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A Deeper Look on Why the U.S. Healthcare System Is So Expensive

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Medication affordability has been a major issue in the U.S. healthcare system. According to the Centers for Medicare & Medicaid Service, the U.S. prescription drug expenditure reached $335 billion in 2018. Studies also show that the price of prescription drugs has been increasing faster than any other medical service.

Access to affordable medicines plays an important role in improving public health and overall health outcomes. But because of the high prices of medical services and prescription medicines, many patients have been reporting to their doctors their inability to afford healthcare.

Healthcare costs in the U.S. have become incredibly high for many reasons. But despite having the highest healthcare spending worldwide, the U.S. remains to have mediocre health outcomes. So what are the factors driving these costs? Here are the reasons why healthcare costs in the U.S. are rising.

Healthcare service cost

Compared to other developed countries, the U.S. has significantly higher procedure costs despite having high healthcare spending than any other country. Because of expensive healthcare services, many Americans choose to skip medical care and forgo a simple doctor’s visit.

Three reasons contribute to expensive healthcare prices in the U.S. These include physician salaries, administrative costs, and prescription drug prices. On average, a general physician earns an average salary of $218,173 annually. Meanwhile, physician salaries in other countries ranged from $86,607 to $154,126. These figures show that physician salaries in the U.S. are significantly higher than in other countries.

Along with the rising drug prices and administrative costs, these three factors contribute to the expensive healthcare cost in the U.S.

Realizing the need for affordable medical care, companies offer paid clinical research trials for patients struggling with medical conditions. By participating in a clinical trial, the patient can access medical care and facilities that aim to evaluate a new medical intervention. In return, the patient will receive a payment depending on the phase of the trial.

Clinical trials are a few initiatives done by the medical community to make healthcare accessible to everyone. They work best for patients who cannot afford healthcare services.

High administrative costs

The U.S. operates in a complex multi-payor system. This means that different payors are financing the healthcare costs. With plenty of stakeholders involved, the process becomes complicated for the healthcare administration.

One reason that contributes to cost inefficiencies is excessive administrative spending, such as billing and insurance-related (BIR) costs. These overhead costs include payment processing, claims reconciliation, and claims submissions. Insurance companies come in as they take the largest share of the BIR costs. Simultaneously, healthcare providers receive their share of the administrative costs for their role in the medical billing process.

According to McKinsey & Company, using automation and streamlining BIR processes can reduce administrative spending by 30%. Instead of relying on human labor, using technologies such as claims processing software can speed up the process, decrease cost, and increase payor productivity.

pile of pills

Expensive drug prices

Precision medicine and specialty pharmaceuticals play a huge role in the high cost of prescription drugs in the U.S. Specialty drugs resulted from experimental therapies that aim to treat chronic conditions, cancers, and autoimmune diseases. Pharmaceutical companies conduct therapies that use important genetic data and complicated procedures to carry out a highly targeted and personalized treatment.

Because of the complex development and distribution of prescription drugs, pharmaceuticals turn to drug pricing strategies. Drug manufacturers do this by creating a price list based on a drug’s estimated value. In turn, manufacturers adjust the price list depending on the drug demand. Unfortunately, the U.S. has few regulations to prevent manufacturers from raising drug prices.

Increase in chronic disease cases

In the U.S., six out of ten adults are suffering from chronic diseases or serious conditions. These include stroke, cancer, diabetes, heart disease, and pulmonary disease.

Since chronic illnesses require long-term medical support, a condition may limit patients from performing regular activities. Depending on the complexity of the condition, the hospital may subject the patient to home healthcare. Because of intensive support services, caring for chronic disease patients becomes more complex while spending goes toward medical services. These include emergency care, outpatient treatments, routine visits, and drug prescriptions.

That is why medical experts often associate the treatment of chronic health conditions with high healthcare costs. But when patients delay care, they are increasing the risk of acquiring life-threatening complications. Meanwhile, those who invest in finding treatment are likely to develop long-lasting side effects. As a result, the long-term management of these side effects can also contribute to costly health expenditures.

It is no secret that the U.S. has the highest cost of healthcare system than any other country. As a patient, you have to know your options to gain access to affordable healthcare medications. Until then, physicians, legislators, and policymakers should work together to provide U.S. citizens with better access to affordable healthcare systems.

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