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8 Reasons Why Healthcare Costs So Much


We all know by now that Americans pay the most overall for healthcare, and the most per capita, by large margins, than any other people in the world. And we do not have the best results by many measures for all of that massive expense.

Personal Finance, Columns, Taxes, Money, Healthcare

We all know by now that Americans pay the most overall for healthcare, and the most per capita, by large margins, than any other people in the world. And we do not have the best results by many measures for all of that massive expense. In short form, let’s review how this has happened, again.

1. By some estimates about 50% of what makes us sick and kills us is our own doing. I know, blaming the victim isn’t cool, but if we just avoided tobacco, alcohol, and drugs, kept our weight down, exercised for a half an hour every day, fastened our seat belts, etc., we’d be much healthier and our costs would plummet. Savings? Billions and billions.

2. The corollary to poor habits is the problem of non-compliance after having seen a physician. It’s the bane of every doc’s practice and it costs us heavily in morbidity, mortality, and runaway costs. For example, we know that 25% of prescriptions are never even filled; and I was taught that nine times out of 10, if you don’t take a medication, it can’t help you. More billions could be saved here.

3. Speaking of meds, let’s turn our sights on Big Pharma. Which just happens to be in the middle of the biggest, fastest price run-up in memory. Two-thirds of them did so in the last quarter alone, according to the Wall Street Journal. Pharma’s excuse is that they need the money for ever-more expensive research. But many don’t do research, they just market and distribute the work of others. And even the ones who do research, after amortizing that big cost, they still have one of the highest returns of any industry. If you think about it, pharmaceutical companies are really a semi-utility dealing with health essentials, not elective luxury goods. Prices should be regulated for the well-being of the community. Billions more saved.

4. Another semi-utility, existing for the common good, not really morally optional, is the insurance industry. They take about 25% of the premium dollar, translating to many billions, most of which could be saved by going to a low-cost Medicare-like system which operates at about a 5% cost. No dividends, etc., don’t you know. Many billions saved.

5. Another enormous cost driver is the fee-for-service model which is a hold-over antique from previous centuries. No matter how ethical docs may be, many studies have shown both the pressure from conscious and unconscious conflict of interests that we are subject to. Being paid more to do more simply drives costs. If you look at salaried systems, Kaiser being a good example, they practice much more cost-effective medicine, even with adequate salaries and perks. Yet more billions not wasted.

6. Next up is the malpractice bogeyman. It is real, but economists have shown that malpractice insurance, awards and defensive costs all together are “only” a single digit percentage of total costs. Do we need to go to something like no-fault panels? You bet. And if you look at JAMA’s annual list of state medical boards disciplinary records, you will see that a number of them need to up their game to discipline and discourage the real malpractice that threatens all of us. Billions more to be conserved.

7. Driving up costs is the rapid pace of technology. It is certainly expensive if not necessarily cost-effective. At least the subject is on everyone’s radar. No short-term savings here. Long-term, likely yes.

8. The last area in driving cost, we must admit, is the average doc’s inability to keep up with the rapid change in science and “best practices.” A RAND study showed that we average about a lowly 50%. That is just one reason why we need more, and better, I might add, Continuing Medical Education. Not necessarily Maintenance of Certification, however. The problems there are rife. Potential savings of unknown scope.

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