Hello All,

Everyone might be wondering why do health care provides in US charge high prices for their services. Several reasons support the disproportionate high costs charged by healthcare providers. Increasing Administrative costs, Use of expensive new technology, Defensive medicine practice, Malpractice, Raising prices of health care goods and services, high physician fee and Aging of population can be considered as most important reasons.

Accounting to 25%, more than $200 billion from hospital spending goes to marketing, underwriting, coding, claim submission and thus leading to high administrative costs. In US, administration in hospitals is more complex as it includes negotiating payments with multiple payers, conforming to billing and claim procedures, varying co-pays, and other regulations. In countries with single-payer system, hospitals are working at the operational efficiency with less administrative burden.

The US uses new technology in health care. Studies state that the use of new technology tend to inappropriate as patients are unlikely benefited out of it, anyhow increases the cost of health care. Researchers consider practice variations to establish a relation between use of new technology in medical practice and patient benefit. For instance, the treatment to chronic low back pain can be done without using lower lumbar spinal fusion. So, physicians grossly over use technology in such cases leading to higher health care costs.

The cost of drugs and goods for health care increase dramatically over years in the United States. The cost of developing a new drug, incentivized the market for higher prices of a drug. Marketing of new medical devices and technologies to both physicians and patients is leading to over use of technology and drugs. Along with development cost, marketing cost also has a considerable role in the rise of health care costs. Patient awareness on generic, non-branded drugs is needed to overcome this issue.

Compensations for physicians is far higher than any other profession in the US. Physician fee is nearly 21% of health care cost. When compared to professional compensation in other nations the disparity arises due to higher education costs, certification costs and barriers to entry for this profession like high capital infusion for individual practice. A modest reduction in healthcare cost can be observed if govt. subsidizes these barriers.

Malpractice and Defensive medicine – treatment done to guard against possible malpractice litigation or to avoid a lawsuit. Costs associated with such treatments are hard to determine as the results can be unreliable. A physician may not disclose his/her defensive treatment or it is hard to understand a clinician’s motive towards a particular case. But this category also has an influential part in health care costs.

Other reasons include; the increase in patient’s desire to get treated by a specialist can directly correlated to decrease in the number of primary care physicians and increase in the number of specialists over years. More care than needed for such patients by specialists is growing, and this is adding up to average patient health care cost of a nation. Aging of population is also a potential cause for an increase in health care spending in US. Need for additional care for a generation that is vulnerable to diseases and health emergencies.

These are some of the reasons for high prices in health care domain in US.I hope that it gives you brief idea on health care prices.

Keep doing great work:)