American health care: why so costly?

Publication year: 2003


Rising health care costs are of concern to policymakers, employers, health care leaders, and insured and uninsured Americans alike. The U.S. has relied on a mixed public–private system of insurance, managed care, and market competition to shape the health care system. Yet, the U.S. has the highest health care spending per capita in the world, and during the 1990s health spending in the U.S. rose faster than in other industrialized nations. The key to containing costs—as well as getting higher value for what we spend— may well lie in fundamental changes in the supply side of the market. We need to shift our attention to reducing errors, eliminating waste and duplication in clinical care, modernizing and streamlining administration, promoting transparency and accountability for performance, and aligning financial incentives for physicians, hospitals, and other health care providers to reward high-quality and efficient care.


Achieving a high-performance health care system—high-quality, safe, efficient, and accessible to all—will require a major change in the U.S. system of delivering health services.

Steps that could be taken include:

Public reporting of cost and quality data on physicians, hospitals, nursing homes, other health care providers, and health plans. Broad-scale demonstrations of new approaches to health insurance coverage, science-based benefits, use of modern information technology, and high-quality care. Investment in health information technology. Development and promulgation of clinical guidelines and quality standards. Paying for high performance in the delivery of health services under Medicare, Medicaid, and private insurance. Investment in research to gain evidence on what works to improve care, eliminate waste and ineffective care, and promote greater efficiency, including use of modern information technology, team work, and improved processes of care. These steps would take us a long way toward ensuring that the U.S. is a high-performing health system worthy of the 21st century.