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What’s Driving U.S. Healthcare Costs Higher?

Posted by Emerald Coast Medical Association on Jul 6, 2018 3:53:49 PM

In 2016, Americans spent an average of about $9,000 per person on healthcare. This figure is almost double what patients in comparable high-income countries such as Canada, Germany, Denmark and Japan spent on healthcare in the same period. According to the biennial study published by the the International Federation of Health Plans (IFHP), the average cost for an MRI in the United States was $1,119 in 2015. This compares quite unfavorably with prices in other nations. The same MRI could be performed for $503 that year in Switzerland and only $215 in Australia. Having appendix removal surgery in America carried a price tag of almost $16,000, while in Switzerland one could have the same operation for only $6,040, and in Spain it was a mere $2,003.

What makes our healthcare so much more costly?

This has been the topic of much debate over the years. Blame has been laid on things like high utilization costs, low social spending, or a higher concentration of medical specialists. But a new study, conducted by researchers at the Harvard Chan School has shown that the real difference between the American healthcare system and systems abroad is simply one of price.

This study, published in March 2018 by the Journal of the American Medical Association, shows that utilization is not the problem. As a whole, Americans actually use the doctor less and spend less time in the hospital than patients in other countries. Our social spending is somewhat lower than most, but not low enough to account for the disparity in healthcare prices. Also, the number of medical specialists in the U.S. is not that different across comparable countries around the world. However, costs in the U.S. are still significantly higher for many of the same products and procedures.

This is due in large part to the differences between our systems. In the US, various insurance plans negotiate individually with care providers and pharmaceutical companies, unlike most of the nations to which we can compare. In other high-income developed countries, such as the UK, there is a central body that negotiates prices for the country as a whole. A regulating body that is essentially negotiating a “bulk price” for all of a country’s residents provides some leverage that can prevent prices from soaring out of control. The U.S. has no such regulating body, and there is a lack of political support for reforming the system.

The high overhead and administrative costs required to keep this system afloat also add to the total price of care. In 2013, Dr. David Cutler, a Harvard economist, was quoted as saying “The administrative costs of running our healthcare system are astronomical. About one quarter of healthcare cost is associated with administration, which is far higher than in any other country.”

That administrative burden has only continued to grow in the last five years as the healthcare landscape has shifted, regulations continue to be changed and adapted, and the system itself seems to be in a constant state of flux. Many doctors report that the time they lose to issues surrounding insurance claims and reporting clinical data is a major problem, and costs their practice a considerable chunk of time as well as money.

Prescription drug costs are also markedly higher in this country. The IFHP survey shows that the drug Humira, commonly prescribed for patients with a range of autoimmune diseases, costs $2,669 per patient here, while British pay half of that price for the exact same medication.

Chief Executive of the IFHP, Tom Sackville, formerly with Britain's National Health Service, says “It’s exactly the same product, but, in terms of the American patient, you’re just paying double or more the price for no more health gain.”

Defenders of the U.S. healthcare system say that spending on pharmaceuticals drives innovation, pointing to the fact that the United States drug approvals hit a 21 year high in 2017, with 46 unique new medications. This is true to an extent, as more money allows the pharmaceutical companies the resources to research and experiment with new products. Is it fair though, that this essentially means that the we in the U.S. are subsidizing pharmaceuticals for the rest of the world? It is also worth noting that any new treatments produced by this process may be inaccessible to many Americans that need them.

One misapprehension that the Harvard Chan School study clears up is in regards to the quality of healthcare.. Despite the high cost and flaws in the system, the actual level of care stacks up favorably against that of the other nations studied. We do have shorter wait times, and our treatment of strokes and heart disease is unrivaled. The unfortunate side to that is that high quality care is hard to access for many of our citizens.

At Emerald Coast Medical Association, what matters to our members matters to us. Healthcare legislation that impacts us at a federal and state level is always on our radar. We keep track of the latest news, research, and innovation to learn how it will impact physicians in our area. At our monthly meetings, we encourage education, networking, and sharing of personal experiences to improve the care we can provide for our patients as well as to grow our own knowledge.

Please click below to learn about the benefits ECMA membership provides and how you can be a part of this long-standing local organization.

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