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Why Health Care Is so Expensive

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Rising health care costs are causing many individuals to put off purchasing California health insurance, and those who do obtain insurance are paying more costs and receiving less benefits. The rising cost of group health insurance is forcing employers to reduce benefits or opting to drop their group health insurance plans altogether. The government is facing ever-growing deficits to support expensive health care programs while the number of uninsured individuals not only in California, but also around the US, are growing.

Americans spend nearly $2 trillion annually on health care. Put more simply, for every dollar earned, a little over 15% is going to health care costs. According to recent statistics, only half of the nation's health-care costs are paid by out-of-pocket or private health insurance. Government health care programs such as Medicaid and Medicare support a majority of the rest. Why?

Who's to blame for the rising cost of Health Care (Not Health Insurance)

Please take note of these two definitions:

Health care: healthcare is the prevention, treatment, and management of illness and the preservation of mental and physical well being through the services offered by the medical, nursing, and allied health professions.

Health Insurance: The term health insurance is generally used to describe a form of insurance that pays for medical expenses.

Many people blame the rise in health care with the creation of Medicare and Medicaid in the 1960s. Following the implementation of these two government programs, doctor’s fees doubled in less than 10 years. Escalating costs got out of control until the government created Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) in the 1990s. Nevertheless, health-care costs have been rising steadily since the turn of the new century.

While most of the blame on high health care costs is focused on the necessity of physicians and facilities in the United States to carry malpractice insurance, inflation, lifestyle, and a growing population of seniors are also contributing factors. A hundred years ago only four people out of every hundred lived past the age of 65, while today 1 out of every 4 people exceed that age.

Add to that the development of advanced and expensive technologies and drugs. Medical research and development of advanced medical technologies create options for less invasive surgical procedures that come with a high price tag. The cost of prescription medications is exorbitant. Studies also shown that the pharmaceutical industry enjoys the highest profit margins of any other field or industry in the country. According to the OECD (Organization for Economic Cooperation and Development), Americans pay 70% more for drugs than other countries (many of which utilize a price cap).

Another major culprit of rising health care costs is the design and utilization of America's multi-payer insurance system, which generates massive amounts of administrative costs.  Then comes malpractice insurance. As of 2006, physicians wary of lawsuits and claims of malpractice spent 7% of health-care dollars on malpractice insurance and defensive medicine practices. Such defensive practices generate unnecessary and costly tests and procedures.

Despite the high cost of health care in the United States, the World Health Organization ranked the United States 37th in health care, utilizing health status indicators developed by their organization, comparing practices and standards from around the globe.

Health care costs are not initiated by California health insurance providers, but by the current state of the American health care system today. Revision is drastically needed, but when such changes will occur is still undetermined.

 

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