Healthcare Spending vs. Outcomes

The United States spent $5.3 trillion on healthcare in 2024, equal to 18.0% of GDP [1]. That figure—$14,885 per person—is roughly 2.5 times the OECD average of $5,967 [2]. No other wealthy democracy comes close. In 2023, the most recent year with complete World Bank data, the U.S. spent $13,473 per capita, while Germany spent $6,849, the United Kingdom $5,860, and Japan $3,638 [3]. Yet on the metrics most commonly used to judge a healthcare system's performance—life expectancy, infant mortality, maternal mortality, preventable deaths—the U.S. consistently finishes near the bottom of the pack among its peers.

This is the central paradox of American healthcare: the country that spends the most gets middling results. Both sides of the political spectrum acknowledge the problem. They disagree, sharply, on the diagnosis and the cure.

Source: World Bank Open Data

Data as of Dec 31, 2023CSV

The Spending Gap, in Dollars and Time

The per capita gap between the U.S. and comparable nations has widened steadily over two decades. In 2005, the U.S. spent $6,429 per capita on health while Germany spent $3,545 and the UK $3,528—a gap of roughly $2,900 [3]. By 2023, U.S. spending had reached $13,473, while Germany reached $6,849 and the UK $5,860 [3]. The gap expanded to more than $6,600, meaning the excess grew faster than the base spending of peer nations. Americans spent $8,353 per person on inpatient and outpatient care alone in recent data, compared to $3,636 on average in peer countries [2].

As a share of GDP, U.S. health spending stood at 17.2% in the most recent OECD comparison, versus an OECD average of 9.3% [2]. The growth rate moderated slightly in 2024—the 6.4% increase was lower than percentage increases in the Netherlands (10.8%) and Germany (10.1%)—but because the U.S. base is so large, the absolute dollar increase of $885 per capita exceeded every other country [2].

What drives this? Research from the Peterson-KFF Health System Tracker finds the difference is primarily about prices, not volume. Americans do not visit doctors more often or spend more days in hospitals than citizens of peer nations. They pay more for each visit, each procedure, each drug, and each administrative transaction [4].

The Outcomes Deficit

Life Expectancy

U.S. life expectancy stood at 78.4 years in 2023, according to World Bank data [5]. That sounds encouraging in isolation. In context, it is less so: Switzerland led at 84.1 years, Japan at 84.0, and Australia at 83.1 [5]. The OECD average was 81.1 years in 2023, meaning the U.S. ranked 30th out of 38 OECD countries at 78.4 years [6]. The U.S. gap of 2.7 years below the OECD average has persisted for over a decade.

The COVID-19 pandemic hit U.S. life expectancy harder than most peers. It fell to 76.3 years in 2021 before recovering to 77.4 in 2022, and then to 78.4 in 2023, while Japan barely dipped below 84 [3]. Provisional mortality data from the CDC shows a continued downward trend in quarterly mortality rates through early 2025, down 2.4% year-over-year as of January 2025 [7]. Racial disparities compound the picture: Black Americans' life expectancy stands at 74.8 years, and American Indians or Alaska Natives at 71.8 [6].

Source: CDC / NCHS

Data as of Jan 1, 2025CSV

Infant and Maternal Mortality

The U.S. infant mortality rate was 5.6 deaths per 1,000 live births in 2023, ranking 32nd among 38 OECD countries [6]. The OECD average was 4.2. Japan's rate was 1.8, Germany's 3.1, France's 3.4 [3]. Among Black infants in the U.S., the rate was 10.9—more than triple the rate among Asian infants (3.5) [6].

Maternal mortality tells a similar story: 18.6 deaths per 100,000 births in 2023, the highest of any high-income country [8]. The comparable rate in most Western European nations is under 10 per 100,000.

Chronic Disease

The U.S. has higher rates of obesity, diabetes, and heart disease than peer nations, which contributes to both higher spending and worse aggregate outcomes. The Washington Post reported that chronic illness rates are surging, contributing to the life expectancy decline relative to other wealthy nations [9]. These are both a cause of higher costs and a consequence of a system that some critics argue emphasizes treatment over prevention.

Where Each Dollar Goes

Understanding who gets paid is central to understanding why costs are high.

Administrative Overhead

A landmark 2019 study published in the Annals of Internal Medicine found that U.S. insurers and providers spent $812 billion on administration in 2017—34.2% of national health expenditures—compared to 17.0% in Canada [10]. The Center for American Progress estimates wasteful administrative spending alone at $285–$570 billion annually [11]. A JAMA analysis attributed roughly 15% of excess U.S. spending to insurers' administrative costs and another 15% to the administrative burden insurers impose on providers [12].

Hospital administrative costs have ballooned from $367 billion in 2011 to $687 billion in 2023, according to the American Hospital Association [13]. The AHA notes that commercial insurers' prior authorization requirements, claims denials, and documentation demands are major contributors.

Pharmaceutical Prices

Prescription drug spending reached $467 billion in 2024, growing 7.9% year over year [1]. Americans pay substantially more for the same drugs than patients in other countries. The VA, which negotiates prices directly, pays roughly 40% less than Medicare for the same medications [14]. Hospital drug expenses surged 13.6% in 2025 alone [13].

Provider Compensation and Hospital Margins

Physician salaries in the U.S. are substantially higher than in peer countries, particularly for specialists. Hospital expenditures grew 8.9% to $1.63 trillion in 2024 [1]. Over the past 20 years, healthcare companies—spanning pharma, insurance, hospitals, and device manufacturers—spent 95% of their net income ($2.6 trillion total) on shareholder payouts through dividends and stock buybacks rather than reinvesting in care infrastructure or workforce wages [15].

Insurance Industry Profits

In 2024, the U.S. healthcare industry generated $491 billion in total profits, of which $192 billion—nearly 40%—was captured by the insurance sector and its related technology and pharmacy subsidiaries [16]. The federal government sponsored 31% of total health spending, and households paid 28%, with roughly 70% of all spending flowing through taxpayer-funded programs including Medicare and Medicaid [1].

The Economic Footprint

The healthcare sector is not merely a cost center—it is the largest employer in the United States. The industry employed over 17 million people in 2023 and generated over 18% of all new jobs created in 2024 [17]. Every new healthcare job creates an estimated 1.3 indirect jobs in logistics, administration, and technology [17]. Healthcare represents 18% of GDP [1].

This creates a structural tension: many of the "inefficiencies" that reformers want to eliminate are someone's paycheck. Administrative simplification that saves $300 billion would also eliminate hundreds of thousands of jobs in billing, coding, claims processing, and insurance administration. Any serious reform proposal must reckon with the political economy of an industry that employs one in eight working Americans.

The Case for What High Spending Buys

Cancer Survival

The strongest data point for defenders of the U.S. system is cancer outcomes. The five-year survival rate for all cancers in the U.S. reached 70% for the first time in recent data, up from 49% in 1975 [18]. The age-adjusted overall cancer death rate has fallen 33% since 1991, translating to an estimated 4.1 million fewer deaths [18]. Survival rates for prostate cancer (98%), thyroid cancer (98%), and melanoma (95%) are among the highest in the world [18]. The American Action Forum and American Cancer Society have both highlighted U.S. cancer survival as evidence that high spending produces real value in at least some domains.

Scott Gottlieb of the American Enterprise Institute has argued that U.S. spending on cancer treatment reflects faster adoption of new therapies and broader access to clinical trials than single-payer systems typically provide. The U.S. accounts for a disproportionate share of global pharmaceutical R&D spending, and market-based pricing is the primary incentive structure that funds this innovation pipeline [19].

Access Speed

Wait times represent another area where the U.S. system shows advantages. The Fraser Institute's 2025 report found that Canadian patients waited a median of 28.6 weeks from GP referral to treatment [20]. Neurosurgery waits averaged 49.9 weeks; orthopedic surgery 48.6 weeks. Diagnostic imaging delays were substantial: 18.1 weeks for MRI scans, 8.8 weeks for CT scans [20]. Some 1.4 million Canadians were waiting for procedures in 2025 [20]. Patients waiting for medical treatments lost an average of $3,043 in wages and productivity [21].

Commonwealth Fund data on NHS systems shows similar specialist access delays in the UK. The Heritage Foundation's Robert Moffit has argued that these wait times represent a form of hidden rationing—costs that do not appear in national expenditure figures but are borne by patients in pain, lost productivity, and deteriorating conditions [19].

Innovation Subsidy

The Cato Institute's health policy research emphasizes that U.S. drug pricing effectively subsidizes pharmaceutical development for the rest of the world. Because other nations impose price controls, pharmaceutical companies recoup R&D costs disproportionately from American consumers. If the U.S. adopted similar price controls, the argument goes, global drug development would slow, and future patients everywhere would pay the cost in foregone treatments [19].

The Case That High Spending Is Waste

Administrative Excess

Proponents of single-payer reform point to administration as the clearest source of waste. The 34.2% administrative share in the U.S. compared to 17% in Canada represents hundreds of billions of dollars spent on billing, coding, prior authorization, claims adjudication, and marketing that single-payer systems largely eliminate [10]. A systematic review of 22 single-payer cost analyses found that 19 of 22 (86%) projected health expenditures would fall in the first year of implementation, with the largest savings coming from simplified billing and lower drug costs [22].

The Commonwealth Fund has consistently ranked the U.S. last or near-last among high-income countries on measures of equity, access, and administrative efficiency [23]. Medicare's administrative overhead runs approximately 2% of expenditures, compared to 12–18% for private insurers [11].

Price Gouging Without Competition

The fee-for-service payment model rewards volume over value. Providers are paid per procedure, creating incentives to do more rather than to do what works. Hospital consolidation has reduced competition in many markets, enabling higher prices without corresponding quality improvements. The EpiPen pricing scandal—where a decades-old generic drug's price rose from $100 to $600 after a market competitor exited—exemplifies how the absence of competitive pressure inflates costs [19].

Drug pricing reform advocates note that every other wealthy nation uses some form of price negotiation or regulation. The Inflation Reduction Act's provision allowing Medicare to negotiate prices on a limited number of drugs represents a first step, but covers only a fraction of total pharmaceutical spending [14].

Coverage Gaps and Preventive Care

Before the ACA, nearly 50 million Americans—about 19% of the nonelderly population—were uninsured [24]. The ACA cut the uninsured rate nearly in half, from 14.4% in 2013 to 7.9% in 2023 [24]. Medicaid expansion accounted for roughly 60% of the initial coverage gains [24]. But 10 states still have not adopted the expansion, leaving 1.4 million people without affordable coverage options, and the uninsured rate in non-expansion states is 70% higher than in expansion states [24]. State-level 2023 Census data shows wide variation: Utah had the highest uninsured rate at 29.2%, while Puerto Rico had the lowest at 17.0%, with a national state average of 23.1% [25].

Lack of insurance delays care, increases emergency department use, and shifts costs to insured patients. The moral argument—that access to healthcare should not depend on employment status or personal wealth—carries weight for single-payer advocates, who point to the universality of coverage in every other wealthy democracy as evidence that it is achievable [23].

Source: U.S. Census Bureau / ACS 1-Year

Data as of Dec 31, 2023CSV

Are International Comparisons Fair?

The Adjustment Question

Critics of international comparisons argue they fail to account for factors outside the healthcare system's control. CDC researchers found that gun violence, drug overdoses, and car accidents are largely responsible for the U.S. longevity gap with peer nations [26]. A study calculated that these three injury causes of death accounted for almost half of the life expectancy gap for men (1.02 years) and about 20% for women (0.42 years) [26]. Gun deaths alone explained 21% of the gap in men [26].

Obesity further complicates comparisons. Researchers at Oxford University and the University of Texas Austin estimated that obesity reduces U.S. life expectancy by approximately 1.7 years [9]. The U.S. adult obesity rate exceeds 40%, roughly double the rate in France or Japan.

When these factors are isolated—guns, drugs, car crashes, obesity—the U.S. life expectancy gap narrows considerably, though it does not disappear. This suggests the healthcare system's performance is better than raw mortality statistics indicate, but still not commensurate with spending levels.

The Counterpoint

Advocates for reform counter that a healthcare system does not operate in a vacuum. High rates of gun violence, drug addiction, and obesity are themselves partly consequences of policy choices—underinvestment in public health, mental healthcare, and social services. The U.S. spends far less on social services relative to healthcare than most peer nations. Our World in Data research shows that many important determinants of life expectancy—smoking, obesity, violence, poverty—are about prevention, not treatment [27]. A system that spends $5.3 trillion and still fails to address these upstream causes is, in this view, misallocating resources.

Market-Based Reform Proposals

Conservative and libertarian health policy thinkers have developed detailed alternatives to single-payer approaches, centered on increasing competition and consumer control rather than expanding government authority.

Health Savings Accounts and Consumer-Directed Care

The Heritage Foundation has long advocated expanding Health Savings Accounts, arguing that when patients spend their own money, they become price-sensitive consumers who drive costs down [19]. The logic: third-party payment (whether by government or employer-sponsored insurance) insulates patients from prices, eliminating the normal market discipline that restrains costs in other industries. HSA-qualified high-deductible health plans covered over 30 million Americans by 2023, and proponents argue that expanding tax advantages and decoupling HSAs from specific plan designs would accelerate adoption [28].

Direct Primary Care

Direct primary care (DPC) practices charge patients a flat monthly fee ($50–$150 typically) for unlimited primary care visits, eliminating insurance billing entirely. Heritage Foundation research shows DPC models cut primary care costs by 40–60% while improving access—patients typically get same-day or next-day appointments [28]. DPC enrollment has grown rapidly, though it remains a small share of the overall market. Critics note that DPC works for primary care but does not address the cost of specialist care, hospitalization, or catastrophic illness.

Price Transparency and Supply Expansion

Federal price transparency rules, which took effect in 2021, require hospitals to publish negotiated rates. Heritage Foundation analyst Robert Moffit argues Congress should strengthen enforcement, since compliance has been uneven [28]. Repealing certificate-of-need (CON) laws—which require government approval before building new medical facilities in 35 states—would increase supply and competition. FDA reform to accelerate generic drug approvals would address pharmaceutical pricing at the source rather than through price controls.

Tort Reform

Estimates of the cost of defensive medicine—unnecessary tests and procedures ordered to reduce malpractice liability—range widely. Higher estimates place the figure at $100–$180 billion annually; more conservative peer-reviewed research in Health Affairs found savings from tort reform would be less than 1–2% of total medical costs [29]. A systematic review in the Journal of General Internal Medicine found the evidence on tort reform's impact on quality and physician supply was mixed [30]. The gap between the political salience of tort reform and its demonstrated cost impact is substantial: it is likely a real but relatively modest contributor to excess spending.

The Singapore and Swiss Models

Singapore achieves universal coverage through mandatory savings accounts (MediSave, funded by 8–10.5% salary contributions), catastrophic insurance (MediShield), and a government safety net for the poor (MediFund) [31]. The system emphasizes individual responsibility and cost-consciousness while maintaining government oversight. Singapore ranked 6th in the WHO's 2000 health system rankings and 2nd in Economist Intelligence Unit outcomes rankings [31]. Total health spending is under 5% of GDP.

Switzerland uses regulated private insurance with an individual mandate—every resident must purchase basic insurance, which insurers must offer on a nonprofit basis regardless of pre-existing conditions [32]. Supplemental insurance operates on a for-profit basis. The Swiss model achieves universal coverage through private markets, with government subsidies for low-income residents. Both models demonstrate that universal coverage does not require a government-run single-payer system.

The ACA's Mixed Record

The Affordable Care Act's coverage expansion succeeded by most measures: 38 million additional people gained insurance, and the uninsured rate fell from 14.4% to 7.9% [24]. But cost control—the ACA's other major objective—largely failed. Premiums and deductibles continued rising, and total national health expenditures grew from $2.6 trillion in 2010 to $5.3 trillion in 2024 [1].

The Oregon Health Insurance Experiment—the only randomized controlled trial of health insurance expansion in the U.S.—produced results that complicate narratives on both sides. Medicaid coverage substantially reduced depression, virtually eliminated catastrophic medical expenditures, and improved financial security [33]. But it produced no statistically significant improvements in blood pressure, cholesterol, or cardiovascular risk [33]. Emergency department use increased by 40% rather than declining as proponents had predicted [33]. Coverage improved access and financial protection but showed limited measurable physical health improvements over the study period.

This finding cuts against the single-payer argument that universal coverage automatically improves health outcomes, while also cutting against the conservative argument that Medicaid coverage has no value. The truth is more nuanced: insurance expansion provides substantial financial protection and mental health benefits, with physical health impacts that may take longer to materialize or may require complementary reforms to the delivery system.

What Would Bending the Cost Curve Require?

Single-Payer and Public Option

The Congressional Budget Office modeled five illustrative single-payer designs in 2022 and found that total national health spending could decrease or increase depending on payment rates and benefit generosity [22]. Setting provider payments at Medicare rates (roughly 20% below private insurance rates) would reduce total spending but could trigger provider shortages, as some hospitals and practices operating on thin margins might close [22]. A public option—allowing individuals and employers to buy into a Medicare-like plan while preserving private insurance—would create competitive pressure on private insurers without the disruption of a full system transition.

All-Payer Rate Setting

Maryland's all-payer model, which sets uniform hospital rates regardless of insurer, produced 2.7% savings after three years [22]. Extending this nationally would reduce the administrative complexity of negotiating thousands of separate contracts while preserving the multi-payer structure. It represents a middle path that neither single-payer advocates nor pure market reformers find fully satisfying.

Political Reality

Any of these reforms faces formidable obstacles. The healthcare industry spent over $700 million on lobbying in 2023. The sector employs 17 million people directly [17]. Provider groups oppose rate cuts. Insurers oppose a public option. Pharmaceutical companies oppose price controls. Hospitals oppose transparency mandates. And the public, while dissatisfied with costs, is wary of disruption to existing coverage—a dynamic that sank the Clinton health plan in 1994 and constrained the ACA's ambitions in 2010.

Joe Antos of the American Enterprise Institute has argued that incremental, market-based reforms—transparency, competition, deregulation—are both more politically feasible and more likely to produce durable savings than top-down restructuring [19]. Single-payer advocates respond that incrementalism has been tried for decades and the cost curve has not bent.

The Unresolved Tension

Source: World Bank Open Data

Data as of Dec 31, 2023CSV

The U.S. healthcare system is simultaneously the most expensive in the world and the most innovative in several measurable dimensions. It produces the best cancer survival rates on earth and the highest maternal mortality rate in the developed world. It employs one in eight American workers and leaves roughly 26 million people uninsured. It funds a disproportionate share of global pharmaceutical R&D and charges Americans two to three times what other countries pay for the same drugs.

These are not contradictions that a single policy can resolve. The spending gap reflects structural features—fragmented insurance markets, fee-for-service incentives, administrative complexity, market consolidation, high provider compensation, and pharmaceutical pricing power—each of which has its own constituency, its own defenders, and its own reform-resistant logic.

The honest assessment is that both the single-payer case and the market-reform case contain elements supported by evidence, and both contain assumptions that remain unproven at U.S. scale. Single-payer systems do produce lower administrative costs and more equitable access, but they also produce longer wait times and may reduce the innovation incentives that fund new treatments. Market-based reforms do sharpen price signals and expand consumer choice, but decades of market-oriented policy in the U.S. have not yet produced the cost discipline that theory predicts.

What the data shows clearly is that the status quo—a hybrid system that combines the inefficiencies of both government and market approaches without fully committing to either—is the most expensive option of all. Whether the path forward runs through more government or less, through price controls or price transparency, through collective risk pooling or individual savings accounts, the $13,473-per-person price tag in 2023 is purchasing outcomes that no one—left, right, or center—finds acceptable.