7 Countries With the Lowest Health-Care Costs

If you didn't already know it, Americans spend more per capita on health care than any other nation on the planet. I recently listed the countries with the highest health-care costs, with the U.S. by far coming out on top (or bottom, depending on how you look at it.)

But what about the opposite angle? Maybe we can learn some lessons from examining the nations that don't spend so much. Here they are -- the seven countries spending the least per capita on health care among the 34 member nations of the Organisation for Economic Co-operation and Development, or OECD.

7. Israel
Israel spends 7.5% of its GDP on health care. That equates to a cost of $2,071 per person -- less than one-fourth that of the United States.

6. Czech Republic
The Czech Republic also spends 7.5% of GDP on health care. However, its $1,884-per-person spending level edges the country ahead of Israel to take our No. 6 position.

5. South Korea
The Republic of Korea, usually referred to as South Korea, spends 7.1% of GDP on health care. That amounts to $2,035 per person.

4. Poland
Poland comes in at No. 4 with 7% of GDP spent on health care. Per capita spending for the Poles totals $1,389.

3. Estonia
Estonia spends 6.3% of GDP on health care. Its medical spending of $1,294 per person ranks the fourth lowest of all OECD member countries.

2. Mexico
Mexico comes in second in health-care spending, with 6.2% of GDP. Mexicans' per capita medical costs total $916.

1. Turkey
Turkey stands as the OECD nation with the lowest health-care costs. Turks spend 6.1% of GDP -- $913 per person -- on health care.

Low cost, low quality?
How effective are these countries' health-care systems? If we use life expectancy as a barometer, they don't appear too effective.

Five of the seven nations have life expectancies well below the OECD average. However, South Korea and Israel have above-average life expectancies. Israel's life expectancy of 81.7 years ranks as the sixth highest among OECD members.

Six of the countries also have fewer citizens reporting good health than the OECD average. Only Israel scores well in this metric, with 82% of people stating that they perceived their health as good.

Many of these nations with low medical costs are seeing those costs grow rapidly. Only Mexico and Israel have health-care growth rates below the OECD average.

Investing takeaway
At first glance, there appears to be little for investors to glean from this information. However, there is something we can take away.

Israel and South Korea provide better comparisons for the United States. Both nations have relatively high GDPs and more developed economies. Both also have made the transition to universal health-care systems in the past 25 years. As the U.S. transitions to Obamacare, lessons from issues encountered in Israel and South Korea could be helpful for investors.

Israel, for example, has state-provided health care, yet 80% of its citizens purchase supplemental health insurance. Israel Medical Association deputy chairman Dr. Yitzhak Ziv-Ner says that "this shows the lack of faith the Israelis have in the basic system, which is not enough for them." 

South Korea's health-care system shares several features in common with Obamacare, but the central government is the single payer. Even with the government calling the shots, health-care costs have skyrocketed, with an annual growth rate of 9% between 2000 and 2010 -- the second highest among OECD nations. The primary culprit in South Korea's medical-cost increases appears to be the fee-for-service financial incentives in place. 

How do these observations help investors in the United States? First, Israel's experience highlights the likelihood of the continued importance of health insurers. Second, South Korea's cost issues emphasize the Accountable Care Organizations, or ACOs, and new reimbursement mechanisms that could help control health-care spending. If we put these two together, we see the possibility that forward-thinking health insurers in the U.S. that are active in ACOs could do well over the long run if the U.S. encounters similar issues to those that Israel and South Korea have faced.

I think UnitedHealth Group (NYSE: UNH  ) stands out as the best candidate for investors to consider with the lessons of these two American allies in mind. As the largest managed-care organization in the Western Hemisphere, UnitedHealth brings considerable economies of scale and significant resources to compete effectively. 

The insurer also has been quite active in promoting ACOs. Just this year, UnitedHealth has launched several ACOs in multiple states, including Colorado, North Carolina, and Rhode Island. The company sees ACOs as "an important element of its value-based contracting strategy." 

UnitedHealth's stock is up around 17% year to date. With the trailing price-to-earnings multiple of 12.4 bumping the top of its five-year range, shares could be viewed as somewhat pricey. However, I don't think shares are overpriced, considering the company's growth opportunities.As we saw with several of the aforementioned countries, sometimes it costs a little more to get more value.

The future success of UnitedHealth is closely linked to what happens with health reform implementation in the United States. The Motley Fool has analyzed the company from a long-term view, homing in on prospects for UnitedHealth in an Obamacare world. To find out more, click here now to claim your copy today.


Read/Post Comments (18) | Recommend This Article (3)

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  • Report this Comment On June 16, 2013, at 1:02 PM, pomdter wrote:

    Life expectancy is not a measure of health care. If you are hit by a bus at 15, it has nothing to do with doctor quality. You need to look at health care outcomes and availability. What are the cancer survivor rates? How many MRI's per capita, etc.

  • Report this Comment On June 16, 2013, at 1:26 PM, BayAreaBill1 wrote:

    Do those %GDP numbers include the cost of government, public sector, and private sector subsidies and group health insurance payments?

  • Report this Comment On June 16, 2013, at 1:27 PM, Trixielu67 wrote:

    Anytime you have "investors" and for profit health insurance companies those seeking or covered by healthcare are the losers, investors want to make money, not make sure that everyone has adequate and affordable healthcare!

  • Report this Comment On June 16, 2013, at 1:53 PM, soliberating wrote:

    @BayAreaBill1

    Yes, they include all sources of medical spending.

    Here is a listing of those countries compared to the US by infant mortality, healthcare spending and life expectancy. It's clear that single payer systems have better results cheaper.

    United States

    Spending: 17.9% of GDP -- $8,608 per person

    Infant Mortality: 5.9 (per 1000 births)

    Life Expectancy: 79

    Turkey

    Spending: 6.1% of GDP -- $913 per person

    Infant Mortality: 22.23 (per 1000 births)

    Life Expectancy: 76

    Mexico

    Spending: 6.2% of GDP -- $916 per person

    Infant Mortality: 16.26 (per 1000 births)

    Life Expectancy: 75

    Estonia

    Spending: 6.3% of GDP -- $1,294 per person

    Infant Mortality: 6.82 (per 1000 births)

    Life Expectancy: 76

    Poland

    Spending: 7% of GDP -- $1,389 per person

    Infant Mortality: 6.3 (per 1000 births)

    Life Expectancy: 76

    South Korea

    Spending: 7.1% of GDP -- $2,035 per person

    Infant Mortality: 3.76 (per 1000 births)

    Life Expectancy: 81

    Czech Republic

    Spending: 7.5% -- $1,884 per person

    Infant Mortality: 3.67 (per 1000 births)

    Life Expectancy: 78

    Israel

    Spending: 7.5% of its GDP -- $2,071 per person

    Infant Mortality: 4.03 (per 1000 births)

    Life Expectancy: 82

  • Report this Comment On June 16, 2013, at 4:09 PM, Lamley2 wrote:

    You took great pains to divulge the average cost per person of the bottom 7 countries (and perhaps I just missed it), but I didn't see the average amount that Americans pay. What would that amount be?

  • Report this Comment On June 16, 2013, at 4:23 PM, brenda1012 wrote:

    Something you don't mention is the waiting time to get into the doctors. I have a friend who's daughter had to wait a year for surgery. And why are people coming from other countries here for cancer surgery because the wait is to long.

  • Report this Comment On June 16, 2013, at 4:41 PM, Petronilus wrote:

    There is a lot of lessons learned in each of these systems. It's sad that governments don't aggressively pursue what works most optimally per spent US$.

    It has been known for ages that the US health care system is way too inefficient and it's not only about wasted money but also about inefficiency in reaching proper diagnosis in a speedy fashion. Patients get thrown around between specialists often waiting weeks for the next appointment. In other countries you can walk into one hospital and leave in a couple of hours with a complete physical, EKG, blood test, urine test and CT or MRI scanning costing some US$ 32 without insurance (China). Doing the same here in the USA seems a bit of a nightmare from my experience.

  • Report this Comment On June 16, 2013, at 5:47 PM, ricky2cavalra wrote:

    *Public can save about one-third of premiums cost for better health care with self-insured local groups of 3,000 (similar to national stats) for comparison-only with local actuarials. Co-ops hold premiums in escrow in local banks or credit unions (no personal slush funds)! That's health care coverage!

    *Savings source: insurers admit 20% profit; plus ads/PR; lobbyists & political contributions; perks for execs; goodies for group buyers; lawyers who break expensive policies. All, paper, not health care.

    *Concept proved in two pilots: see McGraw Hill's "Modern Hospital" (Jan,'70) and "Chicago Tribune's" 'Sunday' mag (Dec16,'86).

    *Both articles were ignored by insurers for decades because findings were so unfavorable to insurers.

    *Local Wellness Co-ops (any-name for local alternatives) are still legal under Obamacare if operating before 1/1/14. Tell your Congressional Three to extend! National control not needed.

    *Also, fed could guarantee startups' fiscal health if valid response to (future) fed fiduciary form & format. Demand it! Only your health is at stake. . . .

  • Report this Comment On June 16, 2013, at 6:26 PM, MachoMan1 wrote:

    Simple....

    they don't have the Insurance company's and indebted politicians in this field as we do !!

  • Report this Comment On June 16, 2013, at 6:28 PM, ticuso wrote:

    If you do not have Med Ins in Mexico they will give you med ins free of charge, my friend spend 30 days in a big well equiped hospital in Guadalajara for a hip transplant that had some complications that normally arise from time to time, cost 500 dollars, you buy the protetis and the med Ins will reinburst you!!

  • Report this Comment On June 16, 2013, at 7:14 PM, pack48 wrote:

    Most of all the civilized countries in the world have some kind of health care for their people. They actually get something for the taxes they pay in. Of course America has fallen so far behind on most things while we see our neighbors expanding,,,we are shrinking. Education, rebuilding our bridges & hwy. and transportation....we are falling behind. All of these things could also develop higher paying jobs for our people. Of course they don't have a government that is almost dead and on life support with no brain activity!!!!!!

  • Report this Comment On June 16, 2013, at 7:17 PM, pack48 wrote:

    My brother retired in the South of France and he has had wonderful care that took no longer to get than to get help from any specialist here.

  • Report this Comment On June 16, 2013, at 7:26 PM, TheCatLady123 wrote:

    Israel has not only some of the lowest health care costs, but some of the best health care in the world.

    Every citizen picks which health care group and set of clinics they want. There are 3 choices in my little town.

    I found out that I have terminal cancer last year. ALL my treatment is covered. Palliative care is also covered. They will never raise my health care premium because I am ill. I receive all my cancer medication and treatment with out co-payment. My health care provider even gives me all my old daily medication for free.

  • Report this Comment On June 17, 2013, at 10:44 AM, NanushNanush wrote:

    I live in Israel, and have lived in the USA. One of my family members has been chronically ill for 39 years, with huge expenses, and also has extensive academic familiarity with the various international health systems.

    One problem in America, has been that as hospitals can not turn poor uninsured people way, the OVERCHARGE the insurance companies, and thus their clients, to balance their budgets. Furthermore, emergency rooms are the stupidest way to provide primary care.

    Israel's health expenses are cheaper, also because her population is very young. The birthrate is by far the highest in any developed nation and percentage of university graduates is also the highest. Thus, while the education budget is the highest per capita in the world, classes are crowded.

  • Report this Comment On June 17, 2013, at 10:57 AM, NanushNanush wrote:

    Israeli health insurance payment is collected by Social Security, as a surcharge upon work. The non employed of working age pay a flat sum. People then select which of 3 major insurers they prefer. Like Kaiser in CA, the "sick funds" also provide services in the community, and pay for others.

    The government does not directly pay for or offer most services, tho they subsidize hospitals, mental health, dialysis, transplants etc.

    People have absolute freedom to change their sick fund, tho the supplemental, voluntary private insurance is not transferable. Many people get by without it

  • Report this Comment On June 17, 2013, at 3:11 PM, mdk0611 wrote:

    Could you provide a summary of the malpractice laws in those various countries?

  • Report this Comment On June 19, 2013, at 11:11 AM, rae53 wrote:

    Is there a reason Cuba is not listed?

  • Report this Comment On June 19, 2013, at 11:14 AM, rae53 wrote:

    Along with Canada, England, and France?

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