“Wasted” US Healthcare Spending Is The World’s 13th Biggest Economy At $1.5 Trillion – Greater Than Total Australian GDP

The map below divides the world between countries with economies that are larger or smaller than $1.5 trillion, the amount the US “wastes” on healthcare each year. Only 12 countries have economies above $1.5 trillion, which means “wasted” US healthcare spending would be the world’s 13th biggest economy, just ahead of Spain and Australia.

The methodology is outlined below including most importantly how “waste” is defined.

Map showing which countries have larger or smaller economies than “wasted” US healthcare spending. (created using MapChart.net)

Data & Methodology

According to the World Bank the US spends by far the most on healthcare per capita (public and private combined) at $9,869.74 annually ($PPP; 2016), well ahead of number 2 Switzerland at $7,867.39.

For reference world average healthcare spending per capita (in $PPP) is just $1,355.61, which means the US spends over 7X the world average.

One way looking at waste would be to compare how much more the US spends above the world average which equals $8,514.13 ($9,869.74 – $7,867.39) per person or about $2.8 trillion. However, this is pretty unsatisfactory because the US has better than average world health outcomes.

According to the World Health Organization in 2015, the US currently ranks 31st in terms of overall life expectancy (men and women combined) at 79.3 years (81.6 years for women and 76.9 years for men). However, every other country with better life expectancy, except Costa Rica ($1,248.55), spends more than $1,355.61 per capita on healthcare.

However, if we look at current health expenditure as a percentage of GDP, we find something a little more interesting.

Again according to the World Bank, US spending at 17.07% of GDP is second only to the Marshall Islands (23.29% of GDP) in terms of the share of the economy devoted to healthcare.

Thus, total US healthcare spending is around $3.6 trillion using current 2019 GDP figures from the IMF (17.07% of $21.3 trillion).

This means total US healthcare spending would be the world’s 5th biggest economy, ahead of India with a population 1.3 billion people. Only the US, China, Japan and Germany have larger economies.

Map showing which countries have economies that are larger or smaller than total US healthcare spending (created using MapChart.net)

How is “wasted” healthcare spending defined?

So how did we arrive at $1.5 trillion being “wasted?”

The current world average health expenditure as percentage of GDP is 10.02% (which it should be noted includes US spending which brings the average up).

Therefore, we’ve defined “waste” as the difference between what the US spends (17.07% of GDP) and the world average (10.02%) to get a figure of 7.05% of GDP, which works out to roughly $1.5 trillion using 2019 IMF GDP figures.

This is larger than the GDP of Spain or Australia ($1.4 trillion each) or the entire GDP of Indonesia (population 268 million).

However, is this a fair measure?

Well let’s look at the 30 countries with a higher life expectancy than the US and the percentage of GDP they devote to healthcare spending (countries in bold spend below world average).

1. Japan – 83.7 years; 10.93% of GDP
2. Switzerland – 83.4 years; 12.25% of GDP
3. Singapore – 83.1 years; 4.47% of GDP
4. Australia – 82.8 years; 9.25% of GDP
5. Spain – 82.8 years; 8.97% of GDP
6. Iceland – 82.7 years; 8.29% of GDP
7. Italy – 82.7 years; 8.94% of GDP
8. Israel – 82.5 years; 7.31% of GDP
9. Sweden – 82.4 years; 10.93% of GDP
10. France – 82.4 years; 11.54% of GDP
11. South Korea – 82.3 years; 7.34% of GDP
12. Canada – 82.2 years; 10.53% of GDP
13. Luxembourg – 82.0 years; 6.16% of GDP
14. Netherlands – 81.9 years; 10.36% of GDP
15. Norway – 81.8 years; 10.50% of GDP
16. Malta – 81.7 years; 9.30% of GDP
17. New Zealand – 81.6 years; 9.22% of GDP
18. Austria – 81.5 years; 10.44% of GDP
19. Ireland – 81.4 years; 7.38% of GDP
20. United Kingdom – 81.2 years; 9.76% of GDP
21. Belgium – 81.1 years; 10.04% of GDP
22. Finland – 81.1 years; 9.49% of GDP
23. Portugal – 81.1 years; 9.08% of GDP
24. Germany – 81.0 years; 11.14% of GDP
25. Greece – 81.0 years; 8.45% of GDP
26. Slovenia – 80.8 years; 8.47% of GDP
27. Denmark – 80.6 years; 10.35% of GDP
28. Cyprus – 80.5 years; 6.88% of GDP
29. Chile – 80.5 years; 8.53% of GDP
30. Costa Rica – 79.6 years; 7.56% of GDP

Therefore, 19 out of the 30 countries with better life expectancies than the US spend below the world average on healthcare as a share of GDP with Singapore at just 4.47% of GDP getting by far the best value for money of any country. Moreover, most other countries are only spending fraction over the world average.

Finally the numbers for the United States look even worse when you consider that the latest Census Bureau figures show that 27.5 million Americans (more than the population of Australia) or 8.5% of the population lack any health insurance whatsoever.

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