WPS Health Insurance Blog

Rising health care costs aren’t Darth Vader’s* fault

Posted by Bruce Geiger

Nov 18, 2015 12:39:55 PM

ThinkstockPhotos-452464623.jpgWith all due respect to George Lucas, there’s no evil galactic villain causing health care costs to rise. It’d probably be easier if there were.

The facts are sobering: the United States devotes a greater share of its GDP to health care than any other country. In 2013, it was about 17.4% of GDP, or about $9,255 per person. And the cost of health care has risen steadily since 1960, nearly always at a higher rate than general inflation.

What is behind the persistent increases?

Seven factors are generally considered to have the biggest impact on health care costs:

  1. Doctors, hospitals, and other medical providers are paid in ways that reward doing more procedures instead of rewarding efficiency or outcomes.
  2. We’re aging, and we’re getting fatter. Therefore, we’re getting sicker.
  3. We like to use the newest – and more expensive – drugs, technologies, and procedures.
  4. Buying health insurance provides tax breaks to employers, and because employers pay much of the total health care bill, the nominal cost to patients is kept artificially low. So we have fewer reasons to object.
  5. We lack information that would help us make better decisions about which medical care is best for us.
  6. Hospitals and clinics are merging, and when they do, prices have tended to rise.
  7. Malpractice insurance, jury awards, and a relatively high percentage of specialists providing primary care all complicate efforts to slow spending.

Spotlight on #5: If consumers had better information, we’d make better decisions, right?

The true objective costs of drugs and health care services have traditionally been extremely hard to identify with any confidence. Which, in turn, makes comparison shopping nearly impossible. And, the data show that people want more unbiased information about the true cost of health care. Paradoxically, though, when such information is available, only a fraction of consumers seek it out. We talk a better game than we walk, apparently.

Also, on average, we fail to see ourselves as contributing significantly to rising health care costs.

In 2013, about half of consumers said their behavior has a “major influence” on increasing health care costs. In contrast, nearly six of 10 employers agreed that consumer behaviors had a “major influence” on health care cost increases, as did more than 82% of physicians. Clearly, we’re kidding ourselves.

Next steps

This post described a situation but didn’t try to solve it. That’s because we all have a stake in working together to rein in the persistent increases in health care costs. There’ll be more information to come in the WPS Your Health Matters blog focused on this topic

* “Darth Vader” is a registered trademark of Lucasfilm Ltd.

Topics: health insurance