A recent checkup revealed that I had a host of medical issues requiring repeated visits to the doctor as well as prescription medications and lab tests in order to improve my overall health. While I do have insurance, these health issues, with their mandatory co-payments and deductibles, resulted in out-of-pocket expense. Adding these medical costs, along with those of my spouse and my allergy-prone teenage daughter, I estimate that my family expended almost 20% of our net monthly income to cover them. That may not seem like a lot, but it does add up in these economically uncertain times, and has a significant impact on our family budget.
Adding up the costs, I started to think about recent efforts to reform the way in which health care is administered in our country and why they have met with so much resistance. If, as seemed to be the case from my own experience, health care costs every year take an increasingly larger bite out of the average American’s income, one would expect a rising chorus directed at keeping those costs down. Oddly enough, much of the debate over health care reform centers on forcing someone to purchase insurance under the Affordable Care Act as opposed to the economic advantages to the individual and the government in having universal coverage for all Americans.
Trying to understand why many Americans favor an individual right not to choose coverage (Americans have, after all, been forced to carry automobile liability insurance for years, without quibble) over lower costs and their own economic advantage, I began to look into why health care costs are so high. According to the 2011 Milliman Medical Index, the total cost of health care for a typical family of four covered by a preferred provider plan was $19,393; an increase of $1,319, or 7.3 percent over the cost for 2010. This amount was double what the same family would have needed less than a decade ago, in 2002, when the cost was $9,235. Of the total 2011 amount, the average employee paid an all time high of 39.7 percent, or $8008. That is certainly not small change at a time when the economy has stagnated and unemployment is high.
Why health care costs continue to rise is not easily answered or understood. Many factors have been cited as contributing to the high cost: the fear of medical malpractice lawsuits, doctor and hospital fees, overuse of unnecessary tests and procedures, extremely high overhead and administrative costs, over-emphasis on treatment as opposed to preventive care, and a quantity- not quality-based system for doctor and hospital reimbursement (they are paid more for how much service they provide) have all been named as potential culprits.
Underlying all of these reasons, however, is the fact that prices for medical goods and services continue to rise because they can. In our market-driven economy, providers of these goods and services like pharmaceutical companies are responsible to their stockholders to show a yearly increased profit. With this goal in mind, prices for products are increased, often without there being any need to do so, other than enhancing the bottom line. According to the Business Journal, for example, the price of a drug that halts premature labor in pregnant women skyrocketed from $10 or $20 per dose $1500 when a Missouri-based pharmaceutical company obtained an exclusive sevenyear patent to sell it. The drug’s price was raised even though the company did not have any associated research or development costs to keep it on the market. In the end, insurance companies will continue to pay for the drug for patients for whom it is medically necessary, but will pass on the added cost by increasing subscriber premiums.
What is clear is that unless something is done to curtail it, the inexorable climb in health care costs will continue. Ultimately, these rising costs will have an increasingly devastating effect on ordinary Americans. Unable to financially bear the larger premiums, co-pays and deductibles, many individuals will put off obtaining needed medical care, endangering their health. That many citizens do put off dealing with health issues because of financial concerns is very sad commentary on the state of the health care industry in the world’s wealthiest nation.