Health care is one area in which the United States is very different from other wealthy countries, including both European nations and Canada. In fact, we’re distinctive in three ways. First, we rely much more on private health insurance than any other wealthy country. Second, we spend much more on health care per person. Third, we were the only wealthy nation in which large numbers of people lacked health insurance until the ACA started to change that.

Table 18-7 compares the United States with three other wealthy countries: Canada, France, and Britain. The United States is the only one of the four countries that relies on private health insurance to cover most people; as a result, it’s the only one in which private spending on health care is (slightly) larger than public spending on health care. (This will not change under the ACA as most health insurance will continue to be provided by private insurers.)

Canada has a single-payer system: a health care system in which the government acts as the principal payer of medical bills funded through taxes. For comparison, Medicare is essentially a single-payer system for older Americans—and the Canadian system is, in fact, called Medicare. The British system is like the American Veterans Health Administration, extended to everyone: a government agency, the British National Health Service, employs health care workers and runs hospitals and clinics that are available free of charge to the public. France is somewhere in between the Canadian and British systems. In France, the government acts as a single-payer, providing health insurance to everyone, and French citizens can receive treatment from private doctors and hospitals. But they also have the choice of receiving care from a sizable health care system run directly by the French government.

Canada, Britain, and France provide health insurance to all their citizens; the United States does not. Yet all three spend much less on health care per person than we do. Many Americans assume this must mean that foreign health care is inferior in quality. But many health care experts disagree with the claim that the health care systems of other wealthy countries deliver poor-quality care. As they point out, Britain, Canada, and France generally match or exceed the United States in terms of many measures of health care provision, such as the number of doctors, nurses, and hospital beds per 100,000 people. It’s true that U.S. medical care includes more advanced technology in some areas and many more expensive surgical procedures. U.S. patients also have shorter waiting times for elective surgery than patients in Canada or Britain. France, however, also has very short waiting times.

Surveys of patients seem to suggest that there are no significant differences in the quality of care received by patients in Canada, Europe, and the United States. And as Table 18-7 shows, the United States does considerably worse than other advanced countries in terms of basic measures such as life expectancy and infant mortality, although our poor performance on these measures may have causes other than the quality of medical care—notably our relatively high levels of poverty and income inequality.

So why does the United States spend so much more on health care than other wealthy countries? Some of the disparity is the result of higher doctors’ salaries, but most studies suggest that this is a secondary factor. One possibility is that Americans are getting better care than their counterparts abroad, but in ways that don’t show up in either surveys of patient experiences or statistics on health performance.

However, the most likely explanation is that the U.S. system suffers from serious inefficiencies that other countries manage to avoid. Critics of the U.S. system emphasize the fact that our system’s reliance on private insurance companies makes it highly fragmented, as individual insurance companies each expend resources on overhead and on such activities as marketing and trying to identify and weed out high-risk patients, leads to high operating costs. On average, the operating costs of private health insurers consume 14% of the premiums clients pay, leaving only 86% to spend on providing health care.

By contrast, Medicare spends only 3% of its funds on operating costs, leaving 97% to spend on health care. A study by the McKinsey Global Institute found that the United States spends almost six times as much per person on health care administration as other wealthy countries. Americans also pay higher prices for prescription drugs because, in other countries, government agencies bargain with pharmaceutical companies to get lower drug prices.