Why Is Health Care Getting More Expensive?

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Kaiser Health News asked themselves this very question and concluded with several factors (courtesy of the Bipartisan Policy Center) that can be attributed to rising health care expenses (exceeding $2.6 trillion) in the United States:

1. We pay our doctors, hospitals and other medical providers in ways that reward doing more, rather than being efficient. Most insurers pay doctors in a fee-for-service system that reimburses for each test performed, each procedure completed, and so on and so forth, which encourages overtreatment and repetitive testing and hence, more charges.

2. We’re growing older, sicker and fatter. Baby Boomers are retiring, which means more enrolling in Medicare. And the rising costs of obesity coupled with chronic conditions (asthma and diabetes) are certainly taking its toll on health care services.  

3. We want new drugs, technologies, services and procedures. And the latest treatments are expensive.

4. We get tax breaks on buying health insurance — and the cost to patients of seeking care is often low. The report states: “the amount employers pay toward coverage is tax deductible for the firm and tax exempt to the worker, thus encouraging more expensive health plans with richer benefits.”

5. We don’t have enough information to make decisions on which medical care is best for us. There is no broad standard on evaluating individual treatments and comparing them with others.

6. Our hospitals and other providers are increasingly gaining market share and are better able to demand higher prices. Consolidation of hospitals can pave the way for monopoly, which drives up prices.

7. We have supply and demand problems, and legal issues that complicate efforts to slow spending. For example, the report states, “‘defensive medicine’ – when doctors prescribe unnecessary tests or treatment out of fear of facing a lawsuit.”

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