5 Things That Drive Health Care Costs Through The Roof

closeup of a young caucasian healthcare professional wearing a white coat calculates on an electronic calculator

The United States of America spends more money on health care than any other country in the world. While it is wonderful that a high quality of care is available to many Americans, many of us pay extremely high insurance costs.

Those who cannot afford insurance and do not qualify for Medicaid and other government programs are penalized on their taxes, and may end up paying back a lifetime of debt should they require a medical procedure. There are obvious problems with this system.

According to the National Health Expenditures 2014 Highlights: “In 2014, U.S. health care spending increased 5.3 percent following growth of 2.9 percent in 2013 to reach $3.0 trillion, or $9,523 per person.”

That is indeed a huge amount of money. So what’s making these costs so high? While there are many factors involved, the following are five that significantly contribute.

Sky-high CEO salaries

Health care CEOs in this country are raking in millions of dollars each year. Last year, the Wall Street Journal published an article detailing some of the top CEO salaries of 2014. At the top of the health care CEO list was Brenton L. Saunders, CEO of Actavis plc, who made 36.6 million dollars in 2014. Twenty-nine other health care CEOs were listed beneath him, with salaries from 3.4 million dollars to 27.1 million dollars.

On this matter, MedCityNews reports a quote by Wendell Potter, a former public relations executive at Cigna: “There’s no doubt that one of the reasons why Americans pay more for health insurance and for healthcare than people in any other country in the world is because of this high executive compensation.”

Demand for new technologies

Developing new medical technologies is important for the progress of medicine, but it’s also a costly endeavor. Also, some new technologies may not work better than older ones, but people want to try the newest treatments regardless. According to Julie Appleby, writing for PBS NewsHour, and citing a report by the Bipartisan Policy Center: “Patients and doctors often demand the newest treatments, even if there is little or no evidence that they are better. Prices for newer treatments are often higher than for the products they replace.”

Medical professionals often get paid per service

In her article, Appleby also explains the system of medical professionals getting paid per service, which encourages more services to be performed, regardless of whether they may be extraneous. Again citing the Bipartisan Policy Center’s report, she writes: “Most insurers — including traditional Medicare — pay doctors, hospitals and other medical providers under a fee-for-service system that reimburses for each test, procedure or visit. Coupled with a medical system that is not integrated, this encourages overtreatment, including repetitive tests, the report says.”

The Affordable Care Act

While the Affordable Care Act, aka “Obamacare,” has had some positive outcomes, by increasing the number of people covered by health insurance, it has also had the drawback of making health-insurance costs significantly higher for many people. On this effect of the Affordable Care Act, Michael Bell wrote for Forbes: “After all this effort about Obamacare, health costs are going to go up — more people being covered for more things with the hope that people currently with health insurance will help pay for the new people in health insurance. We can debate whether this is fair or not for a long time. The fact that it does very little to solve our exploding healthcare cost problem is not up for debate. It won’t.”

Also, according to the National Health Expenditures 2014 Highlights: “The faster growth [of health care costs] experienced in 2014 was primarily due to the major coverage expansions under the Affordable Care Act, particularly for Medicaid and private health insurance. The share of the economy devoted to health care spending was 17.5 percent, up from 17.3 percent in 2013.”

Unhealthy lifestyles

This is a major one. When people do not take care of themselves and follow healthy lifestyles in order to help prevent disease, not only do they often suffer, the entire economy often suffers. Rates of obesity in the United States are soaring, along with the type 2 diabetes and heart disease, which often accompany them. Many people still smoke, and the scourge of cancer runs rampant.

While not all cases of these illnesses can be prevented, many can if healthier lifestyles are adopted. This leaves many people frustrated. Those who do lead healthy lifestyles and take care of themselves may ask themselves why they should be subjected to higher health care costs because others do not practice prevention.

Health care and its accompanying costs is a complicated and multifaceted issue, but there are ways to start making improvements. If everyone commits to a healthier lifestyle, it would go far. We, as a nation, could also re-examine how our health-insurance system works (and how it doesn’t), and put a limit on the egregious salaries that CEOs make.

We could also find ways to make new technologies more cost effective, after we make sure that they really work better than the old ones. If we took these steps, as a start, health care costs could become less of a burden on the people of this nation.

— Tanya Rakhmilevich


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