Low Social Spending Not The Cause Of High Health Care Costs In U.S.


A new study[1] punctures the common argument that the reason the U.S. spends so much more on health care than other countries is because it allocates less to other social services.

Some researchers and policymakers maintain that this relative underinvestment in social services has produced a less healthy society, pointing to the lower U.S. ratio of social-to-health spending compared to other Organisation for Economic Co-operation and Development (OECD) countries.

The study, published in the journal Health Affairs, investigated the claim and found that US social spending is only slightly below the average for OECD countries. In fact, when education spending is included it is above that average.

The study also found evidence a positive correlation between a country’s spending on social services and its spending on health care.

US social spending was 16.1 percent of gross domestic product [GDP] in 2015, compared to 17.0 percent of GDP for the OECD average. The implications seem to be that the main drivers of high health care spending in US are higher costs of medications and hospital care.

A few states have made determined efforts to contain runaway health care costs, and found themselves obstructed by the hospital industry. In North Carolina, for example, large hospital systems were able to stay on the state employees’ health plan even after not agreeing to the state’s proposed payment rates, the Charlotte Observer reported[2].

In July, hospitals thwarted a proposal in California to reduce surprise medical bills. The legislation would have limited how much hospitals could charge insurers for out-of-network emergency care, according to California Healthline[3] – hospitals protested that it would have given insurers too much incentive to exclude hospitals from their networks.

This does not bode well for the price transparency measures and federal prohibition on surprise billing that Congress and the Trump administration are attempting to push through.

[1] The Relationship Between Health Spending And Social Spending In High-Income Countries: How Does The US Compare? 

[2] NC revises new health care plan for state workers after pressure from hospitals

[3] Hospitals Block ‘Surprise Billing’ Measure 

Last Updated on October 22, 2022