What is driving high healthcare costs?
Costs are increasing at rates twice that of inflation – a rate of health-care spending that threatens our nation’s economy. What underlies this cost growth?
- Extra costs to administer a complex system. Private insurers tack an additional 12 percent on top of the underlying costs for medical care to pay for claims administration, marketing and profits.
- The same goods and services — drugs, for example — cost much more here than they do in other countries.
- We pay for “treatments” rather than care, and as a result we get a lot more “treatments” than people in other developed countries, but with no corresponding improvement in health outcomes. Better coordination among care givers and better long term management of chronic conditions can reduce the sheer volume of “treatments” with better outcomes.
- Poor life-styles. Risk factors, such as eating too much, exercising too little, or smoking, raise the overall cost of our healthcare system. But even if every American took up healthful living overnight, our health-care expenses would still be the second highest in the world (after Luxembourg).
- Fraud and abuse. The National Healthcare Anti-Fraud Association estimates that fraud is equal to at least three percent of total healthcare spending, or more than $60 billion per year.
Healthcare cost growth cannot be sustained
Many believe these spending trends simply cannot be sustained. If comprehensive health-care reform is not enacted and things continue as they are, experts estimate that in the next 10 years:
- Family employer-sponsored health-care premiums will exceed $30,000 a year, up from $12,680 today.
- Health-care spending will rise from $2.4 trillion today to $4.7 trillion in 2019.
- We will spend trillions on care that doesn’t actually benefit the patient.
- An estimated 66 million Americans will be uninsured as ever fewer people are able to afford coverage.
- More than 220,000 of these uninsured will die because they sought care too late for their medical problem.
Inadequate access to healthcare
Millions of American’s don’t have ready access to affordable, quality healthcare. The reasons are legion:
- 47 Million don’t have health insurance leading them to avoid care as long as possible so they don’t incur an expense they can’t afford. The uninsured come from all walks of life. Most would purchase coverage if there was a policy that they could afford. In some cases, they can afford coverage but can’t purchase it because they have a pre-existing medical condition. In most states, insurers can decline such applicants.
- 25 Million are insured but they have inadequate coverage( they are “underinsured”)Their share of medical costs, before and after their insurance pays, is more than they can afford. Unfortunately, many people in this situation don’t realize the limits of their insurance policy, because these policies are so hard to understand.
- In some areas of the country, people many not have access to providers because too few primary care providers practice in their area. In other cases, they may live in a rural area with poor access to specialists.
Poor consumer protections
It is hard to think of another market that is failing consumers as badly as the healthcare market.
- You can be turned down for coverage if you have a pre-existing medical condition.
- Insurance companies can “rescind” a policy they issued after you file a claim if they can find something in your medical history that you didn’t report on the application, even something trivial.
- Insurance policies are legal documents, full of legal terms defined in case law, making the terms literally incomprehensible to most of us.
- What exactly you will be covered varies enormously, at huge cost to the policyholder. For example, expenses that count towards the “out-of-pocket maximum” can differ from policy to policy. For example, one study found that a patient with breast cancer would have spent $12,907 on medical expenses, despite purchasing a policy with a $5,000 out-of-pocket maximum.
When you can’t understand your coverage, you can’t really compare policies “apples to apples” when you shop for insurance. Furthermore, you may face unexpected costs if you need a lot of medical care – costs that can be financially devastating.
Should doctors and hospitals bear some of the financial burden when their own mistakes increase the cost of our care? Should they have to report their rates of infection so that we can all choose the safest place to go for our treatment? We think so.
- Each year, 99,000 Americans die from largely preventable healthcare-acquired infections – that’s the equivalent of a jumbo jet full of passengers crashing every other day.
- Another 2 million Americans experience preventable medical harm in a given year.
- Ten years ago the Institute of Medicine (IOM) published its groundbreaking report To Err Is Human, which detailed the epidemic of medical errors in the United States. According to the IOM, the majority of medical errors are preventable. The key to reducing medical errors is to focus on improving the systems of delivering care.
- However the IOM’s major reform recommendations have not been adopted. In the decade since the IOM report, there is no evidence of overall improvement in patient safety.