America spends more on medical care than any other nation, with no noticeable difference in results. It is commonly thought that this is a result of a defect in the organization of medicine in the US, which can be repaired by “reform.” However, medicine is a labor-intensive good and labor is more expensive in the US. We show that these conditions will invariably lead to a higher price and a higher percentage of GDP spent on medicine. Thus, while reforms may improve the functioning of the health care sector, they are unlikely to have a major effect on spending levels.