What makes U.S. health care so overpriced? It’s not what you think

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SUMMARY: “Price of professional services, drugs and devices, and administrative costs, not demand for services or aging of the population, produced 91 percent of cost increases since 2000.” via What makes U.S. health care so overpriced? It’s not what you think.

 

 


This NBC News story is based on a recent study described here.

The study, by Hamilton Moses III, M.D., of the Alerion Institute, North Garden, Va., and the Johns Hopkins School of Medicine, had several other salient points. We quote directly from the press release:

 

“Contributors to Costs

The researchers note that findings from their analysis contradict several common assumptions:

  • Price of professional services, drugs and devices, and administrative costs, not demand for services or aging of the population, produced 91 percent of cost increases since 2000.
  • Personal out-of-pocket spending on insurance premiums and co-payments have declined from 23 percent to 11 percent since 1980. [Editor’s note: Keep in mind that while the percentage may be getting smaller, the pie is getting much larger.]
  • In 2011, chronic illnesses account for 84 percent of costs overall among the entire population, not only of the elderly. Chronic illness among individuals younger than 65 years accounts for 67 percent of spending.

 

“Contributors to Change

The authors add that three factors have produced the most change:

  • Consolidation, with fewer insurers and general hospitals (but more single-specialty hospitals and large physician groups) has produced financial concentration in health systems, insurers, pharmacies, and benefit managers;
  • Information technology, in which investment has occurred but value is elusive;
  • The patient as consumer, whereby influence is sought outside traditional channels, using social media, informal networks, new public sources of information, and self-management software.

These forces create a triangle of tension among patient aims for choice, personal attention, and unbiased guidance; physician aims for professionalism and autonomy; and public and private payer aims for aggregate economic value across large populations. “Measurements of cost and outcome (applied to groups) are supplanting individuals’ preferences. Clinicians increasingly are expected to substitute social and economic goals for the needs of a single patient.”