TL/DR –
The United States spent $12,555 per person on healthcare in 2022, which is nearly double the expenditure of other wealthy countries like Australia. Despite the higher expenditure, the US has one of the lowest life expectancies among rich countries, with Americans suffering from chronic diseases at around twice the rate of other wealthy nations. The US government could establish a system similar to Australia’s Pharmaceutical Benefits Scheme (PBS) to control drug prices, however, this would likely involve closing down multiple private plans, which is beyond the capacity of the Trump administration.
US Healthcare Cost and Performance Sparks Presidential Concern
As the US president, grappling with the country’s healthcare system and its cost would be crucial. The daunting statistics reveal that as of 2022, the US healthcare expenditure stands at $12,555 per person, nearly twice that of other affluent countries such as Australia. This disparity nullifies about half of the US and Australia’s income per person difference, based on World Bank’s estimation.
Increased healthcare spending wouldn’t be an issue if it resulted in a healthier population. Unfortunately, the reality is different. The US ranks among the wealthy nations with the lowest life expectancies. Even though more Americans die young, the survivors have inferior health compared to other nations. Chronic diseases like diabetes, asthma, and depression are about twice as common in the US as in other rich nations.
The disparity in health outcomes can’t be credited to specific causes like drug overdoses or gun violence, or even unequal income distribution alone. The US shows worse health outcomes across the income distribution scale than other affluent countries, even among high-income individuals.
The situation is deteriorating with the decline in US life expectancy post-2014 and an insufficient recovery from the increased death rate following the Covid pandemic. The dismantling of the US public health infrastructure, budget cuts, weakening of essential agencies like the Centre for Disease Control, and the appointment of notorious anti-vaxxer RFK Jr as Secretary of Health and Human Services further exacerbate the problem.
President Donald Trump is now focusing on the cost aspect of the healthcare system. He has raised issues regarding the exorbitant amounts Americans pay for prescription drugs compared to other nations with controlled pricing mechanisms like Australia’s Pharmaceutical Benefits Scheme (PBS). His recent statement labels Australia and other nations as freeloaders on US healthcare resources.
The US government has the authority to establish its own policy on drug pricing. The US Department of Veterans Affairs runs a program akin to the PBS, paying about half the typical US price. This scheme could be expanded to the entire Medicare system unless it threatens to shut down numerous private plans.
The US could establish a PBS-like system to cover all Americans. This could result in pharmaceutical companies demanding higher returns from other countries, including Australia, should prices decrease in the US. However, systemic reform of this nature seems beyond Trump administration’s capacity, resulting in accusations that other nations unfairly benefit from US medical research.
In the 20th century, the US was a global medical research hub, primarily through the National Institutes of Health (NIH). However, NIH funding (adjusted for inflation) peaked in 2004 and has been strapped for cash ever since. As a result, the US share of medical innovations has declined and is on par with leading European innovators.
If Trump seeks to incorporate ideas like PBS into the US system, Australia has much to offer. Australia’s Medicare system could serve as a feasible model for delivering “Medicare for all” in the US without disrupting the private sector.
Trump’s approach is likely to be a series of forceful demands leading to declarations of significant deals, which upon closer scrutiny, prove to be mostly illusory. The key takeaway for Australia is the need to engage with the US as a trading partner rather than an ally or friend, resisting bullying tactics and advocating for free exchange’s mutual benefits.
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