It is well known that the U.S. healthcare system stands out among other developed countries for its relatively high costs and poor health outcomes. A key reason for this is that we spend the vast majority of our healthcare resources taking care of people who are already very ill (acute/hospital care) and too little on preventive/primary care.
If we want to change this dynamic—which we must do to improve individual and population health, avoid the bankruptcy of Medicare / Medicaid, and prevent rapidly escalating healthcare costs from continuing to edge out other critical areas of investment (e.g., education and defense)—we need to change the way our healthcare resources are allocated.
How We Stack Up Today
Cost Comparison:
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- Spending per capita: In 2023, the U.S. spent $13,432 per person on healthcare—over $3,700 more than any other high-income nation. In 2022, the average spending for wealthy OECD countries (excluding the U.S.) was around $6,850 per person.
- GDP share: The U.S. devotes nearly 18% of its GDP to healthcare, much higher than other wealthy nations, which typically spend between 8% and 12%.
- Cost Drivers: The major contributors to high U.S. healthcare costs are higher payments to hospitals, physicians (particularly specialists), prescription drugs, and administrative expenses. Administrative costs account for about 8% of U.S. health spending, compared to 1–3% in other countries.
- Utilization vs. price: The U.S. does not use significantly more healthcare services than peer countries. Instead, higher prices for the same services, drugs, and administrative complexity are the primary reasons for the outsized spending.
Outcomes and Access:
- Life expectancy: Americans have the lowest life expectancy among high-income countries. In recent years, U.S. life expectancy has stagnated or declined, while peer nations have generally seen steady improvements.
- Infant mortality: The infant mortality rate in the U.S. is the highest among developed countries.
- Chronic illness and preventable deaths: The U.S. reports more preventable deaths, unmanaged diabetes, and poor maternal health outcomes than its peers. Many Americans experience difficulties accessing timely and affordable care due to high costs and lack of coverage.
- Insurance coverage: About 90% of Americans have health insurance today versus near-universal (99–100%) coverage in other high-income countries; and the percentage of Americans with health insurance is projected to decrease by 3-5% due to the recently enacted Big Beautiful Bill’s impact on Medicaid enrollment.
- Equity and access: The U.S. system is marked by inequitable access to care, with higher out-of-pocket costs and more underinsurance even among the insured.
Misallocation of Resources
The portion of total U.S. healthcare expenditures devoted to primary care is consistently reported to be in the range of 4.6-5%, while acute care spending—most notably hospital care—accounts for at least 31% of total spending. In contrast, non-U.S. OECD countries spend 13-14% on primary care.
This is important because research has consistently shown that increased investment in primary care reduces hospitalizations for conditions that are preventable or manageable in ambulatory/outpatient settings, such as diabetes, hypertension, and pneumonia. Primary care also improves access to preventive services like vaccinations and screenings, which help detect disease early and reduce the incidence of severe illness.
Underserved and socioeconomically disadvantaged populations, who are particularly lacking in primary care access, experience worse health outcomes and higher rates of preventable hospitalizations and emergency department visits. This reflects the important role primary care plays in reducing health disparities.
Early Signs of Success
The U.S. is finally coming around, albeit slowly. More than 20 states have taken legislative or regulatory action to increase the portion of primary care spending to 10% or more, and early results point to improvements in cost containment, care quality, and population health.
- Rhode Island was one of the earliest to set and enforce a benchmark, increasing primary care spending to at least 10.7% by 2014. The state regularly monitors and enforces targets, and health plans have generally complied.
- Oregon implemented laws requiring at least 12% of health plan spending on primary care by 2023 and has achieved substantial increases across public and private payers.
- Delaware set incremental primary care spending targets, moving from 7% in 2022 to a mandated 11.5% by 2025, with evidence of growing commitment among payers.
- Connecticut, Maine, Vermont, Washington, and West Virginia passed legislation or have implemented primary care spending targets near or above 10%, with ongoing monitoring and public reporting.
Studies in Rhode Island and Oregon have shown that higher primary care investment can be achieved without increasing total health spending. Oregon, for example, found that every dollar invested in primary care led to about $13 in savings in other, more expensive types of care.
States reporting progress, including Rhode Island and Oregon, have seen reductions in avoidable hospital admissions, ER visits, and use of specialist services, consistent with national research linking primary care investment to decreased high-cost care.
In these states, higher primary care spending also seems to be associated with better chronic disease management, higher rates of screenings and immunizations, and improvements on measures of population health.
Investing in a Healthier Future
These early results must be considered preliminary given the relatively recent implementation of increased primary care spending in a limited number of states. However, vast amounts of data collected and analyzed in the U.S. and other developed countries strongly suggest that an increased commitment to primary care will pay off in the long run by reducing the need for more expensive acute care.
The many health and financial benefits of increased spending on primary care—and particularly from “advanced primary care” models that provide more comprehensive, coordinated, and patient-focused care in conjunction with value-based payment models that reward quality, health outcomes, and patient satisfaction rather than visit and service volume—will not be completely apparent overnight. Over time, however, they have the potential to transform the U.S. healthcare system from one that rewards sick care to one that really provides health care.
We must invest in this transition today to realize its many benefits tomorrow. The states that have been leading the way deserve credit, but the handwriting has been on the wall for many years in other countries and we need to move quickly as a nation to catch up. Ten percent is a good start, but it may not be enough. Some healthcare luminaries believe that a 20% commitment to primary care should be the goal, and I tend to agree. Either way, we need to begin to aggressively “pay it forward” on primary care today so we don’t have a financially unsustainable population of severely ill, hospital-bound citizens tomorrow.
Originally posted on Forbes.com