The high cost of inequality: High US healthcare spend falls short

Healthcare in the US is facing a cost crisis and one part of the puzzle could be to address the inequality that persists within the system. Ben Hargreaves looks at how the US has become lumbered with an expensive system and how inequality may be a hidden driver of huge costs.

Healthcare equity in the US is a pressing issue, with the topic gaining attention due to persistent disparities in access to quality care. These inequities disproportionately affect marginalised communities – such as people of colour, low-income families, and rural populations – who face systemic barriers to accessing medical services. Despite advances in medical technology and public health initiatives, factors like income, race, geography, and insurance coverage continue to determine the quality of care individuals receive.

The urgency of addressing healthcare equity has grown as these disparities have been further highlighted by recent events, including the COVID-19 pandemic, which disproportionately impacted minority and underserved communities. These groups experienced higher rates of infection, severe illness, and death due to long-standing social determinants of health, including inadequate access to healthcare, lower rates of vaccination, and chronic diseases.

The US government has recognised the issue, as the Centers for Medicare & Medicaid Services published a document outlining the major barriers to fairer access to healthcare services. Among the notable challenges, the Office of Minority Health outlined that there were a lack of health equity considerations within policies and regulations. A significant amount of research is now emerging about how the country reached this position and the ways in which this can be addressed.

High spend, little return

Healthcare has once again emerged as a battleground topic in the upcoming US presidential election. Many of the discussions have centred on the cost of care in the country, with treatment pricing coming under particular scrutiny. The Peter G. Foundation recently worked with the Organisation for Economic Co-operation and Development’s (OECD) 2024 Health Statistics, a source of statistics on healthcare systems across OECD member countries, to publish a breakdown of US healthcare spending in comparison to other wealthy nations.

The analysis found that the US is spending almost twice the average per capita compared to other wealthy countries, at a cost of $12,742 per person. The second highest spend was Switzerland, at $9,044 per citizen, while Japan was ranked as one of the lowest ($5,424), despite having some of the best healthcare outcomes. In terms of why the US has such expenditure, the report outlined that healthcare cost is mainly driven by two factors: the number of services used and the amount charged per service. In spite of having similar utilisation levels when compared to other nations, the differentiator was the cost difference of services between the US and other nations.

When trying to understand these higher costs, the foundation highlighted various potential influences, including the consolidation of hospitals, and the inefficiencies and administrative waste that arise from the complexity of the US healthcare system. The statistics show that the US spends $1,001 per capita on administrative costs, almost five times more than the average of other wealthy countries. In a worrying sign for the US healthcare system, all of this extra outlay does not equate to a better service for its citizens. On common metrics of health, such as life expectancy, infant mortality, unmanaged diabetes, and safety during childbirth, the country ranked at the bottom of the wealthy nations.

Unequal outcomes

Healthcare inequity is a significant driver for this overspending and underperformance in the US system. Deloitte found that underserved people’s limited access to affordable, high-quality care creates avoidable costs and financial waste, as well as being detrimental to those individuals’ quality of life. The company estimated that health inequities account for $320 billion in annual healthcare spending, with estimates that this figure could grow to $1 trillion or more by 2040. On an individual basis, this could see the cost for average US citizens rise from $1,000 per year to $3,000 annually.

There is also the question of ensuring fair access to care, which is an important issue now, but will become crucial to address moving into the future. Racial and ethnic health disparities are one cause of healthcare inequity in the US, with healthcare outcomes noticeably worse for people of colour. By 2050, people of colour are expected to make up over half of the US population. If current trends of inequitable outcomes continue, or even continue to widen, as seen during the pandemic, the US could face a serious healthcare crisis in the years to come.

Call to action

The Biden Administration has taken steps to address the problem, with measures taken on the first day of his presidency to push through an executive order aimed at improving racial equity and supporting underserved communities. This culminated in 90 federal agencies releasing Equity Action Plans to commit to addressing systemic barriers to inequity across the country.

A wider project will be to ensure universal, affordable, and equitable health coverage. According to the Commonwealth Fund, 25 million people in the US are uninsured and they are disproportionately people of colour. In addition, approximately a quarter of US working-age adults are underinsured, meaning they face high out-of-pocket costs and deductibles relative to their income.

The fund outlines several actions that could be taken to address these gaps in coverage: the 10 states that have yet to expand their Medicaid programmes could do so; Congress could reduce deductibles and out-of-pocket costs for marketplace insurance plans; Congress could lower immigration-related barriers to coverage; and the federal government could promote more equitable treatment of enrolees in commercial insurance plans.

Such efforts would go some way to addressing the holes in care that are trapping certain US citizens. A healthcare system that is more expensive whilst delivering worse outcomes has some way to go to rectify existing issues. However, reducing healthcare inequalities is one way that stakeholders can act to redress this balance.