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Link between health spending and life expectancy: US is an outlier

This post was originally published on August 3, 2016. It was updated on 26 May 2017.
Our World in Data presents the empirical evidence on global development in entries dedicated to specific topics.
This blog post draws on data and research discussed in our entry on how healthcare is financed.

The graph below shows the relationship between what a country spends on health per person and life expectancy in that same country between 1970 and 2015 for a number of rich countries.

The US stands out as an outlier: the US spends far more on health than any other country, yet the life expectancy of the American population is not longer, but actually shorter than in other countries that spend far less.

If we look at the time trend for each country we first notice that all countries have followed an upward trajectory – the population lives increasingly longer as health expenditure increased. But again the US stands out as the country is following a much flatter trajectory; gains in life expectancy from additional health spending in the U.S. were much smaller than in the other high-income countries, particularly since the mid-1980s.

This development led to a large inequality between the US and other rich countries: In the US health spending per capita is often more than three-times higher than in other rich countries, yet the populations of countries with much lower health spending than the US enjoy considerably longer lives. In the most extreme case we see that Americans spend more than 5-times more than Chileans, but the population of Chile actually lives longer than Americans.

[This graph and more information can be found in the entry on how healthcare is financed.]

# And it is not only life expectancy

There are several aspects that contribute to the US being such an extreme outlier: Studies find that administrative costs in the health sector are higher in the US than in other countries; The price comparisons between countries rely on adjustment which are not ideally suited for comparisons of health costs and this might make comparisons more difficult. Sometimes it is also pointed out in these comparisons that violence rates in the US are higher than in other rich countries (and this is true). But while this could explain the difference in levels, it is not a likely explanation for the difference in trends. Over the period shown in the chart above violence and homicides have fallen in the US more than in other rich countries and this should have led to a narrowing of the difference to other countries and not to the increase that we see.

One of the reasons for the underachievement of the US is also the large inequality in health spending. In our entry on how healthcare is financed we discuss the empirical data on this.

The higher levels of violence in the US that kill mostly middle-aged Americans can also not explain why the US is also not just a huge outlier in total life expectancy, but also in child mortality.
The share of children that die before their fifth birthday is much higher in the US than in other rich countries even though they spend much less on healthcare.