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Health care is expensive for the following reasons:
1. Consumers tend to not be price sensitive when it comes to matters of personal/family health. In other words, the health care industry is built to service a customer that wants to avoid the worst case scenario no matter what the cost. Models like this tend to be expensive.
2. A corollary to point number 1 is that there's very little room for true productivity innovations in a market where creating failsafes is the most important exercise. Start ups fail all the time, as an example, but sometimes they work and when they do, these companies deliver massive productive improvements. Imagine if medical treatments and new hospital procedures failed all the time?
3. The industry does not provide effective price transparency to consumers. Insurance is one example of how prices are obfuscated in the health care industry, but there are other examples as well such as an adherence to line item pricing instead of package or convenience pricing. It's almost as if there isn't a functioning market to price.
4. Health care is a service that for the most part can only be delivered locally. While medical tourism is growing, it's still a microscopic portion of the overall industry. As a result, there's very little global competition.
5. The industry as a whole is incredibly complex with massive supply chains. Moreover, many treatments and procedures are labor intensive and/or capital intensive up and down that supply chain.
6. The United States subsidizes pharmaceutical research and development for the entire world. It's good for big pharma shareholders, but bad for consumers in the United States.
7. Malpractice insurance now accounts for $.10 of every dollar on a medical bill.
8. Because it's a complex field, there's really no such thing as an informed consumer. Patients are in the doctors' hands and by extension the hands of insurance companies, pharmaceutical companies, insurance companies, regulators, etc... The consumer doesn't know when or how to put pressure on pricing.
9. We, the consumer, take very, very bad care of ourselves.
When I was growing up (Oh boy – here it comes), my parents paid for the doctor visits and even hospital visits. Insurance covered “catastrophic events” and was reasonably priced. My insurance in college was (and I am of the Scottish decent so I remember every penny) $15.30 per month; there was less mobility so people tended to stay with a particular doctor; we did not try to create an immediate retirement plan by suing a doctor; hospitals were cost conscience (many owned by a group of doctors in the community); and most people understood that some costs such as maternity was not considered a catastrophic event.
If you’re a parent I know you’ll have problems with this statement!
So once business decided that investing in the medical field could be profitable; insurance policies were sold that covered everything; we received discounts for being in a group; and healthcare costs no longer mattered. As business began acquiring hospitals, increases were needed to generate profits (more costs) and they knew that patients no longer cared about prices as the money didn’t come out of their pocket. To increase profitability, doctors were forced to abandon their training in favor of what the insurance company would be willing to pay for and still keep the patient alive. However, to get paid, you have to fill out complex coding which required additional staff (more cost) and probably not see a check for 120 days (more cost) instead of “on the spot”.
The ABA prohibited lawyers from advertising until about 1969. Once the ads kicked in, people took notice that lawyers could get you money for medical outcomes that were not perfect (more costs). The cost to defend yourself and the ensuing bad publicity was more expensive than just settling which further increased costs. Now the insurance companies started to increase the costs of medical malpractice insurance because of increases in jury awards (average awards increased by 43% in one year). More cost to the system
To cover some of the additional costs, pharmaceutical companies began paying doctors to prescribe their product which propped up demand (more cost).
So it’s not just one thing but a series of decisions that created unintended consequences and a culture that places more emphasis on money than any other single element of life. (Just broke my soap box – but it’s insured)
While prior respondents make good points, everyone has missed one of the primary drivers of the high costs in healthcare.
Inflation.
Simply put, the huge quantities of federal dollars that are poured into healthcare (the massive spending by Medicare, Medicaid, and other government programs intended to help Americans get healthcare) 'bid up' the prices of all services in the healthcare market. Plot healthcare spending nationwide over the last 70 years and you will see a "hockey stick" effect beginning with Medicare in the 1960's.
This is simple economics; the more money that is competing for a given quantity of products and services, the higher the price will go. Add to this all the unnecessary procedures and wasteful practices, all the compliance costs with federal mandates from how the paperwork is filled out to the content of the privacy notices.
Another factor is our desire to have the latest technology. Am I the only patient who's conscious that we routinely use fancy imaging machines costing tens of thousands of dollars per use, when a simple $100 X-ray is probably sufficient? I guess the hospital administrators want to see those fancy high-priced machines paying for themselves, but it just drives up cost for no 'medically necessary' reason.
The best thing we as consumers can do to control our healthcare costs? Educate ourselves about nutrition and exercise; eat right; and get up off our duffs and exercise!!
All good points, to be sure. There are others.
Frivolous litigation is not the bug-bear it has been portrayed as, but malpractice insurance premiums are staggering to the individual/small group providers.
Medicare/Medicaid have added cost to the system, but have expanded coverage to people would otherwise suffer mightily. Fraud in those areas, not reimbursement, is the real culprit, and the bureaucracy responds by clamping down on reimbursement.
More people than you might think are informed and responsible consumers of health care services. But, price options are typically not available, and the quality/risk trade-off is embedded in existing networks, and not available as a risk choice.
Medical tourism is a dangerous alternative, when pursued solely for cost purposes. Training, education, hygeine, equipment, purity, technique expertise, and a host of other opportunities for bad outcomes are all unknowns. In short, ther is no - and will not likely ever be - a global competition in health care service delivery.
The use of ERs for routine health care needs by uneducated or indifferent consumers is expensive, and constrains the resources genuinely needed for emergency medicine. Too often, the visits aren't even necessary, made for condition that should have been recognized and treated at home. Happily, "doc in a box" care centers provide an accessible, capable, and less expensive alternative, but are typically used by the informed consumer, and not the real core of the problem user population.
The biggest issue? My opinion: fruitless end-of-life care, needlessly protracting low quality-of-life conditions at the insistence of misguided whose hopes have no basis, and/or agreed to by against-all-odds geriatric patients who may be deliusional. moderately confused, or in denial. The results are typically fabulous cost and resource consumption, prolonged suffering, and a long-belated acceptance of the reality that it was "time to go." This is not an argument for euthanasia, by the way.
Respected Sir,
The points provided by you are really worth of noticing.However, as every coin has two different signs,the health care scenario also has diffrerent side.
It takes certain period of time for a dfrug to be launched in the market.No doubt,that this needs time and money.But prior to this period,the inventor has a long way to go.Firstly,the invention itself consist of a greate deal of effort (Mentally,Physically & Financially). Taking drug chemistry & ethics of pharmaceutical sector in consideration, theirs initially a stage of pre-formulation test,in which the drug properties have to be detected.This consitutes of a lump some of the capital and investment.The test passes to the next stage if all the things are at optimum and satisfactory ratew!And if not.....the whole process has to be once more compelled to be done.Nextly, there's a test for stability,which can never be denied as it has a lot to do with the patient health.In this stage too,strict inspection is done for which the owner has to provide3 the capital.Later,only if the drug passes through these serfies of steps,in the clinical trial phase.This clinical trial phase is expexted to be the the most edging stage for the both-the drug and the owner,as both have to under go through tests and financial problems.The minimum buydget of the clinincal trial phases is considered to be approx.$2 million dollors.Investor has to invest blindly on the market statistics.And market statisics are never stable.
If and only if the drug passes all these "acid tests", it comes to the market.But this is not over yet!When this synthetic boon comes to the market,unfortunatly even this boon has to be marketed.And marketing needs additional capital and investment which is again a blind game of investment.People always like "show-offs" and get fascinated by the shines of the charming ads.Unfortunately medical boon is not even spared by this test!!
These are very primary investments.Whoile proceeding with the molecular research, innumerable amounts of drug designs are prepared and are submitted to rigorous identification and stability tests,Prior to preformulation.The test was priorly dine on trial and error basis.Fortunatly Computer Aided Drug Design (CADD) process is used these days which saves a specific period .But capital matter remains constant.Thousands of molecular designs are made and out of them only one is selected for preformulation.
In short, the whole scenario is completly filled with the blind investment of a huge amount of money.I havent yet mentioned about the market crises and adverse effect test of the of the drug which is considered as the other unfit dimension of the drug.
Saying that health care is expensive is very correct,but we should initially check out the complete scnario of the sector.Malpractices and Insurence policies remain far of,but what matters more is the practice of the health care.Health care in the term of pharmacy means the complete fitness of the body,which itself is a very complex matter.And drug means a substance used in the diagnosis, treatment, or prevention of a disease or as a component of a medication.
In any of the cases we cannot play with the patients health,and in many complex cases,their life.And if you view all these test regions with a serious nature,you will find out that the prices rated on the medicines (alon with the compusory taxes) is answerable as well as understandable.
Padon me if I have made mistake and sorry to waste your time.
Scott, You have great points! I have very little choices to change these except the last one - taking a good care of my own body.
While all of the preceding comments are fantastic, there is one missing element: the hospitals themselves. When Eisenhower left office he warned the U.S. of the Military Industrial Complex. The same warning should/could have been issued about the Healthcare Industrial Complex. Now that the compensation of this industry is being squeezed, Hospital's may start to act a bit more like a business. Accuracy and productivity no longer need to be ignored as they are and have been for decades. Kingdoms within the hospital fail to coordinate simple business processes that cost millions per facility per year. All of these processes are the underlying support of the excellent patient care and should do nothing but improve the care, quality and expediency of taking care of the patient. Until the simple blocking and tackling of running a business are addressed, the Healthcare Industrial Complex will continue to gobble more and more of our GDP.
Great comments from all. There are so many issues that drive the cost of healthcare It is difficult to slice the pie and determine what are the heaviest influencers driving up healthcare costs. In addition to the previous comments, the uninsured and underinsured tax the healthcare system very heavily. Healthcare organizations and providers cannot continue to provide services to all and pick up the tab for the millions of individuals who cannot financially afford insurance or just choose not to have insurance. Yes healthcare costs are driven by the consumer need and expectation for high technology, physician specializations, the reduced focus on primary care and preventative medicine, higher patient acuity in the hospital setting, lack of individual personal accountability for maximizing health, extraordinary measures for end of life care, etc. etc. The list goes on.
It has been most interesting over the last 30 years of my career participating in organizations flexing with reimbursement changes and regulation, implementing supply chain management techniques to reduce supply costs, focusing on process improvement, LEAN, TPS and other manufacturing quality processes to streamline, increase efficiencies and reduce costs, not to mention effectively managing the cost of highly trained healthcare staff that deliver the great care we provide.
Yet, the economic model for healthcare is a different animal. What other industry still offers and provides services even though they won’t get paid? There are the ‘haves’ and the ‘have-nots.’ And the ‘have-nots’ do contribute significantly to the failure of our current system. Balancing medical ethics and the margin is challenging at best.
For the futurists, the implication of obesity is enormous. We are already seeing a decline in life expectancy. When we get to the point that the majority of the population is obese and suffers from preventable diseases such as diabetes, hypertension and coronary artery disease along with possible musculoskeletal disorders associated with obesity we will be swimming in a healthcare model of chronic disease management that is mostly preventable.
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