The Centers for Medicare and Medicaid Services has anticipated that the overall healthcare costs comprising of private and public spending will rise by an average of 5.5% per year over the next decade. The healthcare cost is expected to grow to $6 trillion by the year 2027, and healthcare spending is expected to grow faster than the economy and will increase to 19.4% of GDP in 2027. Every year the Americans spend huge money on healthcare in the form of premiums, high deductibles, copays, and other out-of-pocket expenses. These are just some of the costs associated with health and wellness in the country. The government policy is the reason behind the rising healthcare costs. The launch of government programs like Medicare and Medicaid that was designed for people without health insurance allowed insurers to increase prices. According to the Journal of the American Medical Association, healthcare costs in the U.S. have risen drastically in the last several decades and these costs are expected to rise to $17,000 per person. According to the study of the Journal of the American Medical Association, healthcare spending is broken down into the following categories:
32.7% on Hospital Care
15.6% on Physician services
15.1% on other personal healthcare costs
9.5% on Prescription Drugs
6.6% on the net cost of health insurance
4.8% on nursing care facilities
4.8% on investment spending
4.3% on clinical services
2.8% on Home healthcare
2.5% on Government public health activities
1.3% on Government administration
Reasons behind the Rising Healthcare Costs
The Journal of the American Medical Association’s study shows that the following key factors are responsible for the rising healthcare costs in America:
Growth in the Population and Aging Population
With the growing population, even the healthcare cost is rising, as there is an increase in the senior population and people are also living longer. Therefore, 50% of the rise in healthcare spending is mainly due to the increased costs for services such as inpatient hospital care. It is a big surprise that the two biggest factors behind the increased healthcare spending are an increase in the population and growth in the aging population.
Increase in Chronic Illnesses
The maximum increase in healthcare spending is majorly due to the increased cost of diabetes medications. The major amount of increased healthcare spending accounts for diabetes medications that were alone responsible for the $44.4 billion spending. Besides diabetes, some of the other chronic illnesses that account for the greatest increase in healthcare costs are high cholesterol, high blood pressure, depression, low-back, and neck pain, urinary disease, osteoarthritis, blood infection, falls, and oral disease.
Increased Ambulatory Costs
Ambulatory care comprising of outpatient hospital services and emergency room care has increased the healthcare cost the most among all the studied categories. The annual outpatient costs rose to $706.4 billion and even the emergency department costs across all health conditions have increased.
The increased cost of health insurance premiums is the major concern for most people. According to the National Conference of State Legislatures, the average premium for family health insurance coverage is continuously rising. Even the private individual health insurance premium price has increased and the two most common reasons given behind the rise are government policy and lifestyle changes.
Government Programs like Medicare and Medicaid
Medicare and Medicaid programs have increased demand for medical services that have further resulted in increased prices. Besides these, even an increase in the cases of chronic conditions like heart disease and diabetes have a direct impact on healthcare costs. Chronic diseases account for 90% of the healthcare costs, and more than half of all Americans have a chronic illness.
Higher Out-of-Pocket Costs
Besides higher health insurance premiums, Americans are also paying higher out-of-pocket costs. High deductible health plans have imposed higher out-of-pocket costs that have added to the healthcare cost.
Lack of Transparency and Inefficiency
Knowing the actual cost of healthcare is difficult due to inefficiency and lack of transparency. The cost of healthcare is increasing and it is evident from the complicated medical bills and a few other details but it is not easy for the people to know what they are paying for. It has also been reported in the Wall Street Journal that few hospitals charge more for surgeries or treatment, as they are aware of the actual cost of the medical procedures, so even patients find difficulty in understanding the actual price. As far as maintaining transparency is concerned, only a very few numbers of hospitals and healthcare institutions have maintained transparency.
The rising healthcare cost has forced people to skip medical care altogether, simply because people are afraid of medical bills. It has been revealed in a poll that around 44% of the Americans refused to visit doctors due to rising costs and around 40% of Americans skip to undergo a test or treatment.
All the above-mentioned factors have contributed to the rising healthcare costs, though the growing population and aging population play a leading role in the rising healthcare costs. There are some other factors too that lead to rising healthcare costs like chronic diseases, increased costs of emergency room care and outpatient care, higher premiums, etc. The medical service price and intensity along with the increasing cost of pharmaceutical drugs account for more than 50% of the increase. Other factors that lead to the cost increase varies by the type of healthcare and health condition.