Why Healthcare is So Expensive in the U.S.

HBI Blog / Why Healthcare is So Expensive in the U.S.

The cost of healthcare continues to rise, while the quality of care continues to experience a decline. Gaps in Care are getting larger and they are mostly associated with the increasing out of pocket cost. The rise in healthcare pricing is responsible for depression in individual spending power over the last few decades.

A person, on average, spends around $11000 in a year for healthcare purposes. Though the average family income and minimum wage for American workers have risen, the rise was not significant enough to match the high pricing of health insurance. An average American family of 4 can expect to pay $300 – $700 per month in insurance premiums. Although, some good insurance plans cover preventive care like, physical exams, screening and other basic preventive care measure, this is just a small drop in a bucket when it come to the actual cost for a family care.

Why Healthcare is So Expensive in the U.S.

On top of hundreds in monthly premiums, annual individual and family deductibles raise the overall cost, ranging from $4,000 individual to $12,000 family. Let’s say you meet the deductible and paid your monthly premiums; you have paid $10,000 to $15,000 out of pocket in a year.

Let’s take a look at some of the underlying reasons behind the increasing healthcare cost:

Multiple Systems

To deal with the excess medical spending, the healthcare system in the U.S. has introduced “Administrative” costs. Around 8% of the total amount spent on healthcare is spentas “Administrative” costs, whereas, in most other countries, this percentage lies within 1-3.

Rise in Drug Costs

An American, on average, pays around four times more than that of the citizens of other industrialized countries for pharmaceutical drugs. Unlike Europe, where the government regulates drug prices, U.S. citizens pay high prices for drugs. There is very little regulation in drug prices in the U.S.

Though private insurers in the country can negotiate drug prices with the manufacturers, Medicare, which pays the maximum amount of the national drug costs, doesn’t negotiate drug prices with the manufacturers.

Hospitals = Profit Centers

More than 33% of the nation’s healthcare cost goes towards hospital care. Hospital care for inpatient and outpatient services rose steadily between 2007 and 2014 and has been on the rise since then. Just to put the thing in perspective:

  • An angioplasty costs around $6,400 in the Netherlands, $7,400 in Switzerland, and $32,200 in the U.S.
  • The cost for a heart bypass surgeryis around $32,000 in Switzerland, as compared to $78,100 in the U.S.

The practice of Defensive Medicine

In the U.S., “Just in Case” tests and scans are common. These tests, at times, can be costly than you think. Once again, just like hospital costs, the cost of tests and scans is higher in the U.S. than in other countries. According to the researches, it is not the number of tests and scans, but their pricing that makes healthcare costly in the country.

Though most other developed countries control a part of healthcare and its costs, lack of such standardization in the U.S., driving more and more people to opt for direct primary care instead of going for health insurance. With the global pandemic gradually fading out, it is worth seeing if the scenario changes or not.

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