Uwe E Reinhardt et al has published reports based on data from the Organization for Economic Cooperation and Development (OECD).The most recent work by Gerard F. Anderson, Bianca K. Frogner and Uwe E. Reinhardt was recently published in Health Affairs [Health Affairs 26, no. 5(2007): 1481-1489]. The new data confirms the findings embodied in their previous report. The earlier report was entitled "It's the Prices, Stupid: Why the United States Is So Different From Other Countries" [Health Affairs 22 no 3(2003):89-105].

Of particular interest is that the United States spends $6,102 per capita which is two and one half times the median. Only two countries (Luxembourg and Switzerland) spend more than $4,000.As a percent of GDP we spent 15.3% in the latest year's data (2004). Our closest rival for spending money is Switzerland at 11.6 %. Only 7 countries break the 10% barrier.

The important question is why are costs in the United States so high? At least based on this data, several of the common explanations would appear to be wrong.

Utilization cannot explain cost! The United States has 30% fewer inpatient hospital days and 36% fewer physician visits per capita than the OECD median. Japan as an example had the highest utilization rates with the longest inpatient length of stay (36.3) and the most physician visits per capita (13.8). Despite Japan's over-utilization by our standards, they spend 63% less per capita.

Technology cannot explain cost! The report doesn't include all technology but it does measure the number of MRI and CT units available. In both of these Japan has the most per million people.

Chronic Disease cannot explain cost! Chronic disease is where we spend 80% of the money. But the United States has nothing that stands out in the report to show that the diseases we face or our outcomes are different from those of our peer countries. We use less alcohol and tobacco but are more obese. It is hard to imagine these can account for the differences.

Lack of prevention doesn't explain cost! While it is fashionable to believe that prevention is the magic bullet that will lead to lower cost, in fact this report shows that the United States spends more on prevention than any other country. We spend about 5 times the OECD median. Our closest spender in this regard is Canada which spends $185 as opposed to the U.S. $224.

What is the explanation?

What stands out is the price! If we are to find the answer we must look at how the medical market works or doesn't. Is this an example of a free market where prices and supply respond to needs or is this an example of a planned economy with resultant scarcity and high cost. Clearly it is more the second than the first.

Until we can achieve a better balance between the necessary protection of the public and the efficiency of free enterprise, services will remain in short supply and costs stay out of reach for most Americans.