6 Reasons U.S.Healthcare Is So Expensive
Why We Get Less for Our Money with U.S. Health Insurance
Only 91.4% of the population in the United States has health insurance, but 99% to 100% of the population in other developed countries has health coverage.
The healthcare system in the United States is complicated, and the market determines most healthcare expenses. Hospital care accounts for 31% of the nation's healthcare expenses, ranking higher than other western countries. Prescription medication prices that are high and uncontrolled, as well as the wages of healthcare personnel, rank higher. Administrative laws about billing and coding are another factor contributing to an individual's overall cost.
A variety of variables influence the cost of healthcare in the US. Despite an increase in wages for American employees, net pay has remained constant due to rising health insurance premiums.
KEY TAKEAWAYS
- Hiring pricey administrative support for billing & reimbursements is important due to various use and billing demands from several payers.
- Compared to inhabitants of other developed countries, the cost of pharmaceuticals in the United States is over four times higher.
- Hospitals, physicians, and nurses all demand higher fees in the United States compared to other nations, with hospital expenditures growing far faster than professional incomes over the last several decades.
- In some other countries, the costs of medications and other medical services are influenced, at least partly, by the government. Still, in the United States, prices are determined solely by market forces.
1. Multiple Systems Create Waste
It is normal practice to point the finger at "administrative" expenditures as the root of excessive medical spending. Compared to the other 10 countries investigated by the JAMA research, the United States spends around 8% of its healthcare budget on administrative expenditures. In contrast, these costs ranged from 1% to 3% in those other countries.
Employer-based insurance, private insurance purchased via healthcare.gov, Medicaid, and Medicare have their laws, funding sources, enrollment dates, and out-of-pocket expenditures, making the healthcare system in the United States a very complicated and convoluted structure. Consumers in each of these markets must select from several different coverage levels, high-deductible plans, managed care plans (HMOs and PPOs), and fee-for-service healthcare delivery models. It is possible that these plans do not contain prescription medication insurance along with their coverage levels, deductibles, copays, or coinsurance.
This requires that service providers comply with many restrictions about use, coding, and invoicing. And the expenses associated with these operations account for the lion's share of administrative expenditures.
2. Drug Costs Are Rising
Compared to people of other developed nations, the average cost of pharmaceutical drugs in the United States is about twice as high as the cost in those other countries. Compared to Europe, where drug costs are government-controlled and often based on the therapeutic efficacy of the prescription, high drug prices in the United States represent the single largest area of wasteful spending in the United States.
The United States spends an average of $1,443 per person on medication, while the other prosperous countries analyzed pay an average of $749 per person. This is due to the lack of price restrictions in the United States. The cost of medication in the United States is 256% more than the average cost in other nations. Private insurance companies in the United States can negotiate lower prescription pricing with drug manufacturers, often with the help of pharmacy benefit managers. However, Medicare, responsible for paying for a sizeable portion of the total national medication expenses, is prohibited from pricing with drug manufacturers.
3. Doctors (and Nurses) Are Paid More
As of 2020, family physicians in the United States receive an average annual salary of $214,370, while specialists earn an average annual salary of $316,000, which is much more than the average salary in other industrialized countries. Nurses' salaries in the United States are much higher than in other countries. A registered nurse in the United States makes around $74,250 per year, much more than the average pay of $58,041 in Switzerland & $60,253 in the Netherlands.
Managed care plans (HMOs and PPOs) in the United States may reduce healthcare costs if they require permission before patients can see expensive specialists. It is possible to save medical costs by seeing a nurse practitioner rather than a family physician.
4. Hospitals Are Profit Centers
The costs associated with hospital treatment make up 31% of the total cost of healthcare in the country.
Research published in 2019 in the journal Health Affairs found that between 2007 and 2014, the cost of inpatient and outpatient hospital treatment increased at a far quicker rate than physician care.
In 2020, hospital expenses reached $1.27 trillion, representing a 6.4% increase from the previous year.
The costs of surgical operations performed in hospitals in the United States are much higher than those in other nations. In the Netherlands, the usual cost of angioplasty to unblock a blocked blood artery is $6,390, whereas, in Switzerland and the United States, the cost is $7,370 and $32,230, respectively. Similarly, the cost of a cardiac bypass procedure in Switzerland is $32,010, whereas it is $78,100 in the United States.
Today, the financial stability of a significant number of hospitals is precarious. In addition, due to the coronavirus lockdown, elective surgeries have stopped, and the number of patients seeing their doctors has dropped significantly. Both factors are to blame for a significant portion of the loss in the general economy.
5. U.S. Healthcare Practices Defensive Medicine
As a result of the shared goal of protecting themselves from legal action held by hospitals and doctors, patients may be subjected to further exams and scans "just in case." And the costs of these testing might vary. The average CT scan cost in the United States is $896, which is much more than merely $97 in Canada and $500 in Australia.
The average cost of an MRI scan in the United Kingdom is around $450, compared to $1,420 in the United States. Researchers have concluded that the reason it is so costly to be ill in the United States is not due to a large number of tests and treatments but rather the high cost.
6. U.S. Prices Vary Wildly
Because the healthcare system is so complicated and there are no predetermined rates for medical services, service providers can charge whatever the market will support. It is possible for the amount that is paid for the same healthcare treatment to differ dramatically depending on the payer (i.e., private insurance and government programs, such as Medicare or Medicaid) and the geographical location in which the service is provided.
The Bottom Line
Most of the other developed countries keep healthcare costs under control by giving their governments a more active role in the price negotiation process. Their medical care systems do not necessitate the substantial administrative expenses that majorly contribute to price increases in the United States.
These governments can negotiate reduced pricing for drugs, medical equipment, and hospitals since they are the worldwide overseers of their country's healthcare systems. They can affect the therapies administered, the patient's access to experts, and their ability to pay for more costly treatments. Even though consumers may have fewer options, expenditures are kept under control.
A lack of political support in the United States has precluded the federal government from playing a more significant role in limiting the rising costs of medical care. The Affordable Care Act prioritized expanding access to medical care while preserving the existing system to foster healthy competition among insurers of health insurance and medical service providers.
The costs involved with the healthcare crisis of 2021 and 2020 threatened to exceed the healthcare system and the government's finances. As a result, people need to research to select the health insurance provider most suited to meet their requirements.