Why US Healthcare Costs Are Highest in the World

1. Reasons Why US Healthcare Costs Are Out of Control
2. Other Reasons Why US Healthcare Costs So Much
3. We Spend More But Outcomes Are Often Worse


At Halbert Wealth Management, we often assist clients with their financial planning and such discussions invariably turn to medical costs in retirement. As everyone reading this knows, healthcare costs in America are off the charts.

While the final figures are not out yet, it is widely estimated that Americans spent well over $3.5 trillion (17% of GDP) on healthcare last year, and that figure is estimated to rise to $5.7 trillion (20% of GDP) by 2026, if not sooner.

Healthcare costs per person in the US are well over twice the costs in the average developed nation ($9,000 vs $3,600), as illustrated in the chart below. And our healthcare costs increase at the rate of over 5% a year, more than double the rate of inflation.

Why US Healthcare Costs Are Highest

The question is, why? Is it because Americans require more healthcare than our brethren in other developed countries? Is it because the quality of our healthcare, and therefore outcomes, are superior to other countries? Actually, no! In far too many cases, we pay more for healthcare and receive less value and poorer outcomes when compared to other developed nations.

Today, I will try to identify some of the reasons why healthcare costs in America are so much higher than in other industrialized nations. While this subject is admittedly outside my usual themes such as the economy and investments, I trust that everyone reading this has more than a passing interest in rising healthcare costs.

Reasons Why US Healthcare Costs Are Out of Control

There are many reasons cited for America’s runaway healthcare costs, some of which we have all seen and heard before. However, in doing my research for this E-Letter, one fact jumped out at me that I have never seen cited before. Here it is.

The US and New Zealand are the only two industrialized nations on the planet that allow pharmaceutical companies to engage in direct-to-consumer advertising of their drugs. We consumers pay for this advertising with significantly higher drug prices.

In other countries, most people find out about available drugs and medicines from their doctors or other healthcare providers. They don’t learn about them on TV and other media.

Did you know that pharmaceutical companies pay more to lobby politicians than the lobby expenditures of oil & gas combined? That’s a crazy amount of money! No wonder our drugs cost more than other countries where direct-to-consumer advertising isn’t allowed.

Thanks to the widespread advertising, we have been conditioned to think that we can just pop a pill and cure anything – without having to improve our diet or exercise or do any of the other healthy practices that keep our sister nations healthier. We’ve been brainwashed by the drug companies and at a very high price.