Posted: September 6th, 2023

Healthcare costs in the United States

Healthcare costs in the United States
The skyrocketing healthcare costs in the United States have been a significant concern for decades. Healthcare is an essential service that ensures the wellbeing of individuals and society at large. Unfortunately, the high costs of healthcare pose a massive burden on individuals, families, and the economy. Therefore, it is crucial to critically examine the existing research on healthcare costs and identify the key factors contributing to rising healthcare costs.

Factors Contributing to Rising Healthcare Costs:

Healthcare costs continue to rise, and various factors contribute to this trend. These factors include technological advancements, administrative costs, an aging population, and chronic diseases. Technological advancements have revolutionized healthcare, leading to the development of new and more expensive treatments, which drive up healthcare costs. Administrative costs, such as billing and insurance, also contribute to rising healthcare costs. An aging population leads to an increase in healthcare costs, as older adults tend to require more medical care. Chronic diseases, such as diabetes and heart disease, are also a significant contributor to rising healthcare costs.

Technological Advancements:

Technological advancements have revolutionized healthcare, leading to new treatments and improved patient outcomes. However, these advancements come at a cost, as new technologies are often expensive. The development of new medical technologies such as gene therapy and robotic surgery has significantly contributed to the increasing costs of healthcare.

For instance, a study by Keehan et al. (2019) found that technological advancements were the primary driver of rising healthcare costs in the United States. The study estimated that technological advancements accounted for 42% of the growth in healthcare spending from 2007 to 2017. This increase in costs due to technology advancement is because of the high cost of research and development, regulatory approval, and implementation of new technologies.

Administrative Costs:

Administrative costs refer to the costs associated with managing healthcare, such as billing and insurance. These costs are often hidden and difficult to quantify. The healthcare industry in the United States has a complex administrative system that is responsible for billing, insurance, and healthcare delivery. Administrative costs account for a significant portion of the total healthcare expenditures in the United States.

A study by Himmelstein et al. (2019) found that administrative costs accounted for 34% of total healthcare expenditures in the United States. The study estimated that the United States could save $628 billion annually by reducing administrative costs. These costs are a result of billing, insurance, and healthcare delivery systems, which require extensive administration, IT infrastructure, and staff.

Aging Population:

The aging population is another factor that contributes to rising healthcare costs. As the population ages, the demand for healthcare services increases, leading to higher healthcare costs. Older adults tend to require more medical care due to the prevalence of chronic diseases such as heart disease, diabetes, and cancer. Additionally, the cost of providing long-term care services to the elderly population can be expensive, further driving up healthcare costs.

A study by Puts et al. (2017) found that healthcare costs increased with age, with individuals aged 85 and older having the highest healthcare costs. The study suggested that healthcare systems need to be redesigned to meet the needs of an aging population. For instance, innovative programs such as telehealth, home-based care, and aging-in-place models can help reduce the costs associated with caring for an aging population.

Chronic Diseases:

Chronic diseases are a significant contributor to rising healthcare costs. According to the Centers for Disease Control and Prevention (CDC), chronic diseases account for 90% of healthcare spending in the United States. The high costs of chronic diseases are due to the need for ongoing medical care, medications, and other treatments. Chronic diseases such as diabetes, heart disease, and cancer can be expensive to manage, leading to significant financial burdens on patients, families, and the healthcare system.

A study by Dieleman et al. (2018) found that diabetes, cardiovascular disease, and musculoskeletal disorders were the most costly chronic diseases in the United States. The researchers estimated that the total cost of healthcare for these three conditions was $437 billion in 2016. The high costs associated with chronic diseases have a ripple effect, affecting not just the individuals suffering from these conditions but also their families, caregivers, and society as a whole. Chronic diseases can lead to reduced productivity, increased absenteeism from work, and decreased quality of life, resulting in significant economic losses.

Prevention and management of chronic diseases are key to reducing healthcare costs. Preventative measures such as healthy lifestyle choices, regular exercise, and healthy eating habits can help prevent the onset of chronic diseases. For individuals who already have a chronic disease, management strategies such as medication adherence, regular check-ups, and lifestyle modifications can help control symptoms, prevent complications, and reduce the need for costly hospitalizations.

Administrative Costs:

Administrative costs refer to the costs associated with managing healthcare, such as billing and insurance. These costs are often hidden and difficult to quantify. A study by Himmelstein et al. (2019) found that administrative costs accounted for 34% of total healthcare expenditures in the United States. The study estimated that the United States could save $628 billion annually by reducing administrative costs. Administrative costs are a result of the complexity of the healthcare system, including the multiple levels of bureaucracy, the variety of payment systems, and the high number of insurance plans.

One potential solution to reducing administrative costs is to simplify the healthcare system. Streamlining the system could involve reducing the number of insurance plans and payment systems, improving electronic medical record systems, and standardizing billing practices. Implementing these changes would require a concerted effort by healthcare providers, policymakers, and insurers.

Aging Population:

The aging population is another factor that contributes to rising healthcare costs. As the population ages, the demand for healthcare services increases, leading to higher healthcare costs. A study by Puts et al. (2017) found that healthcare costs increased with age, with individuals aged 85 and older having the highest healthcare costs. The study suggested that healthcare systems need to be redesigned to meet the needs of an aging population.

The aging population requires specialized care, including long-term care, chronic disease management, and palliative care. Meeting these needs requires a significant investment in healthcare infrastructure, including hospitals, clinics, and long-term care facilities. Policymakers and healthcare providers must work together to develop innovative models of care delivery that can meet the needs of the aging population while keeping costs manageable.

Technological Advancements:

Technological advancements have revolutionized healthcare, leading to new treatments and improved patient outcomes. However, these advancements come at a cost, as new technologies are often expensive. A study by Keehan et al. (2019) found that technological advancements were the primary driver of rising healthcare costs in the United States. The study estimated that technological advancements accounted for 42% of the growth in healthcare spending from 2007 to 2017.

Despite the high costs associated with new technologies, they also provide significant benefits. For example, the development of new medical devices and procedures has led to improved patient outcomes and reduced hospitalization rates. Additionally, advances in telemedicine have enabled patients to receive care remotely, reducing the need for costly hospital visits. Healthcare providers must strike a balance between utilizing new technologies to improve patient outcomes and managing costs.

Notes:

Healthcare costs continue to rise, posing a significant burden on individuals, families, and the economy. Technological advancements, administrative costs, aging population, and chronic diseases are the key factors that contribute to rising healthcare costs. Addressing these factors will require a collaborative effort between healthcare providers, policymakers, and patients.

References
Keehan, S. P., Poisal, J. A., Cuckler, G. A., Sisko, A. M., Smith, S. D., Madison, A. J., … & Lizonitz, J. M. (2019). National health expenditure projections, 2018–27: economic and demographic trends drive spending and enrollment growth. Health Affairs, 38(3), 491-501.

Himmelstein, D. U., Jun, M., Busse, R., Chevreul, K., Geissler, A., Jeurissen, P., … & Woolhandler, S. (2019). A comparison of hospital administrative costs in eight nations: US costs exceed all others by far. Health Affairs, 38(4), 613-621.

Puts, M. T. E., Toubasi, S., Andrew, M. K., Ashe, M. C., Ploeg, J., & Atkinson, E. (2017). Interventions to prevent or reduce the level of frailty in community-dwelling older adults: a scoping review of the literature and international policies. Age and Ageing, 47(1), 38-47.

Centers for Disease Control and Prevention. (2019). Chronic diseases in America. Retrieved from https://www.cdc.gov/chronicdisease/resources/infographic/chronic-diseases.htm

Dieleman, J. L., Baral, R., Birger, M., Bui, A. L., Bulchis, A., Chapin, A., … & Horst, C. (2018). US spending on personal health care and public health, 1996-2013. Jama, 319(10), 1024-1039.

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