One topic that’s quite hard to understand is the United States Healthcare system. In particular—as the system has been more scrutinized in recent years—many people have been asking why is healthcare so expensive these days? This is especially true for company health insurance plans, which can eat up a lot of a company’s budget.
It’s very important to understand the factors that lead to health insurance being so costly. Having a better understanding of the system can help you find ways to lessen your own health insurance costs for yourself and your employees.
Today, we’re going to dive into the variables that are increasing health insurance costs and offer up some solutions to decrease costs for your company. Hopefully, by the end of reading this blog, your understanding of health insurance costs will be crystal clear.
Table of Contents
Why Is Healthcare So Expensive: 4 Main Causes
1. Administrative Costs
According to David Cutler—a Harvard health economist—who outlines in an interview with PBS how administrative costs within the U.S. healthcare industry are one of the primary reasons for high health insurance prices.
“About one-quarter of health care costs are associated with administration, which is far higher than in any other country,” Cutler says.
Compare this to the roughly 10 to 15 percent of the next highest countries and you can see just how excessive the U.S. healthcare industry can be in terms of admin costs.
One of the reasons why the U.S. dedicates so many resources to administration in the healthcare sphere is because, “they are figuring out how to bill different insurers for different systems, figuring out how to collect money from people, all of that sort of stuff,” continues Cutler. In other words, because the system is still fairly complicated, healthcare organizations have to spend a lot of time and money carrying out their administrative duties.
2. The United States Spends More on Healthcare
The United States spends a lot more money on healthcare, which ends up driving the cost a substantial amount. That may sound a little confusing and redundant, so let’s break it down to simplify things.
The obvious candidate to talk about is drugs. The cost of pharmaceuticals has been at the forefront of discussions when it comes to healthcare here in the States. In the U.S., branded drugs cost much more than in other countries. Because for-profit companies are so heavily involved in the United States healthcare system, it has a ripple effect down to the patients who need prescription drugs or other medical products.
As David Cutler also notes in that same PBS interview, “… doctors also earn more for doing the same thing in the U.S. than they do in other countries, and a lot of suppliers charge more for things like durable medical equipment in the U.S. than in other countries.” So, when suppliers charge more for their equipment, hospitals have to charge more for their services, and the end consumer (patients) end up paying more.
3. Technological Advancements Are Expensive
Technological advancements happen every day across all industries. But, none of them have a greater effect on the price of a product or service than the tech advancements in the healthcare industry.
According to the Hastings Center, healthcare economists estimate that 40 to 50 percent of annual costs increase can be traced to either new technologies or the intensified use of old ones.
In this CBS News article, Robert Graboyes—a healthcare scholar at George Mason University—sums up technology’s effect on the healthcare industry, stating, “Americans want the newest and latest technology available, and the American healthcare system can often provide that quickly. But, quality and speed come at a cost.”
For example, the da Vinci Surgical System is a robotic surgical system made here in America and was cleared by the FDA in 2000. However, one of the main criticisms of this technology is the extremely high costs associated with it.
4. Americans Receive More Medical Care Than Other Countries
America has a lot of people. As of this post, the United States population is nearing 330,000,000. That is a lot of people who all need healthcare services.
Not only are there more people in the U.S. than most other countries, but once again according to Cutler, “…Americans receive more medical care than people do in other countries.” Cutler goes on to say that this isn’t just in terms of going to the doctor for a check-up or a regularly scheduled visit, but that a person in the United States who has a heart attack is much, much more likely to get open heart surgery than in most other countries.
Cutler uses Canada as an example. In Ontario, there are 11 hospitals that can perform open-heart surgery. In Pennsylvania—which has a similar population to Ontario—60 hospitals can take on the task of open-heart surgery.
So, while people in Canada with lower risks for heart issues may be told that surgery is not necessarily needed, in the U.S. no matter your risk level, you are likely to be recommended to undergo surgery and will easily be able to find a hospital that can perform it. Surgery and other procedures can be expensive, and the practice of being a bit overzealous with who receives medical operations helps add to the overall cost of healthcare in the U.S.
Solutions For Lowering Your Company’s Health Insurance Costs
When it comes to lowering your health insurance costs for your company, it’s important to prioritize your employee’s health. If you can limit the number of times your employee has to go to the doctor or how many complications they have for a health-related issue, you can drastically lower your health insurance costs.
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Here at Pops Diabetes Care, we aim to help businesses lower their health care costs by keeping their employees who have diabetes safe and healthy. We do this with our Rebel virtual care system. Rebel encourages consistent use of diabetes management, which will ultimately lead to fewer complications and visits to the doctor. With Rebel, a 500-person business can save nearly $200,000, and a company with 10,000 employees can save almost $4,000,000.
To learn more about Rebel and how pops can help keep your employees safe and healthy while reducing your health insurance costs, contact us today! We look forward to hearing from you!