The article, “Why the U.S. Spends So Much More Than Other Nations on Health Care” reports that based on previous studies, between 1996 and 2013 the overall economy grew 2.4 percent each year, on average, while the health sector grew at a 4 percent annual rate. Which of the following is the best answer for why spending in the health care sector outpaced the overall academy over such a long time period?a. Americans becames less healthy over this time period.b. Americans spent more time in the hospital over time.c. Prices on health care increased faster than overall prices.d. Large inceases in the quantity of treatments provided per doctor visit.
The correct answer and explanation is:
Correct Answer: c. Prices on health care increased faster than overall prices.
Health care spending in the United States has consistently grown at a faster rate than the overall economy. Between 1996 and 2013, while the broader economy expanded at an average annual rate of 2.4 percent, the health care sector grew at 4 percent each year. This difference is best explained by the fact that health care prices rose more quickly than the prices of other goods and services.
Several factors contributed to this rapid rise in health care prices. First, medical services often involve highly specialized labor and advanced technology, both of which are expensive to produce and maintain. New treatments, diagnostic machines, and drugs frequently come to market with high development costs, and providers pass those costs on to consumers and insurers.
Second, the structure of the U.S. health care system lacks many of the cost-containment mechanisms found in other countries. For example, other nations often negotiate prices directly with drug manufacturers and medical providers. In contrast, the U.S. system features fragmented private insurers, less centralized control over pricing, and limited regulation on what providers can charge.
Third, administrative costs are higher in the U.S. than in many other countries. The complex insurance billing process adds to the cost of providing care. Hospitals and doctors employ large administrative teams to handle paperwork, insurance claims, and compliance, which increases the cost of care overall.
While changes in the population’s health status and treatment patterns also affect spending, research consistently shows that the rise in prices is the most significant driver of health care spending growth. Therefore, option c is the most accurate and comprehensive explanation for why the health care sector’s growth outpaced the economy during that time period.