Photo credit: Stockphoto. April 6, 2015
Keenan Cromshaw
Americans have the highest healthcare costs as a percentage of GDP and therefore pay the most per capita for healthcare as compared to any European nations. Despite this, we have lower marks in overall health indicators, such as life expectancy. Essentially, our healthcare system is sick. But why is this? The answer, like many, is very complex.
One of the biggest factors as to why the U.S. spends more on healthcare is the fact that the U.S. has a much higher rate of obesity as compared to every other European nation. In short, we’re fat! The United States in 2009 (and the rates are higher now) had an obesity rate of nearly 35%–nearly 5% higher than the next OECD nation (Mexico), about 10% higher than the next European nation (the UK), and almost 20% higher than the OECD (Organization for Economic Cooperation and Development) average. A 2012 study by the Obesity Prevention Source revealed that costs related to obesity in 2005 totaled nearly $190 billion, a number that is likely significantly higher now.
Data also shows that the United States has a significantly higher rate of diabetes as compared to the majority of European nations. Obesity and diabetes usually lead to higher medical costs due to conditions and treatments related to these diseases, such as hypertension and even cancer. As many can imagine, costs from these conditions and treatments will certainly inflate the costs of healthcare. The simple fact is that if you have a greater amount of unhealthier people, the higher the total healthcare costs.
One of the best (and probably the one most people can agree on) solutions is to simply get more Americans healthier! Americans need to both exercise and eat better to achieve this. When more people are healthy (and less people are obese), they go to the doctor less, need less treatments, and ultimately spend less on healthcare.
Another huge factor as to why U.S. healthcare is so expensive is due to the fact that many taxpayers and insurance payers pay for a phenomenon called “defensive medicine.” Defensive medicine is essentially medical practitioners ordering unnecessary diagnostic tests, procedures, and treatment plans that may include surgery. The tests to determine a patient’s condition can be extremely expensive along with procedures and treatment plans. These added costs are paid for mainly by insurance companies including Medicare and Medicaid, driving up the costs of healthcare.
The reasons why medical practitioners do this can be varied. Sheer uncertainty of a patient’s condition may prompt practitioners to order diagnostic tests and treatment plans, but a cause that many people believe is very prevalent is the notion that medical practitioners are afraid of having malpractice lawsuits against them. The total costs of defensive medicine practices in the United States may range up to $650 billion annually according to a recent study, although numbers may range lower. Nevertheless, this is still a significant reason as to why our healthcare is expensive and can and should be cured.
Reforming laws regarding malpractice may significantly help to decrease the amount of defensive medicine practiced by showing healthcare providers that they can provide ethical and effective healthcare without fearing an unjust lawsuit.
The next factor as to why the U.S. spends more on healthcare is the fact that the U.S. spends more than all of Europe combined on buying and researching prescription drugs ($365 billion compared to $216 billion). U.S. pharmaceutical research costs alone account for nearly 17.9% of total pharmaceutical revenue-which totals about $67 billion and accounts for nearly 40% of pharmaceutical market growth, the most of any country in the world.
Interestingly, the U.S. has a much higher usage of generic drugs (that are much cheaper as compared to band name drugs), yet spend a higher per capita amount for prescription drugs in general. The reason for this discrepancy is likely because Americans typically buy the MOST POPULAR drugs from brand name prescription companies (which are more expensive). These pharmaceutical companies also hold on to the patents of these drugs until they become non cost effective, decreasing competition. Additionally, the majority of prescription drugs in development are anti-cancer drugs, which are typically more expensive than other medications. The U.S. also prescribes more medicines per capita on average on prescription medicines compared to Europeans, thus driving up medical costs.
Decreasing the amount of time a brand name company has to hold on to the patent of a drug would help to increase competition and lower prices by allowing generic companies to sell the drug at a cheaper price. Moreover, insurance companies increasingly cover non cost-effective drugs/treatments (drugs/treatments that have a high cost of development but are used little and/or have marginal positive health effects) that premium holders are told are necessary, and thus raise insurance premiums. Regulating which drugs can be covered by analyzing cost vs effect would help to decrease total insurance costs and encourage research of cost effective pharmaceuticals.
The U.S. has a higher per capita usage and ownership of advanced diagnostic technologies such as MRI’s and CT scans. This means not only do we own more of the technology per capita, but these machines are used at a rate much higher than those of European nations. The price of using these machines is also typically higher in the United States. All three of these factors compound to drive up insurance costs and put a burden on premium payers and taxpayers at large.
But of course that’s not it. People in the United States also receive a greater amount of surgeries than their European counterparts per capita, which helps to further drive up medical costs. The higher use and ownership of diagnostic medical technology along with the higher rate of surgical procedures may also tie into defensive medicine practices, as the high use of many of these technologies and procedures helps lead to the conclusion that many of these things are NOT entirely necessary to diagnose and treat a patient. Keeping medical practitioners accountable by both decreasing the fear of malpractice lawsuits and also increasing patient-practitioner communication will help to ensure wasteful practices and procedures are reduced.
The last large factor as to why U.S. healthcare is so expensive is because of the immense complexity and inefficiency of healthcare administration. Healthcare administration is essentially everything but the actual diagnosis and treatment of disease, which could include insurance to patient communication, forms medical providers use to document aspects of their patients’ diseases, communication between insurance companies and healthcare providers, and much, more. Administration costs in 2012 reached an estimated $361 billion– and the numbers are rising every year. Some believe that the costs of this administration could be cut nearly in half through a variety of methods (which I won’t go into detail about) that essentially include standardization of records and increased and/or more efficient communication between healthcare providers, insurance companies, and patients.
In conclusion, healthcare in the United has many unique problems that must be individually addressed with precise care. Increasing the overall health of Americans, decreasing fear of malpractice claims, increasing patient-practitioner communication, abating administrative inefficiencies, and restructuring/amending pharmaceutical regulations will ensure healthcare costs go down.