Here is the sad fact about health care: there is often little relationship between what is spent on medical care and the results.

Nations like the US, which not only have huge health care budgets but costs that are rising rapidly, rank poorly in areas such as longevity.  South Koreans live longer than Americans on average, and in most cases more than people in the other 34 countries measured by the Organization for Economic Co-Operation and Development. Meanwhile, South Korea spends very little on medical costs compared to its GDP. In general, countries with low obesity, smoking, and drinking rates have populations which live longer, regardless of whether they have privately funded or publicly funded healthcare systems. Their populations may visit doctors a great many times a year, or rarely. None of these things improves longevity as much as a healthy lifestyle appears to.

That being said, there are exceptions to the rule – nations with poor habits and acceptable health outcomes.In some countries, people stay healthy because they visit the doctor often. In others, it only leads to greater public expense. Culture appears to play a part as far as unhealthy behavior. For example, the Japanese lead much healthier lifestyles than Americans, as evidenced by their minuscule obesity rate – 3.8% compared to 34%  seen in the U.S. The American health care system is certainly fighting an uphill battle against the nation’s expanding waistlines. Nevertheless, national health care systems should not be let off the hook because of poor eating habits. It is the responsibility of these systems to discourage poor behavior through financial incentives and public health campaigns.

• Read the Five Most Effective Health Care Systems
• Read the Five Least Effective Health Care Systems

The data on health care costs and longevity should press national governments to prioritize encouraging citizens to adopt healthy habits early on. That would almost certainly bring down costs more than moving from private health insurance programs to public ones or vice versa. It would also attack the problem of chronic disease at its roots and not at a much later stage in a person’s life when he or she is 70+ years old and infirm.

The OECD argues persuasively in a recent report that the debate over health care has focused too much on the structure of health care systems.

“The empirical analysis suggests that there is room in all countries surveyed to improve the effectiveness of health care spending; there is no health care system that performs systematically better in delivering cost-effective health care – big-bang reforms are therefore not warranted; increasing the coherence of policy settings, by adopting best policy practices within a similar system and borrowing the most appropriate elements from other systems will likely be more practical and effective to raise health care spending efficiency.

This set of  conclusions argue that the debate over health care systems should focus more on results than structure. The recent fight about US reform did not, for the most part, bring about laws which based medical care access on healthy living. Perhaps the idea is too discriminatory and not in keeping with democratic principles. That does not prevent it from making sense.

There are a few other points from the research that should serve as guidance for health care policy. One is that people with access to inexpensive health care often see doctors with impressive regularity. In many cases, this is an unnecessary expense, which binds ease of access and overuse. This is only an educated observation, and the case can be made that frequent visits are worth the cost. 24/7 Wall St. surmises it truly depends on the country, health care system structure, and culture. The same applies for most other health expenses and indicators. For example: Japan, which rates as the most efficient health care system on our list, has by far the longest average hospital stay per admittance, 18.8 days. Meanwhile, Israel, which ranks as the second most efficient, has the third shortest stay – only 4.2 days per person.

Heath care costs were 6% of GDP in 2010  among the 34 nations measured in the OECD report. It should me noted that the ratio will almost certainly increase around the world as the population ages. The US is not the only nation that will have to worry about how it will cover the medical costs of citizens as they get older as younger people need to bear the tax burden of government health care systems.

This data is only available for countries in the Organization for Economic Co-operation and Development. With a few exceptions, notably China and Russia, the 34 OECD nations we rank can fairly be considered a proxy for the developed world. There were some nations, such as Turkey, Mexico, and Chile, which spend very little on care, and have poor results. These countries do not have inefficient care. Merely, they have an absence of care.

In order to determine which nations had the most and least effective health care systems, 24/7 Wall St. ranked countries based on how much is spent as a % of GDP on health care, both public and private, and compared it to average life expectancy from birth in those countries. A country with relatively long life expectancy and relatively low costs as a percentage of GDP were considered more effective than those with relatively short life expectancy and relatively high costs. 24/7 Wall St relied heavily on the OECD Health Care Systems: Efficiency and Institution report. Information on old age spending and sovereign debt ratings came from Standard & Poor’s. We then considered a variety of data to paint a full picture of each nation’s health care system, both in terms of costs and effective maintenance of the country’s health.

The Five Most Effective

5. South Korea
> Annual Health Care Costs as % of GDP: 6.5% (third smallest)
> Active Doctors Per 1,000 People: 1.94 (second fewest)
> Average Length of Hospital Stay: 10.6 (second longest)
> Debt as % of GDP (2010): 18%
> Average Life Expectancy:79.9 years (20th longest)

South Korea rounds out the top five OECD countries with the most efficient health care systems.  The country’s largely privatized system is financially efficient and provides residents with a high level of medical attention.  Korea spends the fourth-lowest amount on health as a percent of the country’s gross domestic product (6.5%).  However, it has the third-lowest public expenditure on health as a percent of total expenditure on health, 55.3%, and the second-highest rate of health expenditures by insurance agents or out-of-pocket payments, 35%.  The country has 7.8 hospital beds for each thousand citizens, which is the third-highest rate amount among OECD countries.  It has the second-longest average length for hospital stays, with 10.6 days.  It also has the second-highest amount of doctors consultations per capita, 13.

4. Luxembourg
> Annual Health Care Costs as % of GDP: 7.8% (sixth least)
> Active Doctors Per 1,000 People: 2.84 (12th fewest)
> Average Length of Hospital Stay: 7.3 days (seventh longest)
> Debt as % of GDP (2010): Surplus of 13.6%
> Average Life Expectancy:80.6 years (11th longest)

Luxembourg spends a great deal of public money on their quality health care system.  The country has the third-highest rate of public expenditure on health as a percent of total health spending among OECD countries, at 84.1%.  It also spends $4,237 a year, the fifth-greatest amount on health per capita. Luxembourg’s public expenditure on health per capita is falling at a dramatic rate, however, decreasing at an annual rate of 7.7%.  This is the greatest decrease among OECD countries.  Luxembourg’s average life expectancy is 80.6 years, the eleventh highest.  The country’s system faces some difficult challenges in offsetting unhealthy lifestyle choices.  For instance, Luxembourg has the highest annual rate of alcohol consumption, 15.5 liters per capita.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

3. Australia
> Annual Health Care Costs as % of GDP: 8.5% (16th least)
> Active Doctors Per 1,000 People: 2.97 (17th greatest)
> Average Length of Hospital Stay: 5.9 days (17th longest)
> Debt as % of GDP (2010): 10.8%
> Average Life Expectancy: 81.3 years (third longest)

Australia’s health care system does a very good job caring for its citizens despite trends in unhealthy behavior.  The country has the third-highest average life expectancy, 81.5 years.  This is despite having the fourth-highest obesity rate (24.8%), a problem that is extremely detrimental to the health of other countries, such as the United States.  The country spends the fifteenth lowest amount on health per capita, $3,353, yet it spends the eighth greatest amount through private insurance and out-of-pocket payments, $605 per capita.  This means that a relatively large amount of the country’s health expenditures do not come from the government.

Click Image to See Larger Chart of Expenditure versus Life Expectancy

2. Israel
> Annual Health Care Costs as % of GDP: 7.8% (11th least)
> Active Doctors Per 1,000 People: 3.39 (12th most)
> Average Length of Hospital Stay: 4.2 days (third shortest)
> Average Life Expectancy:81.1 years (ninth longest)

Although the majority of Israel’s health expenditures come from public spending, 57%, this is fourth-smallest percentage among OECD countries.  Additionally, the country has the fourth-highest rate of health expenditures by financing agents or out-of-pocket payments, 29.7%.  The country has the ninth-highest average life expectancy, 81.1 years.  It also has the twelfth-highest amount of practicing doctors, with 3.39 physicians per each 1,000 people.

1. Japan
> Annual Health Care Costs as % of GDP: 8.1% (12th least)
> Active Doctors Per 1,000 People: 2.15 (fourth fewest)
> Average Length of Hospital Stay: 18.8 days (the longest)
> Debt as % of GDP (2010): 105.5%
> Average Life Expectancy: 82.7 years (the longest)

Among all the OECD countries, Japan has the most efficient health care system.  The country has the seventh-highest rate of public expenditure on health as a percentage of total expenditures on health – 81.9%. This money goes a long way in keeping Japan’s population healthy, however, as Japanese citizens live an average of 82.7 years – the longest lifespan in the OECD. Japan has the most  hospital beds per capita, the most doctor consultations per capita, and longest average length of hospital stays for acute care – 18.8 days compared to the United States’ 5.5. These long hospital stays may mean the country’s patients stay well longer after receiving treatment. It should be noted that Japan, on average, has a fairly health-conscious population.  Obesity affects a mere 3.4% of the population. This is the lowest amount of any OECD country for which this data is available.

Click Here for The Five Least Effective Healthcare Systems

The Five Least Effective

5. Germany
> Annual Health Care Costs as % of GDP: 10.5% (sixth most)
> Active Doctors Per 1,000 People: 3.56 (tenth most)
> Average Length of Hospital Stay: 7.6 days (fourth longest)
> Debt as % of GDP (2010): 75.2%
> Average Life Expectancy: 80.2 years (16th longest)

German health care costs are 10.5% of their GDP. This is the sixth-highest proportion of spending among OECD nations. Costs come out to be about $3,700 per person each year. Germany’s average life expectancy is 80.2 years, which is the thirteenth-highest among the 34 on our list, and is behind Switzerland and Luxembourg, which have similar systems to Germany. In general, the country’s life expectancy is acceptable by OECD standards, but the level of expenses necessary to create this outcome are what cause the country to rank so inefficient on our list.  In an average year, Germany has the eighth most doctor consultations per person, the second-most hospital beds per person, and the fourth-longest length of hospital stays. The country also spends $563 per person on drugs and medical supplies, the eighth most in the OECD. For this frequency of care and level of expenditure, Germany should perform much better in life expectancy.

4. Denmark
> Annual Health Care Costs as % of GDP: 9.7% (11th most)
> Active Doctors Per 1,000 People: 3.42 (11th most)
> Average Length of Hospital Stay: 3.5 days (the shortest)
> Debt as % of GDP (2010): 15.7%
> Average Life Expectancy:78.8 years (11th  shortest)

Denmark has the most nationalized health care system in the OECD, with 84.5% coming from public funds. The country spends nearly the equivalent of 10% of its GDP on health care each year, and yet it has a life expectancy of only 78.8 years, which is worse than 23 of the 33 other OECD nations. Denmark’s socialized health care system is often compared to that of its Scandinavian neighbor, Sweden, and yet Sweden ranks as the sixth most efficient system, whereas Denmark is the fourth least efficient. The two nations rank almost the same in many health categories, including expenditure per capita, practicing physicians per capita, and tobacco use. The reason for Denmark’s significantly higher expenses may lie in visitations. Danish citizens visit physicians an average of 8.9 times each year, the sixth most in the OECD, compared to Sweden’s 2.9 per year, the fourth lowest rate. People in the hospital stay an average of a full day longer in Sweden. One other possible reason the Danish underperform so severely in life expectancy is alcohol use – The Danish consume 2.87 gallons per capita each year – the 10th highest, compared to Sweden’s 1.95 per capita – the sixth lowest.

Also Read: Can the Treasury Make Money on GM Shares?

3. Portugal
> Annual Health Care Costs as % of GDP: 9.9% (10th most)
> Average Length of Hospital Stay: 6.8 days (12th longest)
> Debt as % of GDP (2010): 80.3%
> Average Life Expectancy: 79.3 years (12th shortest)

Portugal actually has one of the lower expenditures per capita on health care, the fourteenth-lowest on our list of 34. Despite this, the country spends the tenth-most as a percentage of GDP. This likely is due to the country’s budgetary difficulties as much as it does health risk factors and efficiency within the system. The country has an A- credit ranking, nearly 70% debt as a percent of GDP, and one of the worst annual budget deficits at -7.8%. Besides issues of fiscal efficiency, the country has a life expectancy of 79.3, the 12th worst rank among all OECD countries. The country ranks in the bottom third for most types of care, including the number of physicians per capita and the number of hospital beds per capita. The nation also consumes well above the OECD average for liters of alcohol per person, at 11.4 per person each year, the ninth most among all ranked nations.

2. Belgium
> Annual Health Care Costs as % of GDP: 11.1% (3rd most)
> Active Doctors Per 1,000 People: 2.97 (13th fewest)
> Average Length of Hospital Stay: 7.1 days (eighth longest)
> Debt as % of GDP (2010): 94.3%
> Average Life Expectancy:79.8 years (10th shortest)

Belgium spends the third most as a percentage of GDP on health care, and the seventh-most per capita, yet the country has an average life expectancy of 79.8, which is good for 21st overall in the OECD. More than 20% of health costs in Belgium are paid out-of-pocket, which amounts to more than $800 each year, almost ¾ of these costs are pharmaceutical expenses. This is the third-highest cost per capita in the OECD and the sixth-highest for pharmaceuticals. Belgians do not consume a particularly large amount of tobacco or alcohol, and the country’s expenses come from long hospital stays, the eighth most hospital beds per capita, and the ninth-most doctor consultations per year – 7.6 per person.

1. The United States
> Annual Health Care Costs Per Capita: 16% (the most)
> Active Doctors Per 1,000 People: 2.43 (eighth fewest)
> Average Length of Hospital Stay: 5.5 days (ninth shortest)
> Debt as % of GDP (2010): 68.9%
> Average Life Expectancy:77.9  years (14th shortest)

The United States has far and away the least effective health care system in the OECD. Each year, the country spends $7,538 per person on health care, the equivalent of 16% of our entire GDP. This is nearly triple what Japan spends per person. Life expectancy in the United States, however, is 77.9 years, which is the eighth worst among the 34 OECD countries. Japan has the highest, at 82.7 years. Relative to the other ranked nations, the U.S. government spends the least as a percentage of total costs on health care, while American citizens pay the second most out of pocket, an average of $912 per year. Pharmaceuticals cost the U.S. an average of $897 per capita, the most spent in any country in the OECD. Unlike nations like Belgium and Germany, these massive costs per person do not yield appropriately high levels of care. The U.S. has the third-fewest hospital beds per person, behind only Turkey and Mexico. Americans also have the fifth-fewest doctor consultations per year. One likely candidate for the country’s terrible life expectancy despite massive costs is obesity, which is well known to be linked to a variety of health complications. While we only have data for 11 OECD countries, the United States has by far the highest recorded rate: nearly 34% of adults are considered unhealthily overweight. This is exactly ten times the rate in Japan – just 3.4%. And, this obesity and the problems it brings probably raise the cost to care for unhealthy people in the last year or two of their lives when they are troubled by the diseases related to their lifestyles.

Click Here for The Five Most Efficient Healthcare Systems

-Michael B. Sauter, Charles B. Stockdale, Douglas A. McIntyre

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.