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Why Are Health Care Costs Increasing

By October 1, 2019 Employee Benefits

When was the last time you bought a car and took it home before finding out how much it cost?  Never, no one would ever do this. Yet just about every time you go for any sort of health care, you are asked to deal with the cost after the service is provided.

There is a lot in the news recently about health care costs and how transparency is a silver bullet for bringing down the costs of health care. In his 2003 publication, “It’s the Prices, Stupid: Why the United States is so Different from Other Countries1” health care economist Uwe Reinhardt explains that in the US we spent nearly twice as much as any other developed nation for everything from doctor visits to prescription drugs.  Not only do we pay more but the study also suggests that Americans are receiving fewer real resources (like time with a doctor) than people in other countries.

A more recent study2 by Harvard researchers agrees with Reinhardt explaining that “Prices of labor and goods, including pharmaceuticals and devices, and administrative costs [appear] to be the main drivers of the differences in spending.” It cites the average primary care physician salary in the US as $220,000 while the other countries ranged from $87,000 to $155,000.  A CT scan in the US averages $896 vs the other countries that ranged from $97 in Canada to $500 in Australia.

To me, the most interesting part of the Harvard study is that it contradicts some of the usual excuses for higher health care spending in the US. The large number of baby-boomers, for example, isn’t as big as a differentiator. Both Germany and Japan have significantly larger populations of seniors but spend 33% – 50% on each citizen’s health care vs the US.

So, we know the prices are high in general but did you know there is a pretty big swing in the costs of care even in the same geographic area? With the recent focus on transparency, more websites are available to help you gauge the costs. Here are a few sample ranges for some procedures:

  • Primary care physician $70 – $130 per visit
  • Specialist physician $100 – $300 per visit
  • MRI $300 – $4,000
  • Appendectomy $8,000 – $26,000

After you factor in payments from health insurance, you’re probably looking at paying between 20% – 30% of those costs (depending on your deductible, out-of-pocket maximum, and coinsurance). With the continuing trend of increasing deductibles (average $533 in 2009 to $1,350 in 2018), your portion may also, continue to grow.

You might be wondering what you can do to help bring down your health care costs.

  1. Go to the doctor for your annual wellness check-up! Preventing a chronic disease will save a lot of money throughout your life.
  2. Check with your insurance carrier to see what tools they have – they are just as interested in reducing costs are you are.
  3. Utilize the wellness and Telehealth services available from your employer or insurance carrier – if you’re not using them, you’re throwing money away.
  4. Check with the hospital about setting up a payment plan or even writing off a portion of your debt.

Ultimately, health care costs are still high but if you educate yourself, you can get more when you do have to spend those dollars.

  1. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.22.3.89
  2. https://jamanetwork.com/journals/jama/article-abstract/2674671