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Health Reform Should Focus on Outcomes, Not Costs

In This Article
  • Targeting better health outcomes is the key to sustainable health reform—the best way both to improve the quality of care and to curb excess health-care spending.

  • BCG estimates that improving U.S. health outcomes to the level of the OECD median is worth approximately $500 billion in potential economic value.

  • To encourage the development and use of comprehensive health-outcomes data, BCG is a cofounder of the new International Consortium of Health Outcomes Measurement (ICHOM). 





Whatever position one takes in the political battle over health care reform, all sides confront the same stubborn fact: the U.S. spends more than twice as much per capita on health care as other developed countries do—and yet fails to provide health coverage for all of its citizens.

Broader coverage is a social good, but the debate quickly becomes mired in matters of cost. At the current high levels of spending, can U.S. society afford to cover everyone? Meanwhile, estimates of excess or unnecessary costs in the U.S. health-care system have ranged as high as $750 billion per year. Depending on who’s talking, those excess costs are blamed on above-average doctors’ compensation, incentives that encourage clinicians to maximize the volume of procedures, high administrative costs associated with private insurance, unregulated prices for pharmaceuticals and medical products, and high malpractice costs, to name a few. As the debate rages on, the demand for health services increases.

And yet, for all the focus on the high cost of health care, remarkably little attention is paid to what U.S. society is getting for its investment—that is, the actual health outcomes delivered by the U.S. health system. Most Americans would be shocked to learn that in nearly every disease group tracked by the 34 countries constituting the Organisation for Economic Co-operation and Development (OECD), U.S. health outcomes are worse—and sometimes considerably worse—than the OECD median. (See Exhibit 1.)


Those poor health outcomes are a human loss; they also represent enormous wasted economic value. We estimate that if the U.S. had been able to improve its health outcomes to the level of the 2008 OECD median (the most recent year of available comparable data), the result in 2011 would have been nearly 2.4 million statistical life-years saved. At standard rates used by health policy analysts for calculating the economic value of a statistical life-year (VSLY), that represents some $500 billion in potential economic value.

Based on a calculation of $213,000 for the value of a statistical life-year (VSLY), the moderately conservative option of four estimates used recently by the U.S. Food and Drug Administration. See Department of Health and Human Services, Food and Drug Administration, Office of Regulations Policy and Social Sciences, Center for Food Safety and Applied Nutrition, “Food Labeling: Calorie Labeling of Articles of Food in Vending Machines NPRM; Preliminary Regulatory Impact Analysis” (Docket No. FDA-2011-F 0171), March 2011.