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Why Are Healthcare Costs On the Rise?

Gina Ortiz / January 4, 2018 January 4, 2018

Healthcare is one of our country’s largest industries.  According to the National Health Expenditures Summary, CY 1960-2015, U.S. healthcare costs were $3.2 trillion in 2015.  In comparison, healthcare costs were $27.2 billion in 1960.  Here are 3 reasons why healthcare costs are on the rise.

1. Administrative Cost
   The cost to support, practice, and deliver healthcare is more expensive today than it was in the past.  According to the National Institutes of Health, the U.S. will spend over $300 billion solely for administrative tasks in 2018. Most of this cost is due to our complex health insurance network.  Every insurer covers a service differently. There are too many hands involved in facilitating and tracking all of this information.  Another high cost contributor is the cost in technological advances. Hopefully, the production of more advanced technology will help reduce costs and increase productivity in the future.
2. Consumers Lack of Information
   Although we have many resources available at our fingertips today, it is still very difficult for the consumer to make informed medical decisions. Healthcare services differ in price based on insurer and location.  Most consumers are not aware of the price variations that exist. Bills are paid by consumers as they come in with no questions asked.  Hospital bills have been outrageous with questionable costs. However, increased transparency in healthcare costs are on the rise. The introduction of reference based pricing and consumer driven health plans are some solutions to this issue.
3. Preventive Care Utilization
   Approximately 40% of deaths originate at least partially from preventable causes (http://www.ncbi.nlm.nih.gov/pubmed/15010446).  Americans are continuing to get more sick and one of the primary reasons can be related to poor Primary Care/Preventive Care utilization.  PCP’s encourage healthy behavior, monitor patient’s health changes, and help manage chronic conditions.  They play a vital role in keeping people healthy.  Studies conducted by the American Academy of Family Physicians (AAFP) have shown that people regularly seeing their PCP suffer from less chronic diseases and have lower healthcare fees.  People are also more likely to avoid expensive ER and hospital visits.  To help increase PCP utilization, employers can offer monetary incentives to their employees.  Some insurers already have incentive programs built into their plans.