Health Insurance Rising Costs

Why Costs Keep Rising

• High Tech is High Cost
• Heroic Efforts
• Inflation
• Drug Costs
• Fewer Hospital Admissions
• Social Ills
• The Government Pays a Smaller Share
• Uncompensated Care
• The Aging Population
• Chronic Illnesses
• People Sue Doctors

High Tech is High Cost

We've come a long way since horse and buggy days, and nowhere is this more apparent than the high tech world of medicine. Major advancements, such as MRIs, are now common procedures, and special operations like fetal surgery and organ transplants are no longer rare. There are many major improvements in health care, but all come with major price tags.

Every day there are breakthroughs that allow more lives to be saved, and the quality of other lives to be improved. But we all share in the cost of developing these breakthroughs.

Heroic Efforts

In America, we go to extraordinary means to save lives that other countries would let expire. In Britain, for example, the national health care system has denied transplant surgery, blood dialysis and other expensive treatments for patients over a certain age or those who are in very poor health.

The "rescue" of premature babies under 27 ounces is routinely attempted in the United States, at a cost of more than $120,000 each. In other countries, those babies would die.

Americans will go to heroic means to save lives without regard for the financial cost on society.

Inflation

About one-third of the cost is that dreaded old "I" word: Inflation. Medical care is not immune to it. Across the United States the cost of goods and services is rising as the inflation rate rises to meet higher labor costs, professional fees and operating overhead.

The U.S. already spends more than $1 trillion a year on health care, and Businessweek magazine says that's expected to double by 2008.

Drug Costs

The cost for drugs makes up an ever higher portion of rising health care costs. A recent study of data from the Health Care Financing Administration found that seniors pay twice as much for prescription drugs as they did just eight years ago. Pharmaceutical companies claim they need to charge higher rates for new drugs because of higher research and development investment costs, along with the costs of testing and the approval process.

Fewer Hospital Admissions

As more people are treated in outpatient settings, hospitals must spread their brick and mortar costs over fewer patients. Hospitals compensate by charging more when you are in the hospital.

Social Ills

Emergency rooms - one of the most expensive treatment options - report more than a million admissions from assaults every year. Thousands of drug-exposed babies are born every year that require extraordinary high costs. Almost one million teens become pregnant every year. Teenage girls are more likely to have premature births and other complications. All these social problems contribute to higher medical prices across the board.

The Government Pays a Smaller Share
and Shifting of Costs Raises Your Premiums

In recent years, our federal and state governments have shifted billions of dollars in medical costs from Medicare/Medicaid to the private sector. In some cases, the federal government reimburses hospitals and doctors for Medicare and Medicaid, less than 50% of what private insurance pays. However, to make up for the difference, health care providers make up for the government's underpayment by shifting more of the cost to their billings to private insurance. Cost shifting has been a major cause of higher insurance premiums, particularly in the individual and small business insurance.

Uncompensated Care

The cost of providing health care for those who won't pay, or can't pay, is rising dramatically. As the number of uninsured people continues to climb, there is a direct increase in the cost of uncompensated care to hospitals, which in turn shift the burden of this "indigent" care cost to those who have private insurance.

The Aging Population

The cost of treating people over the age of 65 is four times higher than thcost of treating the rest of the population. In the year 2010, the first wave of the nation's 77 million baby boomers, those born between 1945 and 1965 will begin to retire.

Chronic Illnesses

New treatments to help people with chronic illnesses like AIDS and cancer are making a huge difference in helping people to live longer and even defeat their diseases. But the treatments add costs to the insurance system. New drug treatments for AIDS/HIV can add between $10,000 and $20,000 per year per patient.

People Sue Doctors

Malpractice insurance costs billions for physicians and providers. Unnecessary tests, performed solely to protect doctors from liability add to the exploding costs of "defensive medicine". The U.S. Office of Technology Assessment in a recent study estimated that about 8% of diagnostic testing is "consciously defensive". An American Association of Health Plans report in February 2000 estimated that "defensive medicine costs the U.S health care delivery system about $50 billion per year". Those costs are passed on through higher doctor bills and hospital bills.