Seven Reasons Why Healthcare Insurance Costs Are Escalating

Health insurance costs rose dramatically in the decades after 1980, according to the Henry J. Kaiser Family Foundation. Whereas in 1980, expenditures on health care totaled approximately $253 billion, by 2008 they had surpassed $2.3 trillion in 2008, an eightfold increase. This dramatic rise can be attributed to a number of causes.

Aging Population

• One of the main drivers of health care costs is a increase in lifespans. As people live longer, they incur more diseases, incurring more expense. Also, elderly patients generally have more health problems than younger patients.

Administration

• At least 7 percent of all health care costs go not to medical treatment, but to administrative purposes, such as marketing and billing, according to the Kaiser Family Foundation. Government-administered programs generally spend less of their budgets on these types of expenses, than private insurance companies, with the Medicare program using only 2 percent of its budget for administration.

Prescription Drugs

• The costs of prescription drugs rose dramatically in the 2000s, with prices for name-brand drugs inflating yearly, according to UnitedHealth Group. By 2009, annual inflation rates for name-brand drugs prices had topped 10 percent.

Unncessary Treatments

• More than one-third of all health care costs are spent on unnecessary procedures, according to a study published by Dartmouth University, cited by California Health Plans. This may be due in part to the compensation system of managed health care plans, which pay doctors by procedures, not by the results experienced by the patient.

Physician Salaries

• The salaries of physicians has risen faster than their European counterparts, according to California Health Plans. While the average U.S. doctor makes $200,000 to $300,000 annually, a European doctor makes only $60,000 to $120,000.

Chronic Illnesses

• Due to in part to longer lifespans, chronic illnesses increased dramatically at the end of the 20th century. According to the California HealthCare Foundation, more than four-fifths of health care costs are generated by a little more than one-third of the population, who suffer from chronic diseases. According to the UnitedHealth Group, citing research by Emory University, rising obesity rates account for a large percentage of health care costs. It estimates that by 2018, more than 20 percent of health care costs will be directly related to obesity.

Care forUninsured

• The higher cost of health insurance has made insurance unaffordable for a number of people, according to the insurance group California Health Plans. Rather than receive preventative care, many of these patients receive their care in hospital emergency rooms, where treatment is often more expensive. This cost is passed on to tax payers.