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  • Ahsan Malyk

Why Is US Health Insurance So Expensive?

The United States' vast healthcare system is now under more strain than it has ever been before. Massive infusions of funding from the federal government have been made in an effort to strengthen hospitals.


However, they have long been struggling under the weight of the testing and treatment load. Moreover, there has been a temporary suspension of elective surgery and normal medical care that has resulted from this.


The United States has a life expectancy of 77 years as of the year 2020. However, the life expectancies of 10 other high-income nations vary from 80.7 to 83.9.


In addition, health insurance coverage is only held by 91.4% of the population in the United States. On the other hand, it is held by between 99.9% and 100.0% of the population in the other industrialized nations.


Factors Affecting Health Insurance in the US


Everyone, regardless of their health status, is impacted by the rising expense of healthcare. Over the last several decades, it has had a negative impact on people's ability to spend money.


Because of rising costs associated with health insurance, American employees have seen an increase in their gross pay. However, their net income has remained the same. It is imperative that excessive expenditure be reined in immediately


This will help assist in the stretching of medical and hospital resources in order to better cope with the strain.

The following are the six primary factors that contribute to the high cost of healthcare in the United States.


Multiple systems


Administrative expenditures are a factor responsible for excessive medical spending. In contrast to the 1% to 3% spent on administrative expenditures in each of the other 10 nations included in the JAMA research, the United States spends around 8% of its total healthcare budget on these expenses.


Employer-based insurance, and private insurance purchased via healthcare.gov, Medicaid, and Medicare each have their own set of regulations, funding sources, enrollment dates, and out-of-pocket expenditures, making the healthcare system in the United States incredibly complicated and convoluted structure.


Consumers in each of these markets have to make a selection from a number of different coverage levels. There are high-deductible plans, managed care plans (HMOs and PPOs), and fee-for-service healthcare delivery models.


These plans could or might not include prescription medication insurance. It comes with its own coverage levels, deductibles, and copay or coinsurance costs, depending on the situation.


This necessitates that service providers comply with a plethora of restrictions about use, coding, and invoicing. In point of fact, the expenditures associated with these activities make up the majority of those associated with administration.


The Prices of Medicine Are Going Up


When compared to people of other developed nations, the average cost of prescription pharmaceuticals in the United States is about twice as high as the cost in those other countries.


When compared to Europe, drug costs are government-controlled and depend on the therapeutic efficacy of the prescription. High drug prices in the United States represent the single largest area of wasteful expenditure in the United States.


The United States spends an average of $1,443 per person on medication. However, the other rich nations analyzed paid an average of $749 per person. This is due to the lack of price restrictions in the United States.


The cost of medication in the United States is 256 times higher than the average cost in other nations.

Private insurance companies in the United States have the ability to negotiate lower prescription pricing with pharmaceutical companies.


However, Medicare, which is responsible for paying for a sizeable portion of the total national medication expenses, has a prohibition from engaging in price negotiations with pharmaceutical companies.


Pay Increases for Medical Professionals


As of the year 2020, family physicians in the United States receive an average annual salary of $214,370. However, specialists earned an average annual salary of $316,000. It is much more than the average salary in other industrialized nations.


The salaries of nurses in the United States are much higher than those in other countries. A registered nurse in the United States makes around $74,250 per year. To your surprise, it is much more than the average pay of $58,041 in Switzerland and $60,253 in the Netherlands.


By demanding prior permission for visits to high-priced specialists, managed care plans (HMOs and PPOs) in the United States may be successful in reducing the overall cost of medical treatment.


It may be possible to save medical costs by consulting a nurse practitioner rather than a primary care physician.


Hospitals are Important Sources of Profit


The expenditures associated with hospital treatment make up 31% of the total cost of healthcare in the country.

Research in 2019 in the journal Health Affairs found that between 2007 and 2014, the cost of inpatient and outpatient hospital treatment increased at a far quicker rate than the cost of physician care.


In 2020, hospital expenditures amounted to $1.27 trillion, representing a 6.4 percent increase over the previous year. The costs of surgical operations performed in hospitals in the United States are much higher than those in other nations.


In the Netherlands, the usual cost of angioplasty to unblock a blocked blood artery is $6,390, whereas, in Switzerland and the United States, the cost is $7,370 and $32,230 respectively.


In a similar vein, the cost of a cardiac bypass procedure in Switzerland is $32,010 whereas it is $78,100 in the United States.


Today, the financial stability of a significant number of hospitals is precarious. In addition, due to the coronavirus lockdown, elective surgeries have stopped, and the number of patients seeing their doctors has dropped significantly; both of these factors are major contributors to the overall economic downturn.


Defensive medicine


As a result of this goal of protecting themselves against legal action by hospitals and doctors, patients may have to undergo exams and scans "just in case." And the costs of these testing might vary.


The average cost of a CT scan in the United States is $896. It is much more than the cost of merely $97 in Canada and $500 in Australia. The average cost of an MRI scan in the UK is around $450, compared to $1,420 in the US.


Researchers have come to the conclusion that the reason why it is so costly to be ill in the United States is not due to the vast number of tests and treatments but rather the high cost of each one.


Variation in prices


As a result of the complexities of the system and the absence of predetermined rates for medical services, service providers are at liberty to charge whatever prices the market is willing to pay.


It is possible for the amount that is paid for the same healthcare treatment to differ dramatically depending on the payer (i.e. private insurance or government programs, such as Medicare or Medicaid) and the geographical location in which the service is provided.


Take Away


The majority of other industrialized nations achieve cost containment by giving the government a more active role. It is in the process of price negotiation for medical services.


Their medical care systems do not necessitate substantial administrative expenses. However, they are a major contributor to price increases in the United States.


Because these governments are the worldwide overseers of their nation's systems, they have the capacity to negotiate cheaper pricing for pharmaceuticals, medical equipment, and hospitals.


A lack of political support in the United States has precluded the federal government from playing a more significant role in limiting the rising costs of medical care.


The Affordable Care Act prioritized expanding access to medical care while preserving the existing system in order to foster healthy competition among health insurance companies and medical service providers.


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