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 Why We Have Rising Health Care Costs Health care costs are on the rise. When the cost of medical care goes up, so does the cost of health insurance. You are no doubt feeling the direct effects of these higher costs which are caused by many factors. Here are some of the major drivers of higher health care costs. 1. The Consumer is Not the Direct Payer for Health Care Few people realize that the drug for which they paid a $25 co-payment could actually cost $150 or more. Many people are not aware that the few minutes they spend seeing a doctor for a common cold results in a average total cost of $200 or more (doctor’s fees, lab/x-rays, pharmacy). Co-payments and deductibles have not kept up with medical cost inflation, making the consumer less aware of actual costs. Your employer picks up the bulk of your premium cost. 2. Health status The baby boomers are aging and they need more medical care than in the past. The increase in health care needed for such a large segment of the population has impacted health care growth. Obesity causes or contributes to a wide range of health problems including diabetes and heart problems. It is estimated that 61% of Americans are overweight. These problems are costly to treat and so, health care costs rise. 3. Medical Advances As new medical advances emerge to treat more health problems, Americans are paying more and more to get the benefits. Most of us want the newest and best procedures and treatments and expect our health insurance policy to pay for these services. 4. Excess Use of Avoidable Care Many Americans tend to go to the doctor at the drop of a hat. Millions of doctor visits a year prove to be unnecessary. With each doctor visit costing an average of $60, the cost starts to add up for everyone. More than half of emergency room visits are unnecessary and should have been handled by the family doctor instead. A family doctor provides personalized care for a fraction of the price of an emergency room visit. 5. Prescription Drugs The high cost of prescription drugs is a large contributor to the rise in health care costs. It is becoming a larger component of total health care costs because of the increasing number of people using prescription drugs, especially higher cost brand name drugs. 6. Mandates/Regulations Federal and state governments have placed over 1500 mandates on the health care industry. These mandates tell a health care plan such things as what they must cover and how they must process claims. Complying with these regulations cost money. The enactment of the Health Insurance Portability and Accountability Act (HIPAA) alone costs billions across the health care industry. HIPAA requires plans to put into place systems to insure privacy and standardize electronic transactions. 7. Litigation Medical malpractice insurance costs are skyrocketing because of the increasing number of jury awards. In turn, doctors and hospitals must raise prices to cover these extra costs. Also inflating costs is the practice of defensive medicine. Physicians may potentially order unnecessary tests and treatments in order to defend themselves against a future lawsuit. Tests are expensive. For example, an MRI costs an average of $2000. Unnecessary tests and treatments waste money and raise costs. 8. Increasing Supply of Physicians and RN Shortage The number of doctors has increased in recent years. This increase is largely due to the growing number of specialists. Along with this growth, more and more people are going to specialists. Specialists generally charge substantially more than primary care physicians. Around the country, hospitals are suffering from a nursing shortage. Since nursing programs are not graduating nearly enough students to meet the demand, the shortage is expected to worsen. Nurses are in high demand and hospitals have increased salaries to attract them. This translates into higher costs for patients. 9. The Uninsured/Underinsured More than 15 percent of the population has no health insurance. Many uninsured are in families where the working spouse cannot afford to cover dependents. When the uninsured receive medical care, they often cannot pay for these services. The costs of these services are often shifted to private insurance to pick up the tab. The under-insured are those whose health care policies do not adequately cover health care costs. The result is that private insurance often ends up paying the difference. 10. Fraud Health care fraud is a crime committed by a doctor or patient in order to illegally collect money from insurance providers. The National Health Care Anti-Fraud Association estimates that fraud costs at least three percent of total health care spending or more than $50 billion a year. Previous Issues:
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