The Truth About America’s health care Costs
© David Burton 2022
The Truth About America’s health care Costs© David Burton 2022 |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
For many years, it has been found that the high cost of health care is a burden on U.S. families, and that health care
costs factor into decisions about insurance coverage and care seeking. These costs and the prospect of unexpected medical bills also rank as the
top financial worries for adults and their families. Polling in 2024 showed that lowering out-of-pocket health care costs was by and large the
public’s top health care priority. Health care affordability was also one of the top issues that voters wanted to hear presidential candidates
talk about during the 2024 election. The following summarizes the results of the 2024 health care polling.
“[An] analysis by Kaiser Family Foundation add[ed] new light on exactly who bears the brunt of these costs and why. “Just 5% of all Americans account for at least 50% of health care spending, [Emphasis mine] according to the Kaiser study. That makes sense. Of course the sickest people spend the most on health care. “But what may be more surprising is the fact that prescription drugs account for an astounding 40% of spending among high-cost patients, [Emphasis mine] pointing out once again how disproportionate the cost of prescription drugs can be . . . " ‘A very small group of patients with major illnesses is responsible for an outsized share of health care spending,’ . . . This new research shows that prescription drugs are a big part of the reason their bills are so high. - - - “For now, despite the clear data showing how huge the drug cost burden can be, especially among the sickest patients, how to lower those cost remains an open question.” [Emphasis mine] (Ref. 3) The Elderly A group that is being blamed for high health care costs is the population of Americans over the age of 65, our senior citizens. Yes, “health care costs are soaring, but don’t blame old people. The per-person allocation for those over 65 is actually shrinking. Health care expenditures have doubled since 2002, but most of that change can be attributed to the 91% increase in costs for those aged 18 to 64. In the last 10 years, the percentage of the US population over 65 has grown from 12% to 16%, but its share of total health care spending has remained flat, meaning the per-person allocation for those over 65 is actually shrinking.” [Ref. 4] According to Reference 4, here are some interesting facts about health care costs in the United States, as of 2016: Total health care expenditures: Over age 65 – less than $0.6 trillion; Ages 18-64 – more than $0.8 trillion; Under age 18 - < $0.2 trillion. The Share of costs per person for those 65 and over is actually decreasing. - - - First off, they’re healthier than ever. {The percentage of unhealthy seniors has fallen from 27% in 1998 to 21% in 2016.} And older people take better care of themselves than middle-aged adults – The percentage of people over 65 who used recommended services is greater than the percentage of people between the ages of 35-64. Meanwhile, share of costs per person for those under 65 is increasing. Government Policy and Lifestyle Changes “In 2017, U.S. health care costs were $3.5 trillion. That makes health care one of the country's largest industries. It equals 17.9% of gross domestic product. In comparison, health care cost $27.2 billion in 1960, just 5% of GDP. That translates to an annual health care cost of $10,739 per person in 2017 versus just $147 per person in 1960. Health care costs have risen faster than the median annual income.” (Ref. 5) For comparison, the U.S. defense spending - in 2018 - amounted to only 3.2% of GDP as compared to the 17.9% of GDP for American health care in 2017.[Ref. 6] What caused the enormous rise in health care costs in America between 1960 and 2017? “There were two causes of this massive increase: government policy and lifestyle changes. “First, the United States relies on company-sponsored private health insurance. The government created programs like Medicare and Medicaid to help those without insurance. These programs spurred demand for health care services. That gave providers the ability to raise prices. [Emphasis mine] A paper in Health Affairs . . . found that Americans use the same amount of health care as residents of other nations. They just pay more for them. [Emphasis mine] For example, U.S. hospital prices are 60% higher than those in Europe. Government efforts to reform health care and cut costs raised them instead. [Emphasis mine] “Second, chronic illnesses, such as diabetes and heart disease, have increased. As of 2010, the health care costs of people with at least one chronic condition are responsible for more than 85% of health care spending. Almost half of all Americans have at least one of them. They are expensive and difficult to treat. As a result, the sickest 5% of the population consume 50% of total health care costs. The healthiest 50% only consume 3% of the nation's health care costs. [Emphasis mine] Most of these patients are Medicare patients. The U.S. medical profession does a heroic job of saving lives. But it comes at a cost. Medicare spending for patients in the last year of life is six times greater than the average. [Emphasis mine] Care for these patients costs one-fourth of the Medicare budget. In their last six months of life, these patients go to the doctor's office around 25 times on average. In their last month of life, half go to the emergency room. One-third wind up in the intensive care unit. One fifth undergo surgery.” (Ref. 5) Government Policy As health insurance expanded, it covered more people and the demand for health care services rose. By 1965, households paid out-of-pocket for 44% of all medical expenses. Health insurance paid for 24%. Medicare and Medicaid covered more people and allowed them to use more health care services. Medicaid allowed seniors citizens to move into expensive nursing home facilities. As demand increased, so did prices. Health care providers put more money into research. It created more innovative, but expensive, technologies. Medicare helped create an overreliance on hospital care. Emergency room treatment is very expensive, making up one-third of all health care costs in America. An astonishing one out of five adults use the emergency room each year. In 1986, Congress passed the Emergency Medical Treatment and Labor Act. It forced hospitals to accept anyone who showed up at the emergency room. Prescription drug costs rose by 12.1% a year. One reason is that the FDA allowed prescription drug companies to advertise on television - a curse that has only worsened over time. Pharmaceutical companies invented new types of prescription drugs. They advertised straight to consumers and created additional demand. The number of drugs with sales that topped $1 billion increased to 52 in 2006 from six in 1997. The U.S. government approved expensive drugs even if they were not much better than existing remedies. In 2003, the Medicare Modernization Act added Medicare Part D to cover prescription drug coverage. It also changed the name of Medicare Part C to the Medicare Advantage program. The number of people using those plans tripled to 17.6 million by 2016. Those costs rose faster than the cost of Medicare itself. The nation’s reliance on the health insurance model increased administration costs. A 2003 study found that administration costs made up 30% of U.S. health care costs. It's twice the administrative costs in Canada. About half of that is due to the complexity of billing. For example, U.S. private doctors' offices use at least 11% of their revenue on administration. A big reason is that there are so many types of payers. In addition to Medicare and Medicaid, there are thousands of different private insurers. Each has its own requirements, forms, and procedures. Hospitals and doctors must also chase down people who don't pay their portion of the bill. The reliance on corporate private insurance created health care inequality. Those without insurance often couldn't afford visits to a primary care physician. By 2009, half of the people (46.3%) who used a hospital said they went because they had no other place to go for health care. The Emergency Medical Treatment and Active Labor Act required hospitals to treat anyone who showed up in the emergency room. Uncompensated care costs hospitals more than $38 billion per year, some of which is passed on to the government.[Ref. 5] Lifestyle Changes [Another] cause of rising health care costs is an epidemic of preventable diseases. The four leading causes of death are heart disease, cancer, chronic obstructive pulmonary disorder, and stroke. Chronic health conditions cause most of them. They can either be prevented or would cost less to treat if caught in time. Risk factors for heart disease and strokes are poor nutrition and obesity. Smoking is a risk factor for lung cancer (the most common type) and COPD. Obesity is also a risk factor for the other common forms of cancer. Prior to 2020, these diseases cost more than $5,000 per person. The average cost of treating diabetes, for example, was $9,601 per person. These diseases are difficult to manage because patients get tired of taking the various medications. Those who cut back find themselves in the emergency room with heart attacks, strokes, and other complications. [Ref. 6) As noted, the high health care costs in the United States are due to numerous causes – bloated prescription drug costs, government policy, bad lifestyles, belief in the something-for-nothing fairy, and more. It will take a colossal effort to reverse the trend of ever-increasing health care spending in the United States. One step in this direction would be to have the consumer of health care services shoulder more of its cost directly. This might well force the consumer to search for ways to lower health care costs, e.g., shop for lower prices, avoid unnecessary visits to medical facilities, improve lifestyle, demand reduced administrative costs, etc. America must do away with the attitude of: “If I don’t have to pay for it directly, I’ll use it and the more the better.“ America must come to realize that government “freebies” are never free. Ultimately, someone has to foot the bill. Health insurance is not free, Medicare is not free, Medicaid is not free, Obamacare is not free, and government payments for health care of the uninsured are not free. High healthcare spending is not necessarily a bad thing, especially if it leads to better health outcomes. However, as of 2019, that was not the case in the U.S. When evaluating common health metrics, the U.S. lagged behind other countries despite higher healthcare spending.” [Ref. 7] The cost of health care in the United States far exceeds that in other wealthy nations across the globe. At the same time, the United States lags far behind other high-income countries when it comes to both access to care and some health care outcomes. As a result, policymakers and health care systems are facing increasing demands for more care at lower costs for more people. And, of course, everyone wants to know why their health care costs are so high. The answer depends, in part, on who’s asking this question: Why does U.S. health care cost so much? Public policy often highlights and targets the total cost of the health care system or spending as a percentage of the gross domestic product (GDP), while most patients (the public) are more concerned with their own out-of-pocket costs and whether they have access to affordable, meaningful insurance. Providers feel public pressure to contain costs while trying to provide the highest-quality care to patients. Total U.S. health care spending has increased steadily for decades, as have costs and spending in other segments of the U.S. economy. In 2020, health care spending was $1.5 trillion more than in 2010 and $2.8 trillion more than in 2000. While total spending on clinical care increased in the two decades prior to 2020, health care spending as a percentage of GDP remained steady and hovered around 20% of GDP (with the largest single increase being in 2020 during the COVID-19 pandemic). No single sector’s health care cost — doctors, hospitals, equipment, or any other sector — increased disproportionately enough over time to be the single cause of high costs. One of the areas in health care with the highest levels of spending in the United States is hospital care, which has accounted for about 30% of national health care spending for the past 60 years (and has remained very close to 31% for the past 20 years). Although hospital spending is the focus of many cost-control policies and public attention, the increases are consistent with the increases seen across other areas of health care, such as for physicians and other professional services. Total spending for some smaller parts of nonhospital care has more than doubled over the past few decades and makes up an increasing proportion of total spending. For instance, home health care as a percentage of total spending tripled between 1980 and 2020, from 0.9% to 3.0%, and drug spending nearly doubled as a proportion of health care spending between 1980 and 2006, from 4.8% to 10.5%. The largest areas of spending that might yield the greatest potential for savings — such as inpatient care and physician-provided care — are unlikely to be reduced by lowering the total number of insured patients or visits per person, given the growing, aging U.S. population and the desire to cover more, not fewer, individuals with adequate health insurance. But policymaker and insurer interventions intended to change the mix of services by keeping patients out of high-cost settings (such as the hospital) have not always succeeded at reducing costs. Thinking about total health care spending as an equation, one might define it as the number of services delivered per person multiplied by the number of people to whom services are delivered, multiplied again by the average cost of each service: Health Care Spending = (number of services delivered per person) × (number of people to whom services are delivered) × (average cost of each service). Could health care spending be lowered by making major changes to the numbers or types of services delivered or by lowering the average cost per service? Although recent data on the overall utilization of health care are limited, in 2011, the number of doctor consultations per capita in the United States was below that in many comparable countries, but the number of diagnostic procedures (such as imaging) per capita remained higher. Furthermore, no identifiable groups of individuals (by race/ethnicity, geographic location, etc.) appear to be outliers that consume extraordinary numbers of services. No surprise - the exception is that the sickest people do cost more to take care of, but even the most cost-conscious policymakers appear to be reluctant to abandon these patients. It may come as a surprise that, in addition to the fact that the average number of health care services delivered per person in the United States was below international benchmarks in 2020, the percentage of people in the United States covered by health insurance was also lower than that in many other wealthy nations. Although millions of people gained insurance through the Affordable Care Act and provisions enacted during the COVID-19 pandemic, 10% of the nonelderly population remained uninsured in 2020. When policymakers focus on reducing health care spending, considering the equation above, and see that the United States already has a lower proportion of its population insured and fewer services delivered to patients than other wealthy nations, their focus often shifts to the average cost of services. A report comparing the international prices of health care in 2017 found that the median list prices (charges) for medical procedures in the United States heavily outweighed the list prices in other countries, such as the United Kingdom, New Zealand, Australia, Switzerland, and South Africa. For example, the 2017 U.S. median health care list price for a hospital admission with a hip replacement was $32,500, compared with $20,900 in Australia and $12,200 in the United Kingdom. In comparisons of the list prices of other procedures, such as deliveries by cesarean section, appendectomies, and knee replacements, the U.S. median list prices of elective and needed services were thousands of dollars — if not tens of thousands of dollars — more. Yet, the list price for these services in the United States is often much higher than the actual payments made to providers by public or private insurance companies. Public-payer programs (particularly Medicare and Medicaid) tend to pay hospitals rates that are lower than the cost of delivering care while private payers historically have paid about twice as much as public payers. However, the average cost per service is still high by international standards, even if it’s not as high as list prices may suggest. The high average costs are partially driven by the highly labor-intensive nature of health care, with labor consuming almost 55% of the share of total U.S. hospital costs in 2018. These costs were growing due to the labor shortages exacerbated by the COVID-19 pandemic. A majority of the country agrees that the federal government should ensure some basic health insurance for all citizens. Out-of-pocket spending for health care has doubled in the past 20 years, from $193.5 billion in 2000 to $388.6 billion in 2020. These rising health care costs have disproportionately fallen on those with the fewest resources, including people who are uninsured, Black people, Hispanic people, and families with low incomes. Increased cost sharing through copays and coinsurance may force difficult spending choices for even solidly middle-class families. In any given year, a small number of patients account for a disproportionate amount of health care spending because of the complexity and severity of their illnesses. To the average person in the United States, immediate cost-control efforts might best be focused on reducing the cost burden for families and patients. Policymakers should continue to seek ways to promote better health care quality at lower costs rather than try to achieve unrealistic, drastic reductions in national health care spending. Investing in prevention, seeking to avoid preventable admissions or readmissions, and otherwise improving the quality of care are desirable, but these improvements are not quick solutions to lowering the national health care costs in the near term. Long-term policy actions could incrementally address health care spending but should clearly articulate the problem to be solved, the desired outcomes, and the trade-offs the nation is willing to make. The U.S. health care system continues to place a disproportionate cost burden on the patients who can least afford it. In the short term, policymakers could focus on targeted subsidies to specific populations — the families and individuals whose household incomes fall outside the average or who have health care expenses that fall outside the average — whose health care costs are unmanageable. Such subsidies could expand existing premium subsidies or triggers that increase support for costs that exceed target amounts. Targeted subsidies are likely to increase total health care spending (especially public spending) but would address the problem of cost from the average consumer, or patient, perspective. Broader policies to ease costs for patients could also be considered by category of service; for instance, consumers have been largely shielded from the increased costs of care related to COVID-19 by the waiving of copays for patients and families. These policies would likely increase national spending as well, but they would make medical care more affordable to some families.[Ref. 8] --------------------------------------------------------------------------------------------------------------------------------- References:
|
| 30 May 2024 {Article 625; U.S. Gov't_98} |