Where is the money going?

I believe this is the question that everyone is asking themselves. Health care cost are so high, yet the benefits of having health insurance doesn't seem to add up to what we pay. Where is all this money going? Who is really benefiting from all of this? Is it the money hungry insurance companies or is the money really being allocated accordingly. Many may argue that it is the growing population of the elderly that is effecting the system. However I believe that this is just an excuse used to justify the fact that the system itself needs a complete makeover.

Taking a look at the structure itself of the health care system, it is so confusing. There are so many exceptions and guidelines as to who receives what service. It almost seems as if I would like to have an illness in order to be considered for many of the programs provided by the system. What happens to those individuals who are considered to some degree perfectly healthy, and do not receive health care benefits from their employer and can not afford basic health care? We complain about individuals using the ER as a form of "basic" health care, when a lot of those emergency visits could have been prevented have they had access to regular Dr. visits. It seems that we are paying way too much into a system, that is being very selective as to who receives care, and in the end we are spending more money on emergency care that could have been prevented.

Why so expensive?

Ara’s blog brought up some interesting ideas on ageing populations and advances in medical technology as reasons for the rising cost of health care. Yet, I am skeptical about this because if we take Japan as an example, it has the largest burden of elderly people in the world and is amongst the top in medical technology, but their health care costs are not nearly as high as that of the U.S.

Yahaira’s comments on the lack of transparency in the U.S. health care system were interesting because I think a lot of things go on behind the scenes between insurance companies, providers and even the government that most of us do not get to see or understand. I am still new to the workings of the U.S. health care system, but in my mind if we are paying a disproportionally higher amount for health care than we should be (looking at the trends in the economy) and we are not seeing an equivalent improvement in the quality of service we receive, then somebody must be getting the benefit along the way. The most obvious answer to me is the giant, powerful, rich insurance companies that we see around us every day.

Listening to Dr. Stevens describe the U.S health care system last week was eye opening and mind boggling to say the least. It was almost impossible to make sense of all of the components within the system and the hundreds of exceptions and qualifications needed to receive treatment. In the end, it just demonstrated to me how inefficient and unnecessarily complicated the whole system is….all so that a few players along the way can collect all the money in this big game. If the health care system was truly for the purpose of providing health, I am confident that it would look a lot simpler and would definitely cost us less.

Rising Health Care Costs + Yasmin Khan

Administrative costs and excessive profits are without a doubt a leading cause in the rising cost of healthcare in the US. It is a known fact the US spends more on health care than any other countries spends, without providing more services than other countries do. So where is the money going?

Some try to justify this difference in many ways. According to the article, “It’s the Prices Stupid: Why the United States is So Different From Other Countires”, one explanation for higher hospital costs is that all the components of providing hospital care in the US – health care workers’ salaries, medical equipment, pharmaceuticals and other supplies – are more expensive than in other countries. Second, it claims that the average US hospital stay could be more intensive than in other countries. Third, is the inefficiency of the health care system compared to other countries. This point eludes to the fact that the US payment system is highly complex and fragmented; greatly contributing to high administrative costs.

While one blogger made the point to adopt a health care system similar to Canada’s to cut costs, one criticism of Canada is that their health care system delivers fewer highly sophisticated procedures than does the US system; with the US conducting four times as many angioplasties per capita and twice the number of kidney dialysis. Although medical necessity is questionable, are we willing to cut down on our highly sophisticated procedures and expertise to cut costs?
Japan’s health care system is definitely one to be admired; being among the least expensive health care systems and providing high levels of CT and MRI scanners. They are able to provide highly sophisticated care at a low cost, making our high costs even harder to justify.

Medicine is a highly specialized profession and if insurance companies continue to pay low fee for services, medical providers are forced to raise those fees. If we continue to allow health care to be driven by the free market, we cannot expect to have an efficient and affordable health care system seen in countries like Canada or Japan.
I think the issue that needs to be raised is accountability. Insurance companies need to be held accountable for their actions what they are doing behind the scenes, similar to the greater need for transparency brought up by Yahaira.

Supply and Demand

While it would seem that rising administrative costs is a key factor to the rising cost of health care, especially considering the disparity b/w the US and Canada's administrative expenditures as quoted by the NEJOM in 2003, I would imagine that there are other contributors to the soaring costs that we are currently experiencing. Setting caps on what medical offices and imaging facilities can bill for specific procedures may be a solution. Supply and demand, with its associated competition has, historically been a good mediator of incremental costs. The question is, why hasn't this been effective in the healthcare industry?

Other means to lower healthcare costs include the usual suspects: utilizing efficient EMR systems, developing efficient machinery for diagnostic imaging, for example to increase volume of patients, hence lowering costs, consumer education regarding preventative maintenance therapy.

With regards to excessive profits, according to consumer reports, the 6 largest private insurance companies profited by more than 11 billion dollars in 2006 (http://www.consumerreports.org/cro/health-fitness/health-care/health-insurance-9-07/premiums-and-profits/0709_health_profit_1.htm). Quite a large number. Depending on the state, insurers keep 15 to 25% of their premiums collected for administrative costs, marketing, and profits. By this margin, the California mandate capping these costs at 15% is on the low end of the spectrum. Whether or not this is a good thing is a tough call for me. One would imagine, that in the free market, private insurance companies would strive to lower their administrative and marketing costs on their own, driven by the goal to increase profit margins. Thus, it seems strange that gov't legislation would have to step in to control this. Furthermore, I worry that legislation may force private health insurance companies out of the state, thereby decreasing competition in the market which may lead to higher premiums for the consumer.

First of all, I am confused as to what kind of costs will be reduced with this type of legislation. Sure, they tell us that "administrative" costs will be reduced but they do not say specifically what these costs are. No one will be able to make a detailed list that shows which costs will be reduced, and I am sure that is the point of this legislation. The public will not really know which costs will be reduced until they get a bill on their mail telling them that some procedure will not be covered by their insurance as a consequence of cuts in administrative costs. There are many problems with this type of events and one of them is that we forget that we are dealing with people's health and well-being. All legislation should focus on the needs of the people. I would argue that we would not need any cuts, if the billions of dollars that go to medical services would be spent to benefit the U.S. population as a whole. In reality, most of the money benefits only a few people who are in position of power. I believe that some of the changes that need to be made would involve getting health insurance representatives and medical doctors together and come up with a protocol that ensures that the public will receive the best care possible. I used to ask myself why is health services focused on money instead of people's well being, but thanks to the lecture from last week I understood that the American health system was founded on the belief that medicine consists of rich people that want to charge too much for their obscure knowledge. Sadly, we have been able to evolve in many ways as a society but that ancient mentality has not changed. Until this mentality continues to be instilled in individuals' mentalities, we will not see any changes in our health system and people's health will continue to suffer.

The Value of Life

I do agree that administrative costs/excessive profits for health care providers and insurers are primary reasons for the rising cost of health care; one just needs to observe the salaries of physicians, the costs to become insured, the costs of medicine, etc. to know that people are being screwed when it comes to the costs of health care. However, I believe that there are other contributing factors involved. Most importantly, we as a people need to take some of the responsibility for these costs. The answer to the high costs of health care are inherent in the value our very being.

“But what do you think would happen if you reached down and took away his health? A human would do anything to save his life. There's no pain like your own. People will do anything to stay alive.” This is a very telling quote that I found from the book of Job. It happens to be from a conversation that “God and the Devil” were having. Ironically, I think Satan pretty much sums up the underlying reason for excessive health care costs. People will give up everything they have in order to have good health in hopes of trying to prolong their lives.

I believe providers/insurers in the United States understand the very simple concept that life is expensive and are just taking advantage of it. I feel like this health care system abides by an underlying thought that human life is the most valuable thing in this world and should be the most profitable. In this country, costs involved with health care are simply inflated. Ultimately, the onus falls on us because of our willingness to pay for it. If we continue to allow this free market health care system to go on without checks and balances, then prices won’t go down. In order to save people and employers’ money, it would take a collective effort of a majority of people to flat of refuse to pay these prices. I think this is the only way that costs would go down significantly. This revolution of sorts would have to start from the ground up, meaning beginning from the masses of common folk up to those who implement and enforce health policy; to create real change where health care would be affordable for everyone.

Increasing Health care costs!!

Health care costs have been rising in the U.S. due to many reasons, which include administrative costs as well as excessive profits. From the Frontline documentary, the U.S. spends the greatest percentage of health care costs on administration services. In contrast, we see countries like Taiwan only spending about 2.2% of their health care cost on administration. A great deal of how they reduced administrations costs was by implementing an electronic system for medical records for each citizen, making it easy to access medical records and prescription history for medical professionals—thus saving time and money. It is staggering how much inefficiency in the administration of health care can lead to increased costs. In addition, excessive profits are also one of the primary reasons why health care costs are rising. CEOs and other executives of hospitals, pharmaceutical companies, and insurance companies are making enormous profit off of health care services. However, there are other factors that contribute to the rising cost of health care. To start off, the fact that the U.S. is a developed country, has a very minimal threat of infectious disease, and a higher rate of chronic disease is one of the main reasons why health care costs are rising. Heart disease, cancer, diabetes—are diseases that require a great deal of health care services, medical technology, medication, and hospitalization. If the population of the U.S. is more affected with these and other types of chronic disease, the overall average cost of care per person would be higher compared to a person in a developing country, where basic sanitation would get rid of a particular disease. In addition, the baby boomers are now at the age where chronic disease is at a staggering high—thus, a larger percentage of the population is suffering from a chronic disease. An article I read on California Healthline stated “According to Mercer, the average deductible for a single person between 2003 to 2007 increased from $250 to $400 and from $1,000 to $1,500 for a family for the same period.” The high steep slope of this increase is staggering, and with gas prices this high and the economy in trouble, the cost of health care is not going to be decreasing anytime soon unless there is a major health care reform change. Some things that can reduce health care costs are preventive care services. With chronic disease being the number one health care cost, more preventive care will decrease chronic disease rates, thus decrease the amount spent on controlling these types of diseases.