Issues That Affect Health Care Costs

Several major factors are attributable to the cost of health care. According to the National Health Statistics Group, physician and clinical services plus in-hospital care accounted for over 50 percent of the nations’ health care expenditures in 2008, or a total of $2.3 trillion. An aging population, consumer demand for state-of-the-art technologies and chronic illnesses are some of the issues affecting health care costs.

Technology

• New instruments and technologies provide for better diagnostic assessment, but they are also costly. Hospitals and clinics that want new technology need to budget for equipment and they’ll pass on the costs to consumers. Consumer demand for new technologies means that hospitals and clinics need to purchase new equipment to be competitive and provide new services. Doctors, nurses and technicians also require training on new instrumentation, further adding to health care costs.

Prescription Drugs

• High costs are associated with the development of prescription drugs. And pharmaceutical companies want to recover their costs when they market their drugs to physicians and consumers.

Chronic Disease

• Americans are living longer and experiencing a greater prevalence of chronic disorders. Many of these illnesses require long-term health care services like extended hospital stays and nursing home care. Diseases like diabetes, osteoporosis and heart disease contribute to costly treatments and account for over 75 percent of national health care expenditures.

Medicare

• Baby boomers are coming of age and contribute significantly to the aging population. In 2011 a large segment of the population will begin to qualify for Medicare, and health care costs are expected to shift from private to public funding.

  The Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund both experienced declining assets in 2008, according to the federal Centers for Medicare & Medicaid Services (CMS). The HI Trust Fund pays for inpatient hospital and related care and the SMI Trust Fund covers physician and outpatient services and prescription drug benefits.

  CMS projects that Medicare costs will rise steeply between 2010 and 2030 due to the sheer numbers of people receiving benefits.

Medical Malpractice Costs

• According to Harvard economist Amitabh Chandra, an estimated 3 percent or $60 billion of overall US medical spending goes toward medical malpractice lawsuits each year. This includes jury awards and settlements. Malpractice insurance paid by doctors pays for these medical settlements. Increased medical malpractice insurance fees result from lawsuits and costs are indirectly passes on to consumers in the form of higher fees for services.