What Makes Healthcare So Expensive in the U.S.?

by | Last updated Dec 15, 2023 | Published on Jan 23, 2018 | Healthcare News

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Healthcare insurance and healthcare costs are major considerations in the healthcare industry, and providers as well as insurance authorization companies need to stay abreast with the latest developments and studies in this regard. A recent study in the medical journal JAMA draws attention to the huge spike in healthcare costs in the United States. According to this study, healthcare spending in the United States has increased by about $933.5 billion between 1996 and 2013, a rise from $1.2 trillion to $2.1 trillion. With the huge increase in costs, the health sector grew at a 4 percent annual rate, while the overall economy grew at a 2.4 percent rate. The report has gathered information on 155 separate health conditions and six possible treatment categories such as inpatient, outpatient (hospital), emergency services, dental care, prescriptions and nursing facilities.

Also, an analysis from JPMorgan Chase Institute has found that tax refund payments play a key role in determining when consumers spend money on healthcare. This study found that consumers’ total out-of-pocket healthcare spending rose immediately after receiving a tax refund.

The JAMA study points out that the increase in US healthcare spending from 1996 through 2013 was largely related to increase in health care service price and intensity, positively related to population growth and aging and negatively associated with disease prevalence or incidence. The report evaluated the association between 5 factors-population growth, population aging, disease prevalence or incidence, service utilization, and service price and intensity of services-as they relate to health care spending over time;the study also analyzed trends overall and across major conditions.

Key findings of the report are –

  • More than half of the total spending increase was due to price and intensity increases, which contributed $583.5 billion to the $933.5 billion total increase.
  • The growth in population led to $269.5 billion of the total expenditures, while aging of the population equaled $135.7 billion of the total.
  • When it comes to specific conditions, diabetes was the condition with the greatest increase in spending, rising by $64.4 billion between 1996 and 2013.
  • Spending on low-back and neck pain surged by $57.2 billion in the 17-year period, followed by several other conditions including hypertension ($47.6 billion), hyperlipidemia or high (“bad”) cholesterol ($41.9 billion), falls ($30.4 billion), and osteoarthritis ($29.9 billion).
  • For outpatient treatment, annual spending on ambulatory care increased from $381.5 billion in 1996 to $706.4 billion in 2013.
  • One of the key drivers of the total increase in health care expenditures was the spending on pharmaceutical drugs. Of the total $64.4 billion increased expenditure for diabetes, $44.4 billion was spent on medications meant to treat as well as to prevent the disease.

An all-payer system or a single-payer system can be implemented as ways to combat high health care prices. Both these payer systems can regulate prices so that all insurers and public programs pay the same amount. However, this system could be met with resistance from all those who directly benefit from high prices, including physicians, hospitals, pharmaceutical companies and others.

The Delaware Department of Health and Social Services recently recommended five strategies to reduce healthcare spending and improve health outcomes in the state. These suggestions would be welcome to healthcare providers and their supporting services such as medical billing and coding companies. Recommended strategies are – establishing state healthcare spending and quality benchmarks, examining and reporting on variation in healthcare costs and care delivery and ensuring providers have access to useful data, implementing alternative and capitated-rate payment models across Medicaid and state employee populations, supporting providers to achieve success under risk-based payment models, and teaming up with stakeholders to continue improving social and economic issues affecting health outcomes.

Julie Clements

Julie Clements, OSI’s Vice President of Operations, brings a diverse background in healthcare staffing and a robust six-year tenure as the Director of Sales and Marketing at a prestigious 4-star resort.

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