Dennis, the government isn’t the answer, but an alternative is needed. I am saying that we cannot let the market run wild with lobbyists from the healthcare industry, including hospitals, insurance companies, and doctors who receive kickbacks from big pharma and many other factors.
Eight reasons for rising healthcare costs
1. Medical providers are paid for quantity, not quality
Most insurers—including Medicare—pay doctors, hospitals, and other medical providers under a fee-for-service system that reimburses each test, procedure, or visit. That means the more services provided, the more fees paid.
This can encourage a high volume of redundant testing and overtreatment, including for patients with a low potential for improved health outcomes.
On top of this, the U.S. medical system isn’t integrated. The World Health Organization 3 defines integrated health services as “the organization and management of health services so that people get the care they need, when they need it, in ways that are user friendly, achieve the desired results and provide value for money.”
So what does that have to do with cost? Integrated health means providers, management, and support teams communicate with one another on a patient’s care. In an unintegrated system, the lack of coordination can result in patients receiving duplicate tests and paying for more procedures than they truly need.
2. The U.S. population is growing more unhealthy
According to the Center for Disease Control and Prevention4 (CDC), more than half of the U.S. population has at least one chronic disease, such as asthma, heart disease, high blood pressure, or diabetes, which all drive up health insurance costs.
A staggering 85% of healthcare costs5 in the U.S. are for the care of chronic health conditions. Moreover, recent data6 finds that nearly 40% of adults over 20 in the U.S. are either overweight or obese, which can lead to chronic diseases and inflated healthcare spending.
As the U.S. population health issues increase, the risk of insuring the average American goes up. And in turn, the higher the risk, the higher the cost of annual health insurance premiums.
Data from the Kaiser Family Foundation7 (KFF) shows that between 2011 and 2021, the average premiums for family coverage rose from $15,073 to $22,221—an increase of 47.4%.
3. The newer the tech, the more expensive
Medical advances can improve our health and extend our life, but they can also lead to an increase in spending and the overutilization of expensive technology.
According to a study by the Journal of the American Medical Association 8 (JAMA), Americans tend to associate more advanced technology and newer procedures with better care, even if there’s little to no evidence to prove that they’re more effective.
This assumption leads both patients and doctors to demand the newest, and often most expensive, treatments and technology available.
4. Many Americans don’t choose their own healthcare plan
Data from the KFF9 finds that roughly 49% of the U.S. population gets their insurance through their employer. That means nearly half of Americans don’t make any actual consumer decisions about the cost of their insurance because their employer already determined it.
Organizations are incentivized to purchase more expensive health insurance plans because the amount employers pay toward coverage is tax-deductible for the organization and tax-exempt to the employee. In addition, low deductibles or small office co-payments can encourage overuse of care, driving demand and cost.
5. There’s a lack of information about medical care and its costs
Despite a wealth of information at our fingertips online, there’s no uniform or quick way to understand treatment options and the cost of care. We would never buy a car without comparing models, features, gas mileage, out-of-pocket cost, and payment options—but yet, this is how we buy healthcare.
Kaiser Health News10 (KHN) reports that even when evidence shows a treatment isn’t effective or is potentially harmful, it takes too long for that information to become readily known, accepted, and change how doctors practice or what patients demand.
And in too many cases, even when hospitals make their service prices available, they are challenging to navigate and understand. To mitigate this lack of transparency, Congress passed the No Surprises Act in January 2022.
The Act aims to reduce surprise medical bills under private health insurance plans and create better pricing transparency to improve the patient experience and control costs of expensive health conditions.
6. Hospitals and providers are well-positioned to demand higher prices
According to the Center for Studying Health System Change11, mergers and partnerships between medical providers and insurers are one of the more prominent trends in America’s healthcare system.
Increased provider consolidation has decreased individual market competition, in which lower prices, improved productivity, and innovation can occur. Without this competition, these near-monopolies have providers and insurers in a position where they can drive up their prices unopposed.
For example, a study done by the American Journal of Managed Care 12 found that hospitals in concentrated markets could charge considerably higher prices for the same procedures offered by hospitals in competitive markets. Price increases often exceed 20%13 when mergers occur in concentrated markets. However, reviews found these cost increases didn’t improve healthcare quality.
