Health-care expenditure

and health policy in the USA versus other OECD countries

The Lancet 01 July 2014

Summary

The USA has exceptional levels of health-care expenditure, but growth has slowed dramatically in recent years, amidst major efforts to close the coverage gap with other countries of the Organisation for Economic Co-operation and Development (OECD). We reviewed expenditure trends and key policies since 2000 in the USA and five other high-spending OECD countries. Higher health-sector prices explain much of the difference between the USA and other high-spending countries, and price dynamics are largely responsible for the slowdown in expenditure growth. Other high-spending countries did not face the same coverage challenges, and could draw from a broader set of policies to keep expenditure under control, but expenditure growth was similar to the USA. Tightening Medicare and Medicaid price controls on plans and providers, and leveraging the scale of the public programmes to increase efficiency in financing and care delivery, might prevent a future economic recovery from offsetting the slowdown in health sector prices and expenditure growth.

This is the fifth in a Series of five papers about the health of Americans

Introduction

With a health expenditure per person of US$7212 in 2011, the USA outspends all other countries by a wide margin. In this Series paper, we review trends in health expenditure since 2000 in the USA and the five countries of the Organisation for Economic Co-operation and Development (OECD) with the highest health expenditure as a proportion of gross domestic product (GDP): Canada, France, Germany, the Netherlands, and Switzerland (hereafter referred to as “other high-spending countries”). Additionally, we analyse a selection of national health policies that contributed in a substantial way to shaping those trends, particularly after the economic recession started in 2008. The health-care systems of the countries examined have diverse sets of insurance organisational structures and regulation of the health-care system, as well as hospital and doctor payment systems. Contributions to health financing schemes have been mostly voluntary so far in the USA, but are compulsory in all other high-spending countries. This diversity makes comparisons somewhat challenging, but it provides an opportunity to assess how different types of health-care systems have responded to the economic downturn.

The analyses reported in this Series paper rely on OECD's System of Health Accounts (SHA) data,1 which provide a systematic account of financial flows through health systems, showing where money comes from, who manages it, and how it is used. The 2013 release of OECD Health Data, in which the latest SHA expenditure data were for 2011, was used in the analyses. A new release, including expenditure data up to 2012, occurred at the same time as the publication of this paper. Preliminary analyses of the newly released data lend further support to the results of analyses we present. For the purpose of making comparisons over time and across countries, we adjusted data for inflation on the basis of general (economy-wide) price indexes,2 although some of the comparisons in this paper are based on price levels specific to each country's health sector, which will become more widely available in the future.3 Finally, even if much policy attention has been drawn to the large and persistent geographical variation in health-care expenditure,4—6 we focused our analysis at country level. The use of more granular data would have made international comparisons difficult,7 although we acknowledge that analyses at a lower geographical level might provide additional information about the possible causes of the trends observed. Data from OECD collections were complemented by national sources and publications.

Health expenditure levels

The USA has the highest total and public health expenditure per person, and share of GDP spent on health care, of the countries examined. However, it has the lowest public share of health expenditure, albeit increasing over time, providing coverage for less than a third of the US population (table). Out-of-pocket (OOP) health expenditure per person is higher than in other high-spending countries (except Switzerland). The OOP share of health expenditure has been decreasing, although a larger proportion of the population than in comparator countries, at all income levels, reported OOP expenses in excess of US$1000 in 2010.8

TableTable image

Health expenditure in six countries of the Organisation for Economic Co-operation and Development

Key messages

• The USA ranks first in the Organisation for Economic Co-operation and Development (OECD) for health-care expenditure, but last for coverage
• Health price levels contribute the most to explaining the higher spending in the USA, and recent price dynamics largely explain declines in health expenditure growth
• During the period examined in this paper (2000—11), the USA prevented a substantial increase in the numbers of uninsured people from the economic downturn and population growth; at the same time, health-care expenditure growth rates fell in line with those of other high-spending OECD countries
• High and increasing rates of generic drug use, an important shift from inpatient to outpatient hospital care, along with some effective price control measures on plans and providers by Medicare and Medicaid, were some of the key factors responsible for the slowdown in health-care expenditure growth in the USA
• Further scope exists for improvement, particularly in controlling the main driver of higher health-care expenditure in the USA (ie, health sector prices); the risk that a future sustained economic recovery, and the probable general price increases that would come with it, might offset the gains made in recent years is real, and should be anticipated

The higher health spending reported in the USA is not simply a result of the country's greater wealth or of the age structure of its population. Even the larger prevalence of risk factors—including obesity—explains only a small part of the reported differences.9 OECD Health Care Quality Indicators show that the US health-care system is doing well in several areas (eg, cancer care), but less well in others (particularly the primary care sector).10 Overall, the quality of the care provided does not seem to explain the higher health expenditure in the USA.9, 11

OECD work on comparative price levels in health suggests that the prices, rather than volumes, of health services contribute the most to explaining the higher US spending, in line with the conclusions of scholarly work.12, 13 In the USA, health sector price levels are higher than in other high-spending countries (except Switzerland), whereas economy-wide price levels are the lowest. This finding means that a large part of the differences reported in health expenditure per person between the USA and other high-spending countries can be explained by differences in health sector price levels. When accounting for such differences, the gap between the USA and other countries is substantially smaller than in comparisons adjusted for differences in general price levels (figure 1). The latter are far more common, since health sector price indexes are not widely available for international comparisons.14, 15

Figure 1 

Health expenditure per person as a proportion of US expenditure, 2011

Values were estimated using general price levels and health-specific price levels (USA=1). Data are from the Organisation for Economic Co-operation and Development Health Statistics 2013.14 OECD=Organisation for Economic Co-operation and Development.

Probable explanations for health price levels exceeding general price levels in the USA include a more intense use of health-related technologies,16, 17 low productivity,18—20 decentralised price negotiations, fragmentation in the insurance market,21—23 and a high level of provider concentration.24, 25 In a private insurance or provider model—as in the Netherlands and Switzerland (with compulsory insurance coverage), and the USA (with voluntary insurance coverage)—a high amount of choice is combined with weaker cost control. In particular, the USA—excluding Medicare—does not use a centralised authority to set health spending budgets or negotiate prices with providers.24 A public-contract model26—as in Canada, France, and Germany—gives a central authority (national government or social insurance administration) more leverage over health-care providers, generally with lower administrative costs than multiple-payer systems.

Health expenditure trends

Growth in health expenditure per person declined sharply in the USA from 2000 to 2011, after adjusting for inflation, and the start of the decline predates the economic recession.27Figure 2 shows yearly growth rates in health expenditure for the USA and for all comparator countries combined, whereas figure 3 shows mean growth rates in individual countries. In the USA, spending grew more than twice as fast as in comparator countries in the early 2000s, but growth rates declined rapidly and fell to less than those of comparator countries after 2007. Preliminary analyses of newly released 2012 data show that USA and comparator countries had a small rebound in health-care spending growth, with the USA's spending growing less than that of comparator countries. However, an equal growth rate still translates into a larger absolute increase in spending in the USA. Public health expenditure growth also declined substantially in the aftermath of the economic crisis, apart from in Germany. Public expenditure grew fastest in the USA, at a mean of more than 4% per year, mostly due to an increased number of people being covered by public programmes. Public expenditure per insured person in the USA rose by about 1%, on average, during the study period.

Figure 2 

Mean health expenditure growth per person (in real terms) across selected OECD countries, 2002—11

Data are from the Organisation for Economic Co-operation and Development Health Statistics 2013.14 *The health expenditure increase recorded in 2009, affecting all expenditure components (eg, inpatient curative care, long-term care, and prescription drugs), might be partly the lagged effect of previous economic growth. OECD=Organisation for Economic Co-operation and Development.

Figure 3 

Mean health expenditure growth per person (in real terms) across selected OECD countries, 2001—11

*Due to a break in time series, the average growth rate relates to 2007—09. Data are from the Organisation for Economic Co-operation and Development Health Statistics 2013.14 OECD=Organisation for Economic Co-operation and Development.

Key policy changes in the study period

We analysed key policies and policy changes in the USA and other high-spending countries in three areas—coverage, prescription drugs, and hospital inpatient care—to provide information about the factors and forces that have driven the reported deceleration in health expenditure.28 Important policy changes have been made in these areas in recent years, with substantial effects on health expenditure in the countries of interest. Changes occurred also in other areas (eg, ambulatory care), not covered in this paper.

Coverage

The USA has the largest proportion of the population without health-care coverage in the OECD area. The number of people who were uninsured increased dramatically from 36·6 million to almost 50 million from 2000 to 2010, mainly as a result of the economic downturn and unprecedented levels of immigration. The statistics show a 1·3 million drop in 2011, although more data are needed before this trend reversal can be interpreted as true. Most of the US population is covered by employer-sponsored insurance (ESI) plans (170·1 million in 2011).29 The numbers of ESI beneficiaries declined by 6·5% between 2000 and 2011, with 11·8 million fewer people covered.30 However, the public programme Medicaid typically operates as a buffer at times of recession and growth of unemployment, absorbing roughly a fifth of those who lose their ESI.27 A range of US Government policies in the late 1990s and 2000s have expanded coverage and have contributed to countering the effects of the economic downturn and international migration.31 Medicaid took on an additional 20 million beneficiaries from 2000 to 2011: a 60% increase. The State Children's Health Insurance Program (SCHIP), introduced in 1999 to provide coverage to children in low-income families, and renewed in 2009 (CHIPRA), progressively expanded to cover 5·7 million beneficiaries in 2011, contributing decisively to an overall 93% coverage of children in the USA.32 The coverage shift from ESI to Medicaid and SCHIP contributed to a reduction in health expenditure growth, partly due to a slightly younger age profile of those who gained coverage, relative to those who lost it, and partly because the average expenditure per non-disabled child and adult Medicaid beneficiary was 10% lower than that for private health insurance in 2011, and the average growth rate in expenditure per beneficiary was 1·8% for Medicaid versus 2·7% for ESI in 2007—11 (OECD estimates are based on published data29, 33). States with decreasing revenues and competing priorities were aggressively containing Medicaid costs,34 including through a shift to managed care.35

In 2009, a federal subsidy was introduced under the American Recovery and Reinvestment Act, covering 65% of health insurance premiums for up to 15 months for workers who became unemployed to maintain their employer-sponsored health insurance (COBRA). The subsidy was offered up to May, 2010, with $3·7 billion paid out to mostly middle-class beneficiaries.36—38

Further major expansions of coverage arose from the 2010 Patient Protection and Affordable Care Act (ACA), which has caused and still causes much political, legal, and ideological debate in the USA. Although the most important insurance reforms are scheduled to happen in 2014, the ACA has already had an effect. Young adults aged 26 years or younger can be covered by their parents' insurance policies, with over 2 million young adults gaining coverage through this provision.39, 40 Seven states used the ACA option to expand Medicaid earlier, with visible effects on coverage.

Coverage issues were addressed in several high-spending countries during the study period, but to a far lesser extent than in the USA, because those countries already had virtually universal coverage. In fact, some of those countries adopted measures to restrict the scope of their health coverage as a way to cope with increasingly tight fiscal constraints.

In Germany, the 2009 Statutory Health Insurance Competition Strengthening Act made health insurance compulsory for all (less than 1% were previously uninsured) and required private insurers to offer at least a basic benefit package, broadly equivalent to the statutory package.41 16% of the population are privately covered for basic health insurance, whereas the rest are covered by the statutory insurance programme funded through income-related contributions. In 2006, the Netherlands introduced a new universal health insurance scheme, replacing a dual system of public and private insurance. The scheme is partly financed by income-related payroll contributions into a Health Insurance Fund, and partly by a flat-rate nominal premium to competing health insurance funds.42

In Switzerland, individuals purchase health insurance from competing funds, with means-tested subsidies for lower-income households, whereas universal coverage is provided in France through different social health insurance funds, with the main one—Caisse Nationale de l'Assurance Maladie des Travailleurs Salariés, or CNAMTS—covering about 80% of the population (all salaried workers and their families, and the unemployed and the poorest fringes of the population). In France, the national benefit package is generous in scope, but involves copayments, for which nearly the entire population (96% in 2010) resorts to complementary insurance.

A tax-funded health-care system ensures universal coverage in Canada. The administration and delivery of health-care services are the responsibility of each province or territory, according to the Canada Health Act, passed in 1985 and amended several times thereafter. Covered health-care services include primary health care and care in hospitals.43 Most provincial and territorial governments fund a range of additional services.

Several measures are used to limit the scope of the health coverage in high-spending countries. Switzerland has a deductible of CHF300 ($323·92), although people can choose lower premiums and higher deductibles (up to CHF2500 [$2699]).44 In the Netherlands, the current deductible is EUR€350 (up from €150 in 2009) and, after the crisis, charges for specific services (eg, in-vitro fertilisation, physiotherapy, and some mental health services) were introduced or increased and the coverage of care outside the European Union was removed.45 In France, in 2008—10, private voluntary health insurance stopped reimbursing new user charges for prescription drugs, physician visits, and ambulance transport; statutory health insurance copayments for patients not following agreed medical pathways were increased and reimbursement rates for specific medicines and medical procedures were reduced.45

Pharmaceutical expenditure

Measures to contain expenditure on pharmaceuticals were introduced and intensified in the aftermath of the crisis. Expenditure growth rates fell sharply in all six countries, and became negative, with the exception of France, between 2009 and 2011 (figure 4). In the USA, this happened despite a continuing sustained growth in pharmaceutical prices (4·2% in 2011).29 Price levels have been historically higher in the USA than in other OECD countries because few barriers to market entry exist after US Food and Drug Administration approval, and less price regulation occurs.

Figure 4 

Pharmaceutical expenditure per person (in real terms at 2005 US$ PPP) across selected OECD countries, 2000—11

Data are from the Organisation for Economic Co-operation and Development Health Statistics 2013.14 PPP=purchasing power parity. OECD=Organisation for Economic Co-operation and Development.

Medicare Part D, a voluntary outpatient drug benefit programme, was introduced in 2006, amounting to the largest expansion of Medicare since its establishment. The programme subsidises participating private prescription drug plans. Drug prices are established through a negotiation of rebates between individual plans and drug manufacturers. By law, central price negotiations are not allowed within Medicare, whereas they are possible in Medicaid. Rebates negotiated by Part D plans (11·5% on average)46 were substantially lower than statutory Medicaid rebates for the same branded drugs (minimum of 15·1%, increased to 23·1% in 2010).47, 48 However, the Centers for Medicare and Medicaid Services is required under the ACA to establish a “coverage gap discount program”, through which branded drug manufacturers provide a 50% discount on covered drugs purchased by Medicare beneficiaries beyond an initial expenditure limit and up to a catastrophic coverage threshold (a so-called doughnut hole).49, 50

The introduction of Part D resulted in a slight increase in average drug utilisation and a decrease in average OOP expenditures. Coverage genuinely increased, but many beneficiaries were simply shifted across different types of insurance (mainly from Medicaid and private plans). Part D beneficiaries increased from 24·5 million in 2006 to 31·5 million in 2011, and the share of prescription drug expenditure financed by Medicare increased from 1·9% in 2005 to 24·2% in 2011, whereas the share financed by Medicaid decreased from 17·7% to 7·2% during the same period.51 Additionally, some evidence suggests that the increase in coverage offset costs elsewhere in the health system, and thus potentially decreased spending downstream.52

Average spending per Part D beneficiary grew by 2·1% from 2007 to 2009, and 0·5% from 2009 to 2011. Growth in pharmaceutical expenditure by private plans and OOP payments fell even more, to negative levels, partly because of the shift towards Medicare of several relatively more expensive elderly patients. An increase in the generic dispensing rate from 61% to 77% in the 5-year period is probably a major factor in Part D expenditure-growth decline.53 All insurers continued to encourage the use of generics through tiered benefit plans offering lower copayments or other discounts.54 Part D plans had less success at controlling price inflation for branded and innovative drugs, partly due to the lack of a systematic approach to assessing comparative effectiveness and cost-effectiveness.55, 56

Other high-spending countries were subject to similar inflationary pressures linked with technological innovation in the pharmaceutical sector, but not to the pressures generated by expansions of coverage. Despite this, and despite a broader availability of incisive cost-control approaches in more centralised systems, the expenditure outcomes were not substantially different from those reported in the USA. Countries' efforts to rein in pharmaceutical expenditure focused on lowering prices and redefining reimbursement rules.

Since 2006, Swiss authorities undertook three waves of price revisions based on international price benchmarking. In 2010, Germany introduced a price freeze on reimbursable medicines, predicted to generate savings of up to €2·2 billion.57 Additionally, pharmaceutical companies' rebates to Sickness Funds were increased from 6% to 16% for non-reference-priced drugs. In the same year, France capped the prices of innovative drugs at around €50 000 per patient per year.

Several countries implemented reference pricing or generic price link systems, setting maximum prices or lowering existing ones for generic products. For instance, several provinces in Canada introduced price caps on generics of between 25% (Ontario) and 56% (Alberta) of the prices of corresponding branded products (originator prices).58 As of April, 2013, Canada's provinces and territories capped the prices of six widely prescribed generic drugs at 18% of their branded equivalents.59 France limits the price of generics to a share of the originator's price, which increased from 30% in 2003 to 60% in 2012, and introduced reference pricing in 2003 for various categories of products. A generic price link has existed also in Switzerland since 2008, aimed at encouraging generic entry into the market.

Financial incentives for consumers using generics were introduced in Switzerland in 2005. In France, media campaigns have been used since 2003 to increase confidence in the use of generics and, in 2006, a 70% generic prescribing target for the 20 most expensive medications was agreed with pharmacists. In 2009, financial incentives were introduced for family doctors.60 In Germany, generic provision by pharmacists was mandated in 2002, unless opposed by the prescriber.61 Canada also probably benefited from increased generic penetration, despite higher prices for generics.62

Copayments were raised in several countries. In France, a fixed copayment of €0·50 for each medicine pack (up to €50 per year) was introduced in 2008, whereas Switzerland introduced an increased copayment for branded drugs with cheaper therapeutic equivalents in 2005. In the Netherlands, the insurance deductible applying to all health-care services, including pharmaceuticals, has escalated since 2009. Two-thirds of the Canadian population obtain drug coverage through voluntary (except for Quebec) private health insurance plans. Each drug plan, public or private, defines its own formulary, as well as the types and levels of copayments.

In all countries, except France, OOP payments decreased slightly as a share of total pharmaceutical expenditure in 2000—09. In the following 2 years, OOP payments increased in Canada (1·7%), Germany (1·6%), France (0·9%), and the Netherlands (0·3%) and decreased in Switzerland (−0·7%) and the USA (−1·8%). Decreases in OOP expenditure might be partly a result of non-adherence to treatment in high-cost-sharing environments.63

Hospital care

On average, hospital care accounts for about 31% of total health expenditure in comparator countries in 2011, and 33·4% in the USA—twice as much as prescription drugs. Hospital expenditure growth decreased after 2009, except in Germany (figure 5); however, it remained positive throughout, and was higher than in other health-care compartments.

Figure 5 

Mean hospital expenditure growth per person (in real terms) across selected OECD countries, 2004—11

Data are from the Organisation for Economic Co-operation and Development Health Statistics 2013.14 OECD=Organisation for Economic Co-operation and Development.

In the USA, most hospital care expenditure is channelled through public programmes. The proportion covered by public programmes decreased slightly between 2000 and 2009 and stabilised at 51% thereafter.29 In the period 2000—09, the growth rate for private plans was 5·9%. This rate declined to 4·6% in 2010 and 2·1% in 2011, possibly as an early effect of the ACA provisions extending coverage for young people up to age 26 years.54 Medicare and Medicaid had substantially lower growth rates (2·2% and 0·6%, respectively, in 2000—09), declining to negative levels in 2010—11.64 Growth in Medicaid was especially low because of the enrolment of generally healthier, lower-cost children and adults, and because of provider rate restrictions that have been imposed by states for the past few years.

Among other factors, a reduction in hospital input price inflation and wage growth brought about by the recession contributed to a slower expenditure growth.53 A progressive shift from inpatient to outpatient care was a further major factor. In the Medicare programme, inpatient admissions fell from 214 to 190 per 1000 enrollees between 2000 and 2011, whereas enrollees receiving outpatient care increased from 690 to 742 per 1000 in the same period.64 These changes probably increased the average complexity of cases treated on an outpatient basis, with a more rapid growth of outpatient, relative to inpatient, expenditures per enrollee (7·7% vs 2%, respectively, in 2000—09, and 3·6% vs 0·2% in 2010—11). However, the net effect was an overall decline in the growth of expenditure for hospital services. Since 2002, growth in Medicare physician and health professional payments overshot Sustainable Growth Rate (SGR) targets, calling for cutbacks in reimbursement rates. Congress regularly deferred cutbacks, providing for no (in most years), or slight (up to 2·2%), updates in the period 2003—13. Cutbacks might never be applied, but SGR targets probably contributed to forestalling excessive cost growth. Medicare physician fees are substantially lower than those offered by private insurance plans, and further cuts might deter physicians from offering their services to Medicare patients. The stagnation in physician fees might also contribute to explaining the increasing volumes of outpatient activity to substitute for inpatient care.

The hospital sector has been the target of cost containment strategies based on the setting of budgets and the application of direct controls on the supply of health care65 in other high-spending countries. France, Germany, the Netherlands, and Switzerland moved towards activity-based hospital payment systems during the study period, whereas British Columbia, Alberta, and Ontario experimented with activity-based funding policies, with the aim of increasing volumes for specific surgical procedures (eg, hip and knee replacement, cataract surgery).66 Some countries adopted global budget systems, in which fixed payments per hospital (eg, Germany) or for all hospitals (eg, Netherlands) are negotiated for target levels of activity.

In Germany, funding based on diagnosis-related groups (DRGs) was introduced in 2003—04, whereby hospitals negotiate yearly contracts with sickness funds, detailing service volumes and a proportionate reduction in DRG reimbursement rates applicable if activity exceeds negotiated volumes. Hospitals are legally required to budget prospectively; however, three of four hospitals are estimated to not finalise contracts until late in the budget year,67 which might make this mechanism for controlling expenditure less effective than it could be, as shown by higher and more rapidly rising hospital activity volumes than in comparator countries.

A hospital payment system based on a diagnosis-treatment combination system was introduced in the Netherlands in 2005. A fixed, centrally determined price is set for 30% of diagnosis-treatment combinations (Part A), with the remaining 70% (Part B) being left to volume and price negotiations between health insurers and hospitals. Regulated competition in the hospital sector led to a concentrated market of general hospitals and proliferation of private clinics, often affiliated with hospitals and financed only through Part B.68 To limit the effect on expenditure of the volume increase resulting from the above changes, a global budget was set across the entire hospital sector, whereby if hospital expenditure increased by more than 2·5%, excess expenditure would be clawed back according to turnover.

A DRG-based prospective reimbursement scheme for inpatient hospital care was introduced in Switzerland in 2012. DRG-cost weights are applied throughout Switzerland, whereas the base rate (price) is negotiated between hospitals and insurance companies and validated by cantons (the member states of the federal state of Switzerland). A DRG system is also used as the basis of hospital payments in France since 2004—05. The overall financing of the hospital sector occurs within a global budgetary envelope for health (and hospitals as a subcomponent) set every year by the government to limit the expenditure of health insurance funds.

Prospective payment systems were exported from the USA to several of the comparator countries, but the USA can now learn from the experience of later adopters.69 For instance, in the later-adopting countries, DRGs typically include physician fees (unlike in the USA), and prices are mostly set centrally, with more opportunities for expenditure control than in parts of the US health-care system (typically private plans).

Discussion

The USA ranks first in the OECD for health-care expenditure, but last for coverage.10 Since 2000, the country made major progress in coverage (with more to come as the ACA takes full effect). At the same time, health expenditure growth was kept in line with other high-spending OECD countries, partly an effect of government policies, partly of market forces. A retrenchment, rather than expansion, of coverage was on other high-spending countries' policy agendas, as they faced the grim consequences of a severe economic recession and fiscal crisis, with accumulating public debt. Many countries cut their health-care budgets, applied strict cost-control measures, froze salaries and drug prices, cut any possible fringes off their benefit packages, and increased copayments. The effect was an unprecedented zero growth in health-care expenditure in the OECD area in 2010—11. Expenditure kept growing in the USA, in line with other high-spending countries, even in 2010—11, albeit at a reduced rate.

Higher health sector prices explain much of the difference between the USA and other high-spending countries. And price dynamics explain, to a large extent, how the USA managed to contain health-care expenditure growth at levels similar to those of other countries. No conclusive evidence exists as to what parts of the slowdown in expenditure growth in the USA might be attributed to the economic cycle and to structural changes. However, the slowdown began well before the economic downturn, and continued throughout the economic recovery.70—73 This slowdown was paralleled, and at least partly caused, by a small but important reduction in health sector price inflation rates, which declined from 3% in 2000 to 2·8% in 2009 and 2·1% in 2011, eventually closing the gap with general price inflation.

We examined three key areas of health policy and assessed recent changes that are likely to have contributed to health expenditure and coverage trends in the USA and other high-spending OECD countries. A sustained decline in the numbers of people covered by ESI was partly offset by a substantial expansion in coverage through the main public programmes, particularly Medicaid/SCHIP, and by other measures described. The increasing trend in the numbers of uninsured people was finally reversed in 2011, with a 1·3 million drop, and with the expectation of further major reductions after the full implementation of ACA,74 whereas high-spending countries mostly adopted measures to adjust aspects of their universal coverage to meet increasing fiscal constraints.

Pharmaceutical expenditure growth declined to similar extents in the countries examined, contributing to overall declines in health-care expenditure growth. The containment of pharmaceutical expenditure was especially challenging in the USA, because an important expansion of coverage occurred during the study period with the introduction of Medicare Part D. A high rate of generic drug penetration, along with copayments and deductibles, helped to control expenditure growth. Additionally, comparator countries were able to use a broader range of central measures to keep expenditure growth under control, including reference pricing systems, tight price negotiations with manufacturers, and price freezes.

Expenditure on hospital services grew more than other categories of health-care expenditure, although rates declined steadily over the study period in all of the countries examined. An important shift from inpatient to outpatient hospital care contributed to such decline in the USA, where a slowdown in price inflation for hospital inputs and a reduced or no growth in physician reimbursement rates were additional strong contributors. Several of the other high-spending countries examined introduced prospective payment systems (long after the USA), along with volume negotiations and global budgets. Despite some possible initial inefficiencies (eg, an increase in admissions in Germany, possibly due to late volume negotiations), these policies contributed to decreasing rates of inpatient expenditure growth.

The USA is an outlier in the scenery of OECD health-care systems, for its staggering levels of expenditure, the extent of fragmentation of its system and the sheer complexity of its administration, the power of vested interests, and the large number of people left without adequate health insurance coverage. However, during the period examined in this paper, characterised by a long and severe recession with a fluctuating economy and employment rates, differences in growth rates between the USA and other high-spending countries were substantially reduced. Great efforts have been made to sustain coverage and lift the USA from the bottom of the OECD coverage league table. Efforts have also been made to contain further growth in health-care expenditure, with rates falling in line with those of other high-spending OECD countries. This progress is no reason for complacency, and more and bigger efforts are needed in the years to come, particularly in controlling the main driver of higher health-care expenditure in the USA—ie, health sector prices. The risk that a future sustained economic recovery, and the probable general price increases that would come with it, might offset the gains made in recent years is real and should be anticipated. Medicare and Medicaid price controls on plans and providers, such as adjustments in payments to Medicare Advantage managed care plans,54 or DRG base rate adjustments to account for expected productivity growth in the general economy,75 could be tightened further and extended, particularly for pharmaceutical products and physician fees, without resorting to measures affecting service use, which would restrict choice or coverage. More daring measures could be used in the hospital sector, such as all-payer fees negotiated at state level (eg, Maryland's Health Service Cost Review Commission),76 global budgets,77—80 and reference prices,81 although these would involve major changes in the US health-care market approach. Examples of effective measures are available from other countries, which might bring the USA further in line, in terms of both health-care expenditure and coverage, notwithstanding the relatively smaller effect of policy changes in the USA, in view of the different relation between insurance or financing and delivery systems. Changes gradually introduced towards the end of the study period, which will probably affect expenditure growth in the future, include bundled payments,82 reference prices for hospital care,81 and the introduction of Accountable Care Organisations to realign provider incentives, with a potential for quality improvement, in addition to cost containment.83 However, more evidence is needed about the complex causal pathways that link health-care expenditure and use with health outcomes, to avoid possible detrimental effects on population health from tightened controls on health-care expenditure.9, 84

Contributors

LL and FS conceived the study. LL and AB retrieved the data and did the analyses. All authors contributed to the interpretation of findings and to the writing of the paper.

Declaration of interests

We declare no competing interests. The opinions expressed in the paper are the responsibility of the authors and do not necessarily reflect those of the OECD or its member countries.

Acknowledgments

The authors would like to thank Robin Osborne and Cathy Schoen from The Commonwealth Fund, Ankit Kumar and Divya Srivastava from the OECD Health Division, and three anonymous referees for their comments on an early version of this manuscript.

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