Causes of high health care costs

The use of expensive tests and treatments can contribute to increased health costs more than any other factor. Their use may be appropriate or inappropriate, but in any case the cost increases.

An example of an adequate but expensive treatment is the use of pharmacist to dissolve thrombus (thrombolytic or fibrinolytic) or techniques to permeable arteries (such as angioplasty) in the treatment of myocardial infarction.

These treatments are very effective and save lives. However, many novel and expensive treatments are not effective, are only slightly better, or are used inappropriately in patients unlikely to benefit from them. For example, the vertebrae of the lumbar region are sometimes fused together to treat chronic low-back pain. Many experts believe that this treatment is ineffective and/or overused.

Increasing costs of goods and services in health care

The price of drugs has risen, and one of the reasons is the increase in the cost of developing a new drug, often close to a billion dollars. Because drug development is so expensive, pharmaceutical companies are not motivated to develop drugs that are less profitable, such as vaccines, drugs to treat rare diseases, and even antibiotics.

This reluctance can negatively affect public health, for example by limiting the number of drugs and vaccines available for the prevention and treatment of serious infections.

Placing on the market of new medicines, devices and procedures

When consumers hear on TV or on the Internet about a novel (and expensive) treatment, they may want to be treated with it and try to convince their doctor to use it. As a result, these new, expensive treatments may be overused or inappropriately used. Some of them are no more effective than the classic, less expensive treatments.

Excessive specialist visits

Specialists are paying more and more attention, partly because the number of primary care physicians is decreasing and partly because more and more patients want to be treated by a specialist.

Specialized care is often more expensive than that provided by primary care physicians. Specialists charge more and may request more tests than primary care physicians. In addition, patients with more than one disorder may require assessment and treatment by several specialists (who have a more limited approach), when a primary care physician (with a broader approach) might be able to do so.

High administrative costs

It is estimated that the percentage of money used in the administration of health care varies between 20% and more than 30%. Most of these costs come from private insurance companies; however, the Affordable Care Act currently limits the amount the private insurance company can spend on administrative costs.

Private insurance companies spend money on marketing and evaluating applicants to identify those with previous illnesses or with the greatest potential to develop a disorder. These processes do not improve healthcare. In addition, having to manage different private health insurance schemes increases administrative costs for health service providers, complicating and slowing down management processes (such as service billing and coding).

Medical fees

In the United States, doctors are paid more than many other professionals in that country and more than doctors in many other countries. This is partly because doctors in other countries tend to spend much less on their medical training and professional liability insurance than those in the United States, and because the costs of operating a practice in other countries are lower.

Because doctor’s fees represent only about 20% of total health care costs, even a significant reduction in these fees would have only a moderate effect on overall costs.

Doctors, other health professionals, health centres and manufacturers of medicines and medical devices pay professional liability (malpractice) insurance premiums. These premiums cover claims compensation and the general expenses and benefits of the professional liability insurance company. Ultimately, these costs, at least in part, are passed on to the government and/or consumers.

Defensive medicine

Defensive medicine refers to the performance of complementary tests or treatments intended to protect the physician and other health care providers from malpractice claims. These tests and treatments may not be medically justified based on the patient’s situation. For example, a physician may admit a patient even though the patient could probably be treated effectively on an outpatient basis.

Ageing of the population

Although often cited as a factor (about one-third of total health costs occur in the last year of life), population ageing is probably not the cause of recent cost increases, because many individuals in the baby-boom generation have not yet reached old age.

In addition, increased health care efficiency tends to delay the onset of serious illness in older people. However, costs may be affected as the baby-boom generation ages. The proportion of the population over 65 is then expected to increase from about 15% in 2016 to almost 20% after 2030.