The core issue of the U.S. healthcare system is not its quality, which is among the best in the world, but its low cost-effectiveness and the misalignment between the cost of services and their actual value. Here’s a summary:
1. High Quality but Low Value
The U.S. leads globally in medical technology, advanced treatments, and pharmaceutical innovation, with top-tier hospitals and specialists.
However, despite spending far more than any other country (~$11,000 per capita annually, ~18% of GDP), its health outcomes (e.g., life expectancy, chronic disease management) fail to outperform or even match other developed nations.
2. Why Are Costs So High with Poor Cost-Effectiveness?
(1) Lack of Transparent Pricing
Patients cannot predict bills due to opaque and inconsistent pricing. For instance, the cost of a basic MRI or hospital stay varies drastically without justification.
(2) "Fee-for-Service" Model
Providers prioritize quantity (e.g., unnecessary tests, procedures) over quality of care, leading to inflated costs without proportional improvement in outcomes.
(3) Pharmaceutical Pricing
Drug prices in the U.S. are often several times higher than in other countries due to weak regulation on pharmaceutical companies.
(4) Administrative Inefficiency
A significant portion of healthcare spending (25-30%) goes to administrative overhead, such as insurance billing, rather than direct patient care.
(5) Market-Driven Healthcare
Unlike universal healthcare systems, the U.S. healthcare system operates as a market, prioritizing profit over patients' needs.
3. Lessons from Other Countries
Countries like the UK (NHS), Germany, and Japan achieve better cost-effectiveness by:
Implementing universal healthcare systems with either government funding (UK) or heavily regulated insurance systems (Germany, Japan).
Price controls on services and pharmaceuticals to ensure affordability.
Aligning the cost of care with its value and patient outcomes.
4. Solutions for Reform
To address low cost-effectiveness, the U.S. should:
Transition to value-based care, where payments are tied to patient outcomes instead of the volume of services.
Enforce stricter drug price regulations and consider importing cheaper medications.
Increase pricing transparency for medical services to curb unexpected bills.
Expand insurance coverage to reduce the financial burden on patients, possibly moving toward a hybrid public-private system like Germany’s.
Reduce administrative costs by simplifying billing and insurance procedures.
Conclusion
The U.S. healthcare system suffers from high costs, low efficiency, and poor alignment between service price and value. While its quality remains exceptional, serious reforms in pricing, transparency, and insurance coverage are needed to address its inherent cost-effectiveness problem.
Thank you very much for your detailed and thoughtful answer which gets many points right, but there is a misunderstanding at the first of the comment that many Americans share, and I appreciate the opportunity to clarify it. It is a critical issue. You say: “The core issue of the U.S. healthcare system is not its quality, which is among the best in the world, but its low cost-effectiveness and the misalignment between the cost of services and their actual value. Here’s a summary: 1. High Quality but Low Value The U.S. leads globally in medical technology, advanced treatments, and pharmaceutical innovation, with top-tier hospitals and specialists.”
The US does lead globally in medical technology, advanced treatments, and pharmaceutical innovation with top-tier hospitals and specialists. You are correct about that, but those things are not the same as quality and that is a frequent point of confusion. Patients need those things because they did not get best practice treatments (optimal medical therapy) earlier in their disease process when they had diabetes, hypertension or high cholesterol.
Optimal medical therapy is a product and patients need advanced treatment, hospitalization, and specialists much less frequently if they receive every best practice intervention every time earlier in the treatment process. Quality is a systems property, and you must develop a system to produce the product whether you are making hamburgers or treating chronic disease. Variation in product output is the enemy of good clinical and financial outcomes and there is massive variation in the effectiveness of diabetes management for example. Some practices only achieve concurrent control of the pressure, sugar, and cholesterol in 10% of patients. Some achieve it in 65% and that leads to much better clinical and financial outcomes. We are so early in this process that most practices have no idea what they are achieving.
The National Academy of medicine of the US National Academy of Sciences has written a book on this topic called Crossing Quality Chasm. Here is what they said early in the book. “Americans should be able to count on receiving care that meets their needs and is based on the best scientific knowledge. Yet there is strong evidence that this frequently is not the case. Crucial reports from disciplined review bodies document the scale and gravity of the problems Quality problems are everywhere, affecting many patients. Between the health care we have and the care we could have lies not just a gap, but a chasm.”
Technology and innovation are great, but they are not the same as quality. To achieve quality, we must integrate the new technology and innovation into the broader best practice system to produce better health at lower cost
What is the nature of the Singapore health care system? Is it predominantly a public system? How much of our inability here in the US to institute a coherent system, with an emphasis on primary care clinics, is due to the privatization of medical care, the role of mega insurance companies, middlemen such as "pharmacy benefit managers," etc?
Singapore is a wealthy country. It has provisions for universal coverage and you have hit on the key difference. The priorities in our healthcare are determined by businessmen who are focused on short-term financial gains. Poor people have more complications from high blood pressure and diabetes. Singapore saves tens of thousands by providing care for diabetes and high blood pressure for poor people for hundreds so that they don't develop strokes, heart attacks, heart failure and kidney failure. The American healthcare system you describe is the biggest barrier to better health at lower cost.
I attended a lecture a few years back that compared healthcare systems in different countries in contrast to our own. it’s easier to initiate new healthcare protocols in small countries who have more homogeneous populations. The US is vast in size with a diverse population and a streak of independent thinkers a mile (or more) wide which makes it hard to get a consensus on anything. I’m also not sure that other countries have to deal with the influence and money that pharmaceutical companies throw around to make politicians come to heel. Trying to make intelligent and informed decisions about my healthcare, especially as I age (closing in on 74) gets harder and harder to do. That’s where I appreciate some of the Substack docs who post. I certainly don’t get much from my PCP nor my Electrophysiologist in my yearly 15 minute consults. I tell myself that no news is good news but I balk at some of the tests my PCP wants to throw at me, probably to get a point checked off on her EMR. (Sorry, being snarky there.)
Kaiser Permanente has done what Singapore does for heart patients in Colorada. If you are on best practice treatment after a heart attack in Kaiser Permanente, you are ten times as likely to be alive in 5 years. If you apply the principles you get the results. Very few people want to be fat or sick. Many will protect themselves if they have the information and trust it.
But who would buy all the medicine produced if we were healthy? Sorry for being facetious. This was very interesting information. It’s too bad we can’t have medical care that makes sense.
The core issue of the U.S. healthcare system is not its quality, which is among the best in the world, but its low cost-effectiveness and the misalignment between the cost of services and their actual value. Here’s a summary:
1. High Quality but Low Value
The U.S. leads globally in medical technology, advanced treatments, and pharmaceutical innovation, with top-tier hospitals and specialists.
However, despite spending far more than any other country (~$11,000 per capita annually, ~18% of GDP), its health outcomes (e.g., life expectancy, chronic disease management) fail to outperform or even match other developed nations.
2. Why Are Costs So High with Poor Cost-Effectiveness?
(1) Lack of Transparent Pricing
Patients cannot predict bills due to opaque and inconsistent pricing. For instance, the cost of a basic MRI or hospital stay varies drastically without justification.
(2) "Fee-for-Service" Model
Providers prioritize quantity (e.g., unnecessary tests, procedures) over quality of care, leading to inflated costs without proportional improvement in outcomes.
(3) Pharmaceutical Pricing
Drug prices in the U.S. are often several times higher than in other countries due to weak regulation on pharmaceutical companies.
(4) Administrative Inefficiency
A significant portion of healthcare spending (25-30%) goes to administrative overhead, such as insurance billing, rather than direct patient care.
(5) Market-Driven Healthcare
Unlike universal healthcare systems, the U.S. healthcare system operates as a market, prioritizing profit over patients' needs.
3. Lessons from Other Countries
Countries like the UK (NHS), Germany, and Japan achieve better cost-effectiveness by:
Implementing universal healthcare systems with either government funding (UK) or heavily regulated insurance systems (Germany, Japan).
Price controls on services and pharmaceuticals to ensure affordability.
Aligning the cost of care with its value and patient outcomes.
4. Solutions for Reform
To address low cost-effectiveness, the U.S. should:
Transition to value-based care, where payments are tied to patient outcomes instead of the volume of services.
Enforce stricter drug price regulations and consider importing cheaper medications.
Increase pricing transparency for medical services to curb unexpected bills.
Expand insurance coverage to reduce the financial burden on patients, possibly moving toward a hybrid public-private system like Germany’s.
Reduce administrative costs by simplifying billing and insurance procedures.
Conclusion
The U.S. healthcare system suffers from high costs, low efficiency, and poor alignment between service price and value. While its quality remains exceptional, serious reforms in pricing, transparency, and insurance coverage are needed to address its inherent cost-effectiveness problem.
Thank you very much for your detailed and thoughtful answer which gets many points right, but there is a misunderstanding at the first of the comment that many Americans share, and I appreciate the opportunity to clarify it. It is a critical issue. You say: “The core issue of the U.S. healthcare system is not its quality, which is among the best in the world, but its low cost-effectiveness and the misalignment between the cost of services and their actual value. Here’s a summary: 1. High Quality but Low Value The U.S. leads globally in medical technology, advanced treatments, and pharmaceutical innovation, with top-tier hospitals and specialists.”
The US does lead globally in medical technology, advanced treatments, and pharmaceutical innovation with top-tier hospitals and specialists. You are correct about that, but those things are not the same as quality and that is a frequent point of confusion. Patients need those things because they did not get best practice treatments (optimal medical therapy) earlier in their disease process when they had diabetes, hypertension or high cholesterol.
Optimal medical therapy is a product and patients need advanced treatment, hospitalization, and specialists much less frequently if they receive every best practice intervention every time earlier in the treatment process. Quality is a systems property, and you must develop a system to produce the product whether you are making hamburgers or treating chronic disease. Variation in product output is the enemy of good clinical and financial outcomes and there is massive variation in the effectiveness of diabetes management for example. Some practices only achieve concurrent control of the pressure, sugar, and cholesterol in 10% of patients. Some achieve it in 65% and that leads to much better clinical and financial outcomes. We are so early in this process that most practices have no idea what they are achieving.
The National Academy of medicine of the US National Academy of Sciences has written a book on this topic called Crossing Quality Chasm. Here is what they said early in the book. “Americans should be able to count on receiving care that meets their needs and is based on the best scientific knowledge. Yet there is strong evidence that this frequently is not the case. Crucial reports from disciplined review bodies document the scale and gravity of the problems Quality problems are everywhere, affecting many patients. Between the health care we have and the care we could have lies not just a gap, but a chasm.”
Technology and innovation are great, but they are not the same as quality. To achieve quality, we must integrate the new technology and innovation into the broader best practice system to produce better health at lower cost
https://www.6sigma.us/process-improvement/process-variation-lean-six-sigma/
https://www.ncbi.nlm.nih.gov/books/NBK222271/
What is the nature of the Singapore health care system? Is it predominantly a public system? How much of our inability here in the US to institute a coherent system, with an emphasis on primary care clinics, is due to the privatization of medical care, the role of mega insurance companies, middlemen such as "pharmacy benefit managers," etc?
Singapore is a wealthy country. It has provisions for universal coverage and you have hit on the key difference. The priorities in our healthcare are determined by businessmen who are focused on short-term financial gains. Poor people have more complications from high blood pressure and diabetes. Singapore saves tens of thousands by providing care for diabetes and high blood pressure for poor people for hundreds so that they don't develop strokes, heart attacks, heart failure and kidney failure. The American healthcare system you describe is the biggest barrier to better health at lower cost.
"How much of our inability here..." All of it.
I attended a lecture a few years back that compared healthcare systems in different countries in contrast to our own. it’s easier to initiate new healthcare protocols in small countries who have more homogeneous populations. The US is vast in size with a diverse population and a streak of independent thinkers a mile (or more) wide which makes it hard to get a consensus on anything. I’m also not sure that other countries have to deal with the influence and money that pharmaceutical companies throw around to make politicians come to heel. Trying to make intelligent and informed decisions about my healthcare, especially as I age (closing in on 74) gets harder and harder to do. That’s where I appreciate some of the Substack docs who post. I certainly don’t get much from my PCP nor my Electrophysiologist in my yearly 15 minute consults. I tell myself that no news is good news but I balk at some of the tests my PCP wants to throw at me, probably to get a point checked off on her EMR. (Sorry, being snarky there.)
Kaiser Permanente has done what Singapore does for heart patients in Colorada. If you are on best practice treatment after a heart attack in Kaiser Permanente, you are ten times as likely to be alive in 5 years. If you apply the principles you get the results. Very few people want to be fat or sick. Many will protect themselves if they have the information and trust it.
https://pubmed.ncbi.nlm.nih.gov/20973686/
https://pubmed.ncbi.nlm.nih.gov/21331203/
But who would buy all the medicine produced if we were healthy? Sorry for being facetious. This was very interesting information. It’s too bad we can’t have medical care that makes sense.
You are right! We have the highest cost and the poorest clinical outcomes of any developed country.