Why is health care so expensive?

October 17 01:00 2015 by ushadmin

As Americans, we are facing many challenges with our health care system. The biggest one is the cost.

Between 1975 and 2008, Medicare spending grew 2.5 percent faster than our nation’s economy, consuming an increasingly larger share of our nation’s economic resources. Affordability has become a matter of great concern to individuals, families and businesses across the country. Businesses cannot remain competitive in the face of continued increases in health care cost.

Warren Buffet, in 2013 on CNBC, said health care costs are “a tapeworm in the US economy.” Many individuals struggle with their own share of health care expenses. More than one out of five Americans has medical debt. The high cost forces some to avoid care they may need, or thrust them into bankruptcy.

While there are multiple problems in our health care system, the number one problem is the high cost. America spends 50 to 100 percent per person more than other developed countries. With 10,000 new seniors turning 65 and joining Medicare every day, we cannot afford the out-of-line cost.

There are numerous factors contributing to our high health care cost, including unnecessary tests and procedures, the high cost of drugs, fraud, lack of tort reform, inefficiency, and lack of standards. Each of these factors contributes billions of dollars to the cost problem.

The number one contributor is the unnecessary tests and procedures. They account for up to a trillion-and-a-half dollars of excess spending per year. The root cause is the decades old system of reimbursement, which encourages more tests and procedures. The vast majority of providers is honest and performs or recommends what they think a patient needs, but there is no incentive to be conservative. The more visits, tests, and procedures there are, the more reimbursements occur. That is about to change.
The Patient Protection and Affordable Care Act (ACA), signed into law in 2010, includes a new concept for reimbursement called the accountable care organization (ACO).
Under the ACO model, providers are paid a fixed amount per month for each consumer under an ACO contract. For example, Medicare, Aetna, Cigna, BlueCross or other payers may enter into a contract with a hospital to care for a subset of the local population. Contrasted with the traditional fee-for-service model, the ACO provides an incentive for providers to eliminate unnecessary tests and procedures and focus on preventing people from getting sick.

Hundreds of ACOs are in operation across the country and some are producing savings. The ACO model needs refinement, but it has proved it can work and it should be expanded. In a way, it is common sense to pay for keeping people healthy rather than just treating them when they get sick.

The fastest growing cost in health care is coming from double-digit growth in the cost of drugs. The cost of drugs is a significant burden for millions of Americans. Some believe the root cause is greed, but I believe the root cause comes from Congress. When the Medicare Part D Prescription Drug Plan was passed in 2003, Congress inserted a provision prohibiting Medicare, now the larger purchaser of health care, from negotiating the price of drugs from the pharmaceutical industry. Other developed countries pay a fraction of what we pay for the same drugs. In effect we are subsidizing some of the wealthiest countries in the world.

Congress should immediately allow Medicare to negotiate the price of drugs they pay for. This simple change could save hundreds of billions of dollars.

Another area where unnecessary waste of money in health care goes is toward the dozen or more prescription drug TV advertisements foisted upon us every day. No other developed country in the world allows direct-to-consumer drug advertising on TV. The billions of dollars spent on advertising would be better spent on research for new drugs. The TV advertising, which is subsidized by taxpayers because it is a deductible expense, adds cost for drugs most people have never heard of and do not need. Consumers have learned how to search the web for solutions to health issues.
A solution which could greatly help bring down the cost of health care would be to require all suppliers and providers in health care to publish price lists. Unlike just about everything else we buy, the lack of transparency makes comparison shopping next to impossible.
Millions of people are joining the health care rolls at an affordable cost, but the large deductibles make most of their health care costs out of pocket and unaffordable. They need to be able to comparison shop for health care services.