10 Questions in the U.S. Health Care Cost Debate

Why Does Health Care Cost So Much in the U.S.?
Student nurses and health workers demonstrate in London in 2016 against government plans to scrap the National Health Service grants given for training and to replace them with loans. Carl Court/Getty Images

Americans pay a whopping $3 trillion annually for health care. That's twice what people in the rest of the developed world pay. It's also the same amount as the United Kingdom's GDP -- and the U.K. has the world's fifth-largest economy [sources: Consumer Reports, CNN]. Why such a discrepancy?

Here's the most obvious reason: The numbers are higher because everything associated with health care just costs more in the U.S. — whether it's a hospital stay, X-ray or prescription drug. U.S. physicians earn a lot more money than their counterparts in the rest of the world, too. This is partly because they pay a lot for their education, while doctors in other countries are educated nearly free of charge — so they need to charge more to pay off those student loans.

American physicians also tend to order a lot of tests to ensure a correct diagnosis and avoid a malpractice lawsuit, which drives up the cost of care. Drug companies are free to charge whatever they wish for their pharmaceuticals and medical devices, so they do. In addition, the American health care system is much more complicated than the health care systems in other countries, as it's composed of innumerable private plans plus separate systems for seniors, veterans, Native Americans and others. This translates to high administrative costs; about 25 percent of that $3 trillion goes toward administration, again a much higher percentage than paid by other countries [sources: Thompson, Epstein, Consumer Reports].