U.S. Health Care Spending: What a Tangled Web We Weave

by Cathy Miller on October 30, 2012

in Health and Wellness, Health Care Reform, Health Insurance

Most health care professionals agree on one thing.

There is no simple solution to the U.S. health care system.

A recent report from the Bipartisan Policy Center (BPC) gives new meaning to a tangled web, with a haunting look that would make Halloween promoters proud.

The following highlights key features of What Is Driving U.S. Health Care Spending? America’s Unsustainable Health Care Cost Growth.

Ghouls & Goblins

The cast of characters in our health care system is so diverse it makes identifying one key culprit impossible.

The following all have a part in our current health care crisis.

  • The American population
  • The health care delivery system

My categories are broader than those shared in the report. Let’s look at each.

American Population

We are the consumers.

  • We purchase (or not) health care services
  • We drive costs (to some degree)

Some of the population factors, such as aging, are beyond our control – no matter how much we pay our plastic surgeon.

Other cost drivers are within our control.

  • Obesity
  • Chronic disease management

There is an increasing focus on the expanding waistlines of Americans. According to the Centers for Disease Control and Prevention (CDC):

  • 36% of U.S. adults are obese
  • 17% of our youth are obese

The link between obesity and chronic disease makes our health care problem worse.

The BPC report cites a study conducted by the CDC that concludes many chronic conditions are preventable. The study suggests unhealthy choices made by individuals accelerate chronic conditions.

Look at the impact of chronic conditions on health care spending.

 Sources: Medical Expenditure Panel Survey, 2006 and Robert Wood Johnson Foundation, Chronic Care: Making the Case for Ongoing Care, February 2010.

 

Note that 84% of total health care spending is on individuals with chronic conditions.

Health Care Delivery System

I lumped a few entities into this category.

  • The insurance industry
  • The health care industry
  • Legislation

Insurance Industry

Despite being around since World War II, employer-based health insurance retains some of the same characteristics from back then.

  • Tax exclusions for employer-sponsored insurance
  • Relatively low cost-sharing by employees
  • Plan designs that trigger payment based on disease
  • Medical networks reimbursed (for the most part) on a fee-for-service basis

The basis for claims is still disease. You get sick – your plan pays.

While most employers now offer some form of wellness programs, there remains little incentive for managing costs.

Other factors found in the BPC report that affect health care spending include the following.

  • The lack of transparency regarding costs, utilization
  • Decreasing competition from consolidation
  • The administrative burden of the claims review process

The Health Care Industry

The health care industry has some of the same issues as consumers and insurers.

  • Fragmented delivery systems lack accountability/incentives for managing cost
  • The industry is also seeing consolidation of provider groups and facilities
  • A shortage of health care professionals worsens with retiring providers
  • Like insurers, health care providers have an administrative nightmare (much of it brought on by regulations)

Advances in medical technology also add to the cost of health care. And we, as consumers, want the very best.

Legislation

The report reviews the impact of legislation and regulations on health care spending.

  • Legal barriers – The structure of the current regulatory system supports fee-for-service arrangements, which hinders other. more cost-effective delivery systems
  • Medical malpractice  - High costs and fear of lawsuits cause over-testing and treatment, adding to overall cost
  • Fraud and abuse – Estimates for the cost of fraud and abuse in Medicare and Medicaid alone are $50 to $100 billion
  • Scope of practice restrictions - Regulations limit the scope of practice of qualified health care professionals, driving up cost by requiring physicians for those services

Tangled Mess

This tangled mess of health care spending has trappings from multiple sources.

  • Non-engaged consumers who have little incentive for healthy behavior
  • An insurance industry tied to traditional financial and delivery systems
  • A fragmented, diminishing pool of health care professionals

And all is wrapped up in a legal, regulatory web.

Is it any wonder we have yet to find an answer?

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Notice of Disclaimer –Cathy Miller is not an attorney or health care provider and cannot provide legal or health care advice. The information provided is for your general background only, and is not intended to constitute legal or health care advice as to your specific circumstances. We recommend you review legislation with legal counsel and visit your physician for health care issues.

 

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