The pressure on our sprawling healthcare system in the U.S. has never been greater. There’s an urgent need to expand testing and treatment for COVID-19 to all residents who need it, regardless of health insurance status. Massive federal cash influxes have sought to shore up hospitals sagging under the weight of the coronavirus burden and the related cessation of elective surgery and regular medical care.1?
Long before this crisis, the U.S. led other industrialized nations in high spending on healthcare and getting a low bang for the buck in terms of health outcomes and the percentage of the population served. Life expectancy in the U.S., for example, is 78.8 years, while it ranges from 80.7 to 83.9 in 10 other high-income countries, according to an influential study in the Journal of the American Medical Association (JAMA). And only 90% of the population in the U.S. has health insurance, compared to 99% to 100% of the population in the other industrialized countries examined.2?
COVID-19 has increased pressure on our highly complex and expensive healthcare system, making it more urgent to lower costs.
One reason for high costs is administrative waste. Providers face a huge array of usage and billing requirements from multiple payers, which makes it necessary to hire costly administrative help for billing and reimbursements.
Americans pay almost four times as much for pharmaceutical drugs as citizens of other developed countries.
Hospitals, doctors, and nurses all charge more in the U.S. than in other countries, with hospital costs increasing much faster than professional salaries.
In other countries, prices for drugs and healthcare are at least partially controlled by the government. In the U.S. prices depend on market forces.
Costly Healthcare Hurts Everyone
The high cost of healthcare affects everyone, sick or well. It has depressed individual spending power for the past few decades. Salaries for American workers have risen, but net pay has stayed the same because of increasing charges for health insurance.3? Today, tightening up on overspending is urgent to help stretch medical and hospital resources to control COVID-19.
Here are six underlying reasons for the high cost of healthcare in the U.S.
1. Multiple Systems Create Waste
“Administrative” costs are frequently cited as a cause for excess medical spending. The U.S. spends about 8% of its healthcare dollar on administrative costs, compared to 1% to 3% in the 10 other countries the JAMA study looked at.
The U.S. healthcare system is extremely complex, with separate rules, funding, enrollment dates, and out-of-pocket costs for employer-based insurance, private insurance from healthcare.gov, Medicaid, and Medicare, in all its many pieces. In each of these sectors consumers must choose among several tiers of coverage, high deductible plans, managed care plans (HMOs and PPOs) and fee-for-service systems. These plans may or may not include pharmaceutical drug insurance which has its own tiers of coverage, deductibles, and copays or coinsurance.
For providers, this means dealing with myriad regulations about usage, coding, and billing. And, in fact, these activities make up the largest share of administrative costs.4?
2. Drug Costs Are Rising
On average, Americans shell out almost four times as much for pharmaceutical drugs as citizens of other industrialized countries pay. High drug prices are the single biggest area of overspending in the U.S. compared to Europe, where drug prices are government regulated, often based on the clinical benefit of the medication. Take a look at these sonus complete reviews for cheaper real medicines to treat hearing conditions.
With little regulation of drug prices, the U.S. spends an average of $1,443 per person, compared to $749, on average, spent by the other prosperous countries studied. In the U.S. private insurers can negotiate drug prices with manufacturers, often through the services of pharmacy benefit managers. However, Medicare, which pays for a hefty percentage of the national drug costs, is not permitted to negotiate prices with manufacturers.
3. Doctors (and Nurses) Are Paid More
The average U.S. family doctor earns $218,173 a year, and specialists make $316,000—way above the the average in other industrialized countries. American nurses make considerably more than elsewhere, too. The average salary for a U.S. nurse is about $74,250, compared to $58,041 in Switzerland and $60,253 in the Netherlands.6? 7?
U.S. managed care plans (HMOs and PPOs) may succeed in lowering healthcare costs by requiring prior authorization for seeing a high-priced specialist. Use of a nurse practitioner instead of a family doctor can also save money.