Health Insurance

Why Are Health Care Costs Rising?

It’s no surprise that Americans spend huge sums of money each year on health care. High insurance premiums, high deductibles, co-pays and other costs are just some of the health-related costs in this country.
One of the reasons for rising medical costs is government policy. Providers have been able to raise prices since the introduction of Medicare and Medicaid (programs that help people without health insurance).
But there are more reasons for rising healthcare costs than government policy. Read on to learn how much the U.S. is spending on healthcare costs, what is driving prices up in the industry, how the COVID-19 pandemic has changed the entire cost structure discussion, and how recent legislation offers hope and relief.

Chronic Disease Prevalence

According to the Centers for Disease Control and Prevention (CDC), 6 in 10 adults in the United States have a chronic disease or condition. The most common chronic conditions in the United States include:

  • Heart disease
  • Stroke
  • Cancer
  • Diabetes
  • Chronic kidney disease
  • Chronic Obstructive Pulmonary Disease (COPD)

We may use Definitive Healthcare medical performance data to identify diagnostic volume and comorbidity information. This data is an important tool for understanding the prevalence of chronic diseases in the United States. Full-payer claims data can provide insight into comorbidities, common procedures, or areas with high numbers of specific chronic disease diagnoses.
Chronic conditions often require long-term medical care. Some conditions may also limit activities of daily living, which may require seeking home health care or other support services. Due to the challenges of living with a chronic disease, some people also experience anxiety, depression, and other mood disorders.

All of these factors make the care of patients with chronic conditions more complex and resource-intensive. In the United States, there is a strong association between health care costs and chronic disease. According to a report by the American Action Forum, the United States spends approximately $3.7 trillion annually on treating chronic health conditions and the resulting loss of economic productivity.
Much of this health care spending is for services such as routine doctor visits, prescriptions, outpatient treatment, or emergency care.
Additionally, the COVID-19 pandemic has caused some patients with chronic conditions to delay or avoid essential care. This means that people with chronic diseases spend less on medical services in the short term. However, this can have long-term health and financial consequences.

When patients with chronic diseases delay treatment, they can face life-threatening complications. Those who sought help promptly were more likely to have long-lasting side effects. Long-term management of these side effects may increase national healthcare expenditures and consumer costs.

Healthcare costs

According to an analysis published by the Commonwealth Foundation, Americans go to the doctor half as often as other developed nations. But the U.S. also spends more on health care than any other country.
How is this possible? Health care costs are much higher.
For example, a C-section (C-section) is one of the most common inpatient procedures (including removal of birth products, open surgery) in the United States. According to Definitive Healthcare, the average cost of a C-section in 2019 was $5,305. This fee does not include other costs associated with medical procedures, complications or overnight hospital stays.
According to a 2020 pricing report, procedure costs in the U.S. have consistently been higher than in other developed nations.

A 2017 report found that the average cost of coronary artery bypass graft (CABG) surgery in the United States was $78,100. In comparison, the same procedure in the Netherlands would cost just $11,700. The United States also reported higher costs for outpatient procedures such as MRI scans and colonoscopies.
According to a 2018 JAMA study, three key factors are driving the rise in U.S. healthcare prices:

  • Doctor salary
  • Administrative costs
  • Prescription drug prices

Doctors in the U.S. earn more than other countries, JAMA study finds. In 2016, GPs earned an average of $218,173 a year. According to the study, doctors in other countries earn an average salary between $86,607 and $154,126.
These three factors, along with administrative costs and increases in drug prices, are the biggest contributors to U.S. healthcare price increases.

Higher out-of-pocket costs

Higher insurance premiums are only part of the equation. Americans are paying more out of pocket than ever before. Moving to a high-deductible health plan (HDHP), with co-pays of up to $14,000 per family, dramatically increases health care costs. 10
Employer contributions to HDHP help mitigate higher deductibles; in fact, according to a 2018 study, HDHP members pay 20% of total premiums, while Preferred Provider Organization (PPO) members pay up to 27%. 11

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