The Rising Cost Of Healthcare

The Rising Cost of Healthcare

There is no doubt that healthcare cost are rising out of control. No one likes the

increases, but it is far more understandable when considering all the reasons for these increases.

American people look at their insurance bills, co-pays and drug costs, and can't understand why they continue to increase. The insured should consider all of these reasons before getting upset. In 2004, employee health care premiums increased over 11 percent, four times more than the rate of inflation. In 2003, premiums rose 10.1 percent and in 2002 they rose 15 percent. Employee spending for coverage increased 126 percent between 2000 and 2004. Those increases were lower than expected. (National Coalition on Health Care, 2005, Facts on health care costs). Premiums have risen five times faster than workers wages, on average. If medical spending continues to rise by just two percent more than personal income, by 2040 Medicare and Medicaid would hit 18.5 percent of the gross domestic product, leading the federal deficit to be 20.7 of the gross domestic product. (Melcer, R., 2004, St Louis Post-Dispatch, Rising Costs of healthcare pose huge challenges).

There are huge impacts of the rising costs. Many people can not afford health insurance. Of the families that do have health coverage, 50 percent are concerned about having to pay more for that coverage in the future, while 42 percent fear they will not be able to afford coverage at all. (National Coalition on Healthcare, 2005, Facts on healthcare costs).

This fact leads me to one of the reasons for health care cost increases: cost sharing or cost shifting. When an individual or family does not have insurance, and can not or does not pay their medical bills, the cost of that care is "shifted" to patients who do have insurance. For example, a study done by Harvard University found that 50 percent of all bankruptcy filings were partly the result of major medical expenses. The average medical expenses in these bankruptcy filings were $12,000. And someone files bankruptcy every 30 seconds in this country. (National Coalition on Healthcare, 2005, Facts on health care costs). Most of those lost dollars are shifted to consumers in higher premiums and costs.

In 2003, health care spending reached 1.7 trillion dollars and 1.8 trillion dollars in 2004. That is 4.3 times the amount spent on national defense in this country. (California Health Care Foundation, March 02, 2005, Health care costs 101).

Even though 45 million Americans are uninsured, the U.S. spends more on health care than any other industrialized nation, and those countries provide health care to all of their citizens. (National Coalition on Healthcare, 2005, Facts on health care costs).

Because of advances in technology and medicine, people are living longer lives. This is another reason for increased cost. The average age of insurance members today is 60 years old. By the year 2008, approximately 15 percent of the U.S. population will be 65 years old or older. (Blue Cross/Blue Shield, 2006, Healthcare costs).

This leads to further complications because of diseases that are mostly confined to the elderly, such as COPD, emphysema, diabetes, heart disease, arthritis and certain forms of cancer. All of these diseases are costly to treat and require multiple visits to the doctor, as well as multiple medications.

Because of this and other factors, hospital and nursing home stays have increased. Fifty cents of every health care dollar is spent on hospital and nursing home stays. (Blue Cross/Blue Shield of Kansas, 2004, The rising cost of health care, the reasons).

The older population also needs more medication to treat their ailments. Drug spending in the U.S. rose more than 11 percent in 2003 to over 180 billion dollars. Americans consume about 3 million prescriptions a year. People over the age of 65 spend an average of $2300.00 a year. That is just in co-pays. The co-pays for brand name drugs jumped 62 percent, from $16 to $25 in 2003. Most of these drugs have generic equivalents, but even those co-pays rose to an average of nine dollars. As a whole, retail prescriptions have increased 7.4 percent a year from 1993 to 2003, triple the inflation rate of 2.5 percent. (National Coalition of Healthcare, 2005, Facts about health care costs).

Most of this increase reflects the cost of research, and the time it takes to develop a medication, and have it approved by the Food and Drug Administration. A medication takes years to advance from idea, to theory, to research and testing, and finally to approval. All of this time costs money.

Another reason for increased usage involves all ages. Most consumers have had changes in lifestyle from earlier years. Seven out of ten Americans