a strong emphasis on preventive care and efficiency, contributing to some of the best health outcomes in the world. The country spends around 10% of its GDP on healthcare, which is relatively low compared to the United States but similar to other high-income nations (OECD, 2023). Japan’s system is primarily funded through employer-based health insurance for workers and a public insurance program for retirees and the unemployed. Despite moderate healthcare spending, Japan boasts an exceptionally high life expectancy, averaging around 84 years, and low rates of infant mortality (OECD, 2023).

key concept

A key factor in these outcomes is Japan's focus on early detection and prevention, including regular health screenings, vaccination programs, and public health initiatives aimed at promoting healthy lifestyles. Additionally, Japan's healthcare system is known for its efficiency, with relatively low administrative costs and a high level of patient satisfaction. Japan's healthcare system is often noted as one of the most effective in terms of health outcomes relative to spending.

3e. Finland

Finland’s healthcare system is primarily publicly funded through taxes, with a strong emphasis on equity and access to care for all residents. The country spends approximately 9–10% of its GDP on healthcare, which is lower than many other high-income nations, yet it consistently ranks highly for health outcomes (OECD, 2023). Finland provides universal coverage through a combination of municipal healthcare services and a national health insurance program, ensuring that essential medical services, including preventive care, specialist treatment, and hospital care, are accessible to all citizens.

key concept

As a result, Finland has one of the highest life expectancies in Europe, at around 82 years, and relatively low rates of preventable deaths and infant mortality (OECD, 2023). The Finnish healthcare system is particularly noted for its focus on public health initiatives, early childhood health services, and a well-developed network of primary care providers.

3f. Switzerland

Switzerland's healthcare system is one of the most expensive in the world, with the country spending around 12–13% of its GDP on healthcare, which is higher than most other European nations (OECD, 2023). It operates under a universal healthcare model where private health insurance is mandatory for all residents, and individuals must purchase basic insurance coverage from private insurers, although the government subsidizes premiums for low-income individuals. Despite its high costs, Switzerland consistently achieves outstanding health outcomes, including a life expectancy of approximately 83 years and low rates of preventable diseases (OECD, 2023). The Swiss healthcare system is known for its high quality of care, patient satisfaction, and innovation in medical technology, as well as its focus on efficiency and competition among insurers, which helps to keep costs in check.

did you know

Switzerland is notable for a strong emphasis on elderly care and long-term health services, ensuring that its aging population receives adequate and specialized care. Switzerland has a well-developed long-term care (LTC) system, ensuring that elderly citizens receive high-quality care, whether at home or in specialized facilities. The country provides substantial financial support through a mandatory social insurance system that covers a range of services, including nursing home care, home care, and rehabilitation. Additionally, Switzerland places a strong emphasis on the autonomy and dignity of the elderly, with a well-established system for elderly care professionals and a focus on individualized care plans.

Overall, Switzerland’s healthcare system is often cited as a model of how a high-quality, privatized insurance system can function while delivering excellent health outcomes.

4. Healthcare Spending in Low- and Middle-Income Countries

Healthcare spending in low- and middle-income countries (LMICs) varies significantly depending on the country’s economic status, healthcare infrastructure, and government priorities. On average, these countries, such as India and Nigeria, spend a smaller proportion of their GDP on healthcare compared to high-income nations, often due to limited financial resources, competing national priorities, and reliance on external aid.

IN CONTEXT

The World Bank and the World Health Organization (WHO) estimate that LMICs generally allocate between 3% and 6% of their GDP to healthcare, which is much lower than the 10% or more typically seen in high-income countries (World Bank, 2023). In many LMICs, government spending on healthcare is limited, and much of the financial burden falls on individuals, leading to high out-of-pocket costs that can result in financial hardship, particularly for the poor. Public healthcare systems in these countries often struggle with inadequate infrastructure, shortages of medical staff, and insufficient access to essential medicines, which can hinder the quality of care.

REFERENCES

OECD. (2023). Health at a glance 2023: OECD indicators. OECD Publishing. doi.org/10.1787/4dd50c09-en

World Bank. (2023). Health expenditure, total (% of GDP). The World Bank Group. data.worldbank.org/indicator/SH.XPD.TOTL.ZS