Rising healthcare insurance costs affect everyone, including workers, their employers and medical professionals. There are a number of factors which cause these price increases, and understanding them can make it easier to manage healthcare costs in a more beneficial manner.
Increase in Obesity And Associated Diseases
Due to advances in technology and societal attitudes, a growing number of people are spending much of their time sitting down. They spend 8 hours in front of a desk at work, and then they come home and spend the rest of the day in front of a television. Fewer people work or play outdoors, including children, and this sedentary lifestyle has led to an increase in obesity and associated disease such as diabetes, which has led to increased demand for healthcare which puts pressure on prices, causing them to rise.
Healthcare Costs Are Highly Regulated
Most Americans don’t pay directly for their health insurance out of pocket, and instead acquire it through an employer. This means that the employer acts as a type of middleman, and the laws of economics dictate that middlemen always make prices go higher rather than lower.
Reduced Option Plans And Provider Networks
Health insurance providers have sought ways to control costs, but the methods they’re using have made the situation worse rather than better. For instance, they’ve reduced the total number of plans which are available. There has also been a reduction in provider networks. Economically this merely causes scarcity because there are fewer plans available to consumers and their access to doctors is limited.
Little To No Transparency
Healthcare in the United States and the developed world in general has become overly complicated. This incredible complexity is partly due to a lack of transparency within the healthcare field itself, which has contributed to higher prices. In most developing countries you either have the money or insurance to pay for treatment out of pocket or you don’t, and if you have neither then you don’t receive any service.
In the U.S. there is this idea that everyone deserves healthcare regardless of their ability to pay, which necessitates the involvement of the Federal government which leads to all sorts of complex rules and legalities that make it difficult for consumers to understand treatment plans and costs, and which force employers to cover them.
Healthcare Professionals Are Not Rewarded For Efficiency
The laws of economics dictate that increasing efficiency always leads to lower prices. The faster and more efficiently a product or service is produced, the lower the prices. This is why a brand new computer back in the 1980s cost thousands of dollars whereas today one can be purchased for a few hundred dollars.
Unfortunately this phenomenon has not occurred in the healthcare industry and this is partly because healthcare providers are not rewarded for efficiency. Government programs such as Medicare compensate medical professionals and institutions under a system which is called fee for service. This system reimburses them for all the tests and procedures they perform, which leads to over treatment.