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5 Reasons Healthcare Costs Are on the Rise

5 Reasons Healthcare Costs Are on the Rise

It’s not your imagination. Healthcare is expensive and costs continue to rise. According to the Journal of the American Medical Association, costs increased by almost one trillion dollars between 1996 and 2015. The rise in healthcare costs cannot be attributed exclusively to any one cause. Rather, there are a number of causes that, put together, are responsible for the rise. All of the following, plus more, have a role.

An Aging Population

The first of the Baby Boomers turned 65 in 2011, and more are joining them in old age every year. As a large chunk of the population gets older, they become more prone to the health problems associated with age. According to The Pharmacy Times, it is estimated that 60% of this population is expected to be managing at least one chronic health condition by 2030. These conditions often require ongoing and expensive treatment, which can drive up healthcare costs.

An Increase in Chronic Diseases

While older Americans are more likely to experience chronic health issues, they are not the only portion of the population that is coping with them. More and more Americans are developing chronic issues that include type 2 diabetes and high blood pressure.

In some cases, these health issues go undiagnosed for extended periods of time. For instance, approximately 7.2 million of the estimated 30.1 million Americans who have type 2 diabetes do not know that they have it. When conditions like diabetes go undiagnosed, they can lead to other health issues. When these issues arise and demand more immediate medical care, the costs can be high.

A Lack of Cost Transparency

In most spending areas, individuals have the ability to shop around to find the lowest price. Competition, as a result, keeps costs in check. This sort of comparison shopping, however, is typically not possible when it comes to medical care. Few hospitals or doctors publish the costs associated with common procedures. Additionally, the cost to the patient is not always closely correlated to the cost to providers. In one case cited in the Wall Street Journal, a hospital in Texas was charging well over $50,000 for knee surgery procedures that typically cost under $10,000. If this happens frequently, costs can easily go out of control. Movements toward greater degrees of price transparency could result in more stable prices over time.



Rising Prescription Prices

Soaring prices for needed prescriptions have repeatedly made headlines in the last several years. Prices on some forms of insulin have more than doubled. The cost of a life-saving EpiPen has multiplied. It is often assumed that increases in prices are associated solely with new therapies. However, research indicates that there is more to the story. A recent report on NPR revealed that the increases in costs in prescription drugs were largely linked with increased prices from manufacturers on drugs already on the market. Brand name oral medications increased nine percent in price between 2008 and 2016. Injectable medications increased in price by 15%. The report went on to say that generics may provide price relief, but not yet. In the first years a drug’s patent expires, there is not a great deal of competition between generic manufacturers. Because of that, prices of the generic remain close to those of the name brand prescription. Over time, however, generic prices tend to fall as more producers get into the game.

Increasing Costs for Ambulatory Care

Procedures performed on an out-patient basis are generally far cheaper than those performed in a hospital setting. Ambulatory care includes emergency room visits and out-patient surgical procedures. In the JAMA study cited above, they found that ambulatory care costs increased from $381.5 billion to $706.4 billion during the course of their study. According to experts, the increased cost was associated with an increase in ambulatory care services. Additionally, populations who rely heavily on emergency room visits for care are associated with rising costs in this sector.

With healthcare costs continuing to increase, it’s important to be sure that the health coverage that your organization provides keeps up. Examining benefit packages on a regular basis can help you ensure that you are getting the best coverage for your employees at a cost that fits your budget and their needs.

We’re here to help guide you and your company through health coverage decisions. Download our guide “Step-by-Step Guide for Introducing New Employee Benefits” to learn more.



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