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“IN AMERICA nearly one in every five dollars spent is on health care,
a larger share than in any other country. Many of the culprits are well-known. Americans have
more procedures, pay more for them, and face exorbitant administrative costs. One driver
of rising costs has often been overlooked, however: politicians. [Emphasis mine]”
(Ref. 1)
Prescription Drugs
Another culprit is claimed to be prescription drugs.
- ”The sickest 5% of Americans account for at least 50% of all health-care spending, according
to a Kaiser Family Foundation study.
- ”Prescription drugs now eat up an astounding 40% of all the health spending among high-cost
patients, the study found.
- ”The data underscore the importance — and cost — of prescription drugs in treating people
with serious illnesses such as HIV, MS, cystic fibrosis, rheumatoid arthritis, diabetes and
cancer.
“If you tuned into {the August 2019} Democratic presidential debates
you got an earful on runaway health costs and various proposals to solve the health-care access
problem. But amid the talk of Medicare for All, universal care, a public option, and other bold
proposals, one underlying issue continue{d} to dominate the discussion inside and outside of
Washington: The high-cost of pharmaceutical drugs.
“{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. 2)
The Elderly
Another 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. 3)
According to Reference 3, 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 - less than $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. 4)
For comparison, the U.S. defense spending in 2018 amounted to
only 3.2% of GDP as compared to the 17.9% of GDP in 2017 for American health care.
[5] 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. 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. 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. 4)
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. [Emphasis mine] Pharmaceutical companies
invented new types of prescription drugs. They advertised straight to consumers and
created additional demand. [Emphasis mine] 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.
[Emphasis mine]
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 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. [Emphasis mine]
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.[4]
Lifestyle Changes
“The second 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.
“These diseases cost more than $5,000 per person. The average
cost of treating diabetes, for example, is $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. 4)
In Summary
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, government payment for
health care of the uninsured is not free.
“High healthcare spending is not necessarily a bad thing,
especially if it leads to better health outcomes. However, that is not the case in the U.S.
When evaluating common health metrics, the U.S. lags behind other countries despite higher
healthcare spending.” (Ref. 6)
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References:
- Health-care costs are soaring, but don’t blame old people, Tate Ryan-Mosley,
MIT Technology Review,
21 August 2019.
- Blame Congress for high health-care costs, The Economist,
2 September 2017.
- Wondering why health-care costs are so high? Blame it on the drugs,
Walecia Konrad, cbsnews.com,
2 August, 2019.
- The Rising Cost of Health Care by Year and Its Causes, Kimberly Amadeo,
the balance, 28 February 2020.
- The Biggest Military Budgets As A Share Of GDP In 2018, Niall McCarthy,
Forbes, 29 April 2019.
- WHY ARE AMERICANS PAYING MORE FOR HEALTHCARE?,
Peter G. Peterson Foundation,
15 March 2019.
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