A health dividend for America: the opportunity cost of excess medical expenditures.

A s of 2010, health care–related expenditures in the U.S. totaled some $2.6 trillion (17.9% of the gross domestic product [GDP]). Year after year, healthcare spending rises at double the rate of overall GDP growth, and total healthcare spending growth consistently outpaces overall inflation. This exuberant growth would be welcome if health care were thriving because of its effıciency. Instead, it is among the leasteffıcient parts of the economy, and much of the healthcare spending does not improve health outcomes substantially. Indeed, the IOM recently conservatively estimated that some $750–$765 billion spent on health care in the U.S. is in excess of what should be spent to achieve the observed health outcomes.Others have estimated the excess to be between $700 billion to upward of $1.2 trillion. Despite spending almost 50% more per capita on health care than theOrganisation for Economic Co-operation and Development (OECD) country with the next-highest expenditure and 2.5 times the average of all OECDcountries, U.S. outcomes are much worse than other developed countries. The U.S. ranks 26th among 34 developed countries in life expectancy, and 30th in infantmortality. Many analyses of the relatively poor health of the American population and the large disparities in health among various subgroups of the population point to two underlying determinants: social environment and physical environment. Babies born to mothers who did not graduate from high school are twice as likely to die in the fırst year of life as those born to mothers with 16 or more years of education. Adult men with less than a high school education can expect to live 7 years less than those with 16 ormore years of education; for women the difference is 5 years. Thirty-one percent of those living below the federal poverty line (FPL) are in fair or poor health compared with less than 7% of those over 400% of FPL. Rates of diabetes are twice as high among those below the poverty line as those above it.The physical environment, too, has profound effects on population health, through the walkability of neighborhoods, the safety of streets, the viability of infrastructure (e.g., transportation and water supply), and the abatement of environmental toxins. Poor health outcomes matter not only for equity, but also for effıciency. Although the U.S. has slipped to fıfth on the Global Competitiveness Index, it has fallen even further to 42nd on the health and primary education component, suggesting a bleak economic future if it does not change course. Because somuch of U.S. health care is federally fınanced, a poorly performing healthcare sector contributes substantially to a federal debt that has ballooned from less than 40% of GDP in 1980 to close to 100% of GDP today. Although economists disagree on how urgently this debt level should be addressed, all agree that, left untreated, this debt will sooner or later adversely affect employment, further erode essential infrastructure, and reduce the U.S. standard of living. States, required by law to balance their budgets, must make agonizing tradeoffs between exploding healthcare budgets and priorities such as education and infrastructure. In 2011, Medicaid alone consumed 23.6% of total state spending, an increase of 10.1% over 2010, and states incur additional expenditures for current and former employee health benefıts and for prison health care. Healthcare-related spending at this level has been shown to crowd out other expenditures on social goods including primary, secondary, and higher education; economic development; and maintenance of critical infrastructure.The IOMrecently concluded that spending on From the Department of Health Policy and Management (McCullough, Zimmerman, Fielding), Fielding School of Public Health, Geffen School of Medicine (Fielding), University of California Los Angeles, and Los Angeles County Department of Public Health (Fielding, Teutsch), Los Angeles, California Address correspondence to: Frederick J. Zimmerman, PhD, Box 951772; 31269 CHS-Public Health, Los Angeles, CA 90095. E-mail: fredzimmerman@ ucla.edu. 0749-3797/$36.00 http://dx.doi.org/10.1016/j.amepre.2012.08.013 The IOMcalculated “excess” costs in six domains: unnecessary services, services ineffıciently delivered, prices that are too high, excess administrative costs,missed prevention opportunities, andmedical fraud. Total excess costs were calculated through three separate methods: extrapolation from geographic variation healthcare expenditures (estimated at $750 billion); comparison of U.S. expenditures with other OECD nations’ (estimated at $760 billion); and consensus estimates from IOMworkshops (estimated at $765 billion).