eli5: How come health care cost so much more in America vs. other countries?

Question

I understand that insurances covers part of the cost. However, the total cost (before coverage) is still much higher in America. Why?

Is the supply chain different? Are doctors and staff paid better in America?

In: 188

Answer 1

In America, healthcare is provided by a large number of individual companies, all working to make a profit. There is no incentive to keep costs down.

In countries with socialised healthcare, it is typically provided by a single organisation that doesn’t operate for profit which keeps costs down. In addition, because it is a single organisation it is in a massively favourable bargaining position when it buys supplies from drug companies and medical equipment manufacturers. It is essentially a reverse monopoly, being the only customer in the country. This pushes costs down further as companies need to offer reasonable prices or risk not doing business in the country at all.

This is why a vial of insulin costs $98 in the US, but only $7.50 in the UK.