CEO, Atlas Surgical Group, one of the largest ASC groups in U.S. Author of “Success in Amb. Surgery Ctrs” and “The Healthcare Entrepreneur.”
The cost of healthcare in the United States is a significant concern for policymakers and citizens and is a pressing issue affecting millions of Americans. This upward trajectory in healthcare expenditures has far-reaching implications for both individuals and the greater healthcare system.
To shed light on this critical problem, let’s delve into some statistics and their sources. Firstly, it’s crucial to acknowledge the sheer scale of healthcare spending in the U.S. In 2021, the nation’s healthcare expenditure reached a staggering $4.3 trillion, accounting for 18.3% of the GDP, according to Centers for Medicare & Medicaid Services (CMS) data.
In 2021, Americans spent an estimated $378 billion just on prescription drugs, as reported by Statista. This represents a substantial portion of overall healthcare spending, and the continuous increase in drug prices compounds the problem.
Health insurance premiums also continue to climb. The Kaiser Family Foundation found that the annual family premium for employer-sponsored health insurance plans surpassed $21,000 in 2020. This trend puts a heavy financial burden on individuals and employers alike. High out-of-pocket costs further exacerbate the burden on patients. In 2020, the average deductible for individual health plans reached $4,364, according to eHealth, making it challenging for many Americans to access necessary care.
The end, however, is not near. There are measures we, as a nation, can take to slow this downward spiral. Government and private healthcare sector actions are key. Together, there are several ways that they could potentially cut down costs. Here are a few examples.
Increase Price Transparency
One of the biggest drivers of healthcare costs is the lack of price transparency. By making prices for procedures and treatments more transparent, patients and insurers could make more informed decisions about where to receive care, and providers would be incentivized to lower costs.
A study published by Health Affairs found that in 2018, a large portion of insured adults were unaware of the cost of care they would be responsible for until they received the bill. This factor is key. Hospitals and large healthcare systems feed off consumer ignorance. If people were given the choice to “shop” for care based on cost, much like an Excel graph on Amazon offers different products with prices laid out for all to see, the savings and fiduciary outcomes would be stratospherically different.
As Warren Buffett famously said, “Price is what you pay. Value is what you get.” We need more value for our expenditure, not price. Only disclosure and transparency will bring that goal about.
Promote Value-Based Care
A good start in this direction would be to reduce the number of unnecessary procedures and visits. I believe that a significant portion of healthcare spending goes toward unnecessary procedures and treatments. By reducing the number of unnecessary procedures and promoting outcome-based payments to providers, we could save billions of dollars.
As Thomas Edison once noted, “The doctor of the future will give no medicine but will instruct his patient in the care of the human frame, in diet, and in the cause and prevention of disease.” According to estimates by the Institute of Medicine (via the U.S. Department of Health and Human Services), “30% of U.S. health spending (public and private) in 2009—roughly $750 billion—was wasted on unnecessary services, excessive administrative costs, fraud, and other problems.” Someday, we will heed Edison’s advice. That may be the inflection point for our healthcare issues.
Encourage The Use Of Generic Medications
Generic medications are typically much less expensive than brand names and can provide the same level of effectiveness. Encouraging the use of generic drugs could save billions of dollars for the government and patients. The FDA reported that generic drugs saved the U.S. healthcare system $293 billion in 2018. That number is probably much higher now.
Implement Payment Reform
The current payment system in healthcare is based on fee-for-service, which incentivizes providers to perform more procedures and treatments. By moving to a value-based payment system, we could incentivize providers to focus on quality and outcomes rather than the quantity of services provided. A report by the National Academy of Medicine and Third Way states that fee-for-service payment models contribute to overuse and inefficiency in healthcare.
Increase Competition
By increasing competition in the healthcare market, we could help to drive down costs. This could be done by allowing insurers to sell policies across state lines or encouraging new market entrants. A study published in the American Journal of Managed Care and the National Institute of Health found that increased competition among hospitals led to lower service prices.
Invest In Preventive Care
Preventive care can help identify and address health problems before they become more serious and can help reduce the need for expensive treatments and procedures. According to the CDC, every dollar invested in immunizations saves $52 in direct medical costs.
Lower Administrative Costs
The healthcare system is bogged down with a lot of paperwork and administrative tasks. Lowering administrative costs by streamlining the system could reduce costs and make healthcare more efficient.
The Commonwealth Fund reported that the U.S. spends nearly twice as much on healthcare administration as other high-income countries, accounting for 8% of total healthcare costs. There will come a time when the coffers will dry up, and we will have to make some very unpleasant cuts. Perhaps smarter heads will prevail before that and tame this beast while we still have time.
The cost of healthcare in the United States is a major concern for both policymakers and citizens. Some of these costs could potentially be cut down costs by increasing price transparency, reducing the number of unnecessary procedures, encouraging the use of generic drugs, implementing payment reform, increasing competition, investing in preventive care and lowering administrative costs.
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