Top 10 healthcare cost drivers
WhatsTheRealCost.org
Health care costs in the United States have risen from $1,100 per person per year in 1980 to nearly $7,900 today.1 Medical advances during this time deliver value, but not commensurate with the rising costs that push health insurance rates beyond the reach of too many of us.2 Claiming one in every six cents Americans spend ($2.3 trillion), out-of-control health care costs threaten our entire economy.3
So why do costs continue to rise? Experts4 have identified the following 10 top cost drivers:
1 - “It’s covered”
Few realize that the drug they paid a $30 co-payment on costs hundreds, or that physician office visits are primarily paid by insurance coverage—most patients pay only a small portion5 of the actual cost. As medical cost inflation continues to rise higher than consumers’ co-payments and deductibles, employers are picking up the bulk of premium costs—making the consumer less aware of total costs.6
2 - Personal habits
Our individual choices increase the cost of coverage for everyone
- Tobacco and second-hand smoke kill 450,000 people in the U.S. annually and sicken millions, costing $96 billion in health care and $97 billion in lost productivity.7
- Obesity and complications (heart disease, diabetes, cancer) cost an estimated $117 billion a year, and drove 27 percent of the per-capita health spending growth from 1987 to 20018
- Chronic diseases—often preventable—take 75 cents of each health care dollar.9
3 - High Rate of Use
More care is not better care.
According to Dartmouth College’s Institute for Health Policy and Clinical Practice, the U.S. spends $500 billion dollars annually on unnecessary medical care. In fact, studies have shown that patients have at least a 43 percent chance of undergoing an unnecessary medical test at their next physician visit.10
4 - Technology
Hearts, hips and knees are routinely replaced. Cancer survivors number in the millions. Medical advances offer many life-enhancing and life-saving benefits—at a cost. More costs more. The U.S. has one-third more CT scanners and 2.5 times as many MRIs per person than the average in developed countries. While an x-ray machine costs about $175,000, a CT scanner costs $1 million and MRI machines up to $3 million.11 We get MRIs when an x-ray would do, possibly injuring health.12
5 - Defensive medicine—poorly coordinated care
Defensive medicine occurs when medical providers order unnecessary tests out of fear for being sued for misdiagnosis. Medical tests aren’t cheap. Some estimates indicate that defensive medicine costs the health care system more than $100 billion per year.13 Team that with a fragmented poorly coordinated care system that treats one symptom at a time (and 125 million Americans with at least one chronic condition)— health care suffers and costs increase.14
6 - Cost-shifting
When Medicare/Medicaid pass costs to the private market, by not paying the same rates, market rates rise. According to a study by Kaiser Family Foundation, shifting Medicare/Medicaid costs to private payers adds a “hidden tax” of $1788 to insure a family of four.15
7 - Prescription Drugs
Prescription medications can prevent and treat illness, improve quality of life and are the fastest-growing component of health care, thanks to biologic medications made from living organisms. These powerful medications are expected to drive usage 30-fold between 2005 and 2013. Biologics already cost between $1,000 and $3,000 per month today.
8 - Mandates / Regulations
Federal and state governments have placed thousands of mandates on the health care industry dictating what they must cover and how to process medical claims. Mandates increase administrative overhead and forces up the cost of health insurance.17
9 - Hospital and Facility Duplication
Hospitals have traditionally provided most surgical procedures to patients. However, a new phenomenon has transformed the landscape of these services. Doctors are building an increasing number of facilities that provide income-producing, surgical services to patients that require less overhead. As these facilities are built, physicians are leading patients to them, decreasing the number of income-producing procedures sent to hospitals. This leaves hospitals with more of the more costly emergency room business, and fewer profitable procedures. As hospitals lose money on more costly services, the costs of other services provided to other patients must increase.18
10- The Uninsured / The Underinsured
Uninsured individuals cost approximately $164 billion each year to treat. That figure is paid primarily by taxpayers (everyone) and private entities19. With so much invested, it’s important to understand the facts behind the numbers:
- 67 percent have private insurance and CMS says by adding government insurance, the total of those who have coverage, or are eligible for government programs, totals 95%20.
- More than eight in 10 uninsured Americans live in families where the head of the family works.21
For more information visit
www.WhatsTheRealCost.org
1. http://www.nchc.org/facts/cost.shtml,
2. http://laborcenter.berkeley.edu/press/sacbee_oct08.shtml
3. www.nchc.org/facts/cost.shtml,
4. America’s Health Insurance
Plans: A Shared Responsibility, 2008; Kaiser Family Foundation: Health Care Cost Drivers 2008; Blue Cross and Blue Shield Association Medical Reference Guide 2008; OECD Health Indicators, 2007Regence BlueCross BlueShield is an Independent licensee of the Blue Cross and Blue Shield Association,
5. Cost-sharing: http://www.kff.org/medicare/upload/7749.pdf,
6. What employers pay: http://www.ncsl.org/programs/health/healthmc.htm
7. http://www.tobaccofreekids.org/research/factsheets/pdf/0072.pdf,
8. http://www.cdc.gov/NCCDPHP/publications/AAG/obesity.htm
9. http://www.cdc.gov/nccdphp/overview.htm,
10. http://www.cbsnews.com/stories/2006/05/19/health/webmd/main1637144.shtml),
11.http://www.ecosante.org/index2.php?base=OCDE&langh=ENG&langs=ENG;,
12. http://www.parade.com/articles/editions/2008/edition_07-06-2008/3Too_Many_Tests
13. http://www.cbsnews.com/stories/2007/10/22/eveningnews/main3394654.shtml,
14. http://www.cdc.gov/nccdphp/overview.htm,
15. PricewaterhouseCoopers’ Health research institute. Behind the numbers* Health cost trends for 2009,
16. Stevens, D. AccredoHealth, “Speciality Pharmacy to Therapy Management: The Next Generation,” presented at PCMA Specialty Pharmaceuticals Annual Meeting, October 2005.,
17. NAIC.org and AHIP Regulation Chart support this statement.,
18. www.usatoday.com/money/health/2002-02-20-hospitals.htm; ,www.nihp.org/MARS.htm,
19. http://www.commondreams.org/headlines04/0511-07.htm., http://www.kff.org/uninsured/upload/7810.pdf,
20. http://www.census.gov/hhes/www/hlthins/hlthin07/hlth07asc.html,
21. http://covertheuninsured.org/factsheets/display.php?FactSheetID=124
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