White Paper: Healthcare Cost Trends

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Health Care Cost Trends

Health Cost Trends

Over the last several years, the issue of rising health care costs has been increasingly brought to the forefront. Where, the consistent price increases have begun to eat into the pockets of many consumers. Evidence of this can be seen by looking no further than a study conducted by the Kaiser Foundation. Where, they found that Americans spent $2.3 trillion on health care services in 2008. This is three times the rate that they were spending on health care services in 1990, which accounted for $714 billion. ("U.S. Health Care Costs") What this shows, is that while Americans do have access to cutting edge treatments and technology in health care, the overall amounts of demand are causing costs to skyrocket. Then, when you combine this with a severe economic recession and large government deficits, means that the individual is going to have to pay more of the costs for various health care services or health insurance. A good example of this can be seen, with a survey that was conducted by Price Waterhouse Coopers, which found that 42% of employers are going to be passing on various health care costs to employees. ("U.S. Health Care Costs Jump 10%") This is important, because it shows how rising costs and various economic challenges could have an impact upon the underlying levels of health in the individual. As an increasing number of people, do not have any insurance because they cannot afford the rising premiums. To prevent the vast disparities from becoming worse requires understanding why health care costs are rising. This will be accomplished by examining the various reasons why health care costs are consistently going higher to include: medical related factors, lifestyle factors, fraud and cost shifting. Together, these different elements will provide an overall scope, as to what specific factors are helping contribute to rising health care costs.

Medical Related Factors

When you look inside the field of medicine, it is clear that there are a number of different costs that can have an impact upon prices. A few of the most notable would include: rising physician costs, disparities in treatment and government regulations. Physician costs for health care services in the U.S. are more in comparison with other industrialized countries. Where, American doctors will earn two three times as much as their counterparts in other countries. Part of the reason for this, is because many doctors have begun to focus on offering more specialized services and utilize expensive technology as a part of their practices. Evidence of this can be seen by looking no further than, total number of physicians that became dermatologist and radiologists between 1997 and 2006. As there was a 97% increase in the number of doctors working as dermatologists, while the number of radiologists would increase by 65%. As far as expensive technology is concerned, it has increased the overall costs of health between 38 to 65%. This is important, because it shows how the overall amounts of fees that physicians are charging and the use of technology will have a dramatic impact upon the costs for a variety of health care services.

Disparities in various health care services often occur because of redundant or inefficient procedures that are in place. Where, many different health care providers will still utilize paper-based medical records and other inefficient methods. This is problematic, because this reduces the overall quality of health care services that are being provided. With it increasing the total number of medical errors; due to the fact that various procedures creates an environment for mistakes to occur. A good example of this can be seen with medication errors, where it results in 1.5 million injuries every year and increases costs by $3.5 billion. ("Medication Errors Injure 1.5 Million People") At the same time, the inefficient procedures will increases the overall costs of care. Evidence of this can be seen by looking no further than a Rand study, which found that the inefficient medical procedures can increase health care costs by as much as 30%. This information is significant, because it highlights how the lack of having efficient procedures in place can cause errors to increase. As the inefficiency within the organization will slow down diagnosis and treatment options, this will increase costs as well as reduce the overall quality of care being provided.

The different government regulations will affect the overall way health care services are delivered. As the different regulations and government programs, will determine how much various fees are for these services and what amount they will pay to health care providers. Evidence of this can found in a study that was conducted by the Cato Institute, which found that government regulations accounted for a $169.1 billion drag on the health care industry. This is significant, because it shows how government regulations are helping to contribute to the inefficiency of many health care providers. As they were implemented with the best of intentions; but have failed to address the issues that many health care providers are currently facing. (Conover 2004)

Lifestyle Factors

The lifestyle of an individual will play an important role in determining health care costs. What is happening is an increasing number of Americans are obese. Simply put, this is when someone will have a body mass index above 30. The body mass index is the overall amounts of fat, in proportion to the height of the individual. This is problematic, because obesity has been shown to be directly linked to a variety of conditions including: diabetes, high blood pressure, coronary artery disease and heart disease. These various conditions will require increased usage of health care services and prescription drugs to treat them. Over the course of time, this can help to contribute to higher health care costs, as individuals and insurance companies are required to pay an increasing amount. A good example of this can seen with a study that was conducted by Centers for Disease Control (CDC), which found that the overall number of obesity cases increased by 37% between 1998 and 2006. During the same time period, they found that it accounted for 9.1% of health care cost in 2006. This is above the 6.5% that was reported in 1998. Overall obesity cases now account for, a total of $147 billion of the increases being seen in health care costs. At the same time, the individuals that are overweight will spend on average $600.00 per year more in various prescription drugs. Commenting about these results the lead researcher from the study Dr. Eric Finkelstein said, "Although bariatric surgery and other treatments for obesity are increasing in popularity, in actuality these treatments remain rare. The medical costs attributable to obesity are almost entirely a result of costs generated from treating the diseases that obesity promotes. As long as obesity prevails to the extent that it does today, it will continue to be a significant burden on health care." ("Obesity Health Care Cost U.S. $147") This is important because it highlights how obesity cases will require increased amounts of health care services and prescription drugs, as the two will be necessary in treating the condition.

Fraud

Another issue that is impacting the underlying costs in health care is fraud. This is when an individual will deliberately try to make false claims to: the insurance company, health program or health provider; about various services that may or may not have been received. With it currently accounting for 3 and 10% ($60 billion to $600 billion) of the total health care costs every year. (Amadeo 2010) This is problematic, because the underlying amounts of fraud are contributing to the problems that are occurring in health care. Where, the inefficiency and waste inside the system will help to allow for various instances to occur. To make matters worse, the underlying amounts of fraud are continuing to increase. Evidence of this can be seen by looking at information from the National Health Care Anti-Fraud, which found that this accounts for a $100 million per day problem. ("2010 Medical Cost Trends ") This is significant, because it shows how the underlying amounts of fraud are helping to make the problem worse, as the industry has no effective way of accounting for various cost errors. When these go undetected, they can allow for a culture of inefficiency to exist. At which point, the underling amounts of fraud will become more extreme.

Cost Shifting

Cost shifting is when the insurance company or government program will pass more of the financial burden on to the individual. The idea is that by having someone pay more out of pocket expenses for health care services, they will be responsible, as to how and when they are being utilized. This would allow various insurance carriers or government programs to reduce their exposure to a particular individual, while allowing their costs for health care services to remain stable. The problem with using this strategy is that it can lead to worse health care problems down… [END OF PREVIEW]

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