Eight Reasons Our Healthcare Costs Are (Still) Out of Control


How Much Longer Can the Costs REMAIN Unsustainable?

In the US, we have a crisis of cost and quality at both the individual consumer level and at the national level.  According to the Centers for Medicare and Medicaid, spending for healthcare in was $3.2 trillion in 2015, or $9,990/person, and accounted for 17.8% of our Gross Domestic Product.

Healthcare costs were first labeled as 'unsustainable' at least 30 years ago when they reached 11% of GDP - and yet costs continue to rise and are projected to reach 20% of GDP by 2025.

Before we can begin to untangle the Gordian knot that we call the US healthcare delivery system, we need to understand the challenges and how we got here.  It doesn’t help that industry experts disagree on the many, varied reasons and fingers are pointed in every direction.  At Health Cost Matters we believe these problems are all intertwined.

Below we outline 8 underlying reasons why we believe health costs are so high: 

1.  Lack of Price Transparency. 

Healthcare prices can vary wildly in the same neighborhood for identical services, but in our current system, most consumers typically do not or cannot compare quality or cost, especially in an emergency.  Many leading think tanks and research organizations (including Robert Wood Johnson Foundation, George Washington Public Health Online, Health Affairs and others) cite price opacity as one of the leading causes of spiraling healthcare costs. While prices have never been transparent, this problem has become more apparent to consumers since the inception of the ACA when high dollar deductibles have become more common.

2.      Hospital and other Medical Charges Often Increase Unchecked, Are Irrational and Not Reflective of Provider Cost or Services Rendered.

Lack of price transparency allows healthcare costs to continue to rise unchecked.  Investigative reporter Stephen Brill reported in his Time Magazine April 4, 2013 cover story (A Bitter Pill) that irrational and exorbitant hospital charges set the bar for eye-poppingly high reimbursement.  To sum up his reporting he quotes Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, “the obvious and only issue: All the prices are too damn high.”

3.      Unnecessary, Harmful and Duplicative Services Are Causing Financial Waste ... Not to Mention Potential Harm and Human Suffering.

According to author and physician, Atul Gawande, "Millions of Americans get tests, drugs, and operations that won’t make them better, may cause harm, and cost billions.” Drugs are prescribed that are ineffective (e.g., antibiotics for viral infections), or harmful (e.g., over-prescribing opioids following surgical procedures).  Patients are subjected to redundant diagnostic tests because providers at one facility do not or will not accept the testing performed at other facilities.  Surgical procedures (e.g., back and spinal, cardiac and arthroscopic procedures) are performed that have no or negative therapeutic value.  Patients are subjected to painful services and diagnostic tests for untreatable and terminal conditions.

4.      Medical Coding, Billing and Reimbursement Errors ... and Then There's Fraud, and Abuse.

No one knows for sure, and estimated reimbursement error rates vary vastly within the healthcare industry, but billing/payment error rates reportedly range from 20% to 80% of all claims submitted for reimbursement.  Errors affect everyone: Provider billing errors and insurance payment errors result from inaccurate coding and reimbursement; Patients are sometimes overcharged by providers - and healthcare claims are sometimes underpaid by insurers.  Fraudulent, wasteful and abusive billing practices are designed to slip undetected for months or years and are often never caught.  The cost of ‘rework’ (i.e., time and resources required for auditing, researching and re-adjudicating erroneous billing and payment) is staggering. 

5.      Soaring Prescription Drugs Charges.

Researching this topic we can readily find scores of expert opinions and explanations why pharmaceutical costs in the US are so expensive and outstrip the costs for the same drugs abroad.  To name a few:  Lack of price transparency.  No price controls.  Monopolies or limited competition.  Inability of the government to negotiate lower prices. Cost of research, developing and bringing drugs to market. Small markets for important and specialized drugsFewer and higher priced generics Advertising and marketing to providers and consumersThere are many, many reasons for runaway drug costs, but few solutions that policy makers can agree upon.

6.      Lobbying on Behalf of the Medical-Insurance Complex.

The Center for Responsive Politics has reported that lobbyists for hospitals, pharmaceutical companies and HMOs “spend more than three times what the military-industrial complex spends in Washington.”  In 2016 alone, lobbying for this sector of our economy was almost $510 million.  Ask your Congressional representatives how much their campaigns receive annually from healthcare industry lobbyists. (To find your representative, go to www.whoismyrepresentative.com and enter your zip code.)

7.      The Healthcare Insuring and Brokering, Coding, Billing, Collecting, Auditing, Rework Infrastructure

The insuring and brokering, coding, billing, collecting, auditing, rework (etc.) infrastructure for purchasing and reimbursing health services employs hundreds of thousands, and adds hundreds of billions of dollars to the cost of providing care.  While most individuals employed in this infrastructure do not participate in the actual provision of medical services, the loss of these high paid/high skilled jobs and businesses on the US economy would be devastating.

8.      Payment for the Uninsured

According to a study by the Henry Kaiser Foundation, “Uncompensated care fell by $6 billion nationwide in 2014,” to $29 billion, down from $35 billion in 2015. This decrease is largely a result of the ACA Medicaid expansion. (Providers located in poorer areas suffer greater losses from uncompensated care, and risk instability and insolvency when uninsured rates climb.)  Whether the new administration defunds the Medicaid expansion in exchange for state block grants will determine the direction of uncompensated care.  Either way, if you have insurance or pay taxes you participate in picking up this tab. If you live in an area where uncompensated care is particularly high, you risk losing providers.

How Do We Solve?

We believe solutions to this problem exist because failure is not an option.  For ourselves and our children’s future, we (the US) must find solutions. 

How can we begin to cure exorbitant health costs?  There is no one solution, it's a journey.  The first step is understanding what it is we’re trying to fix. 

We welcome feedback and ideas from readers and thought leaders from all sides that are reasoned and not politically dogmatic. 

Share your ideas and follow @loisrhall on Twitter.