Why Are Medical Costs So High In The United States?

The United States has the highest costs for medical care of any other developed nation, and yet we do not get better health care for that cost. We are not sicker, we don't go to the doctor more often, and yet our costs are sky high, and rising every year. It is projected that we will pay $13,708 dollars per capita by 2020, or 19.8% of our GDP.

In research I did for on my article  “Why Are Medical Costs So High In The U.S.A.?”,  I found that there are four major reasons of these escalating costs:

1. We pay doctors more in the United States – in 2008, general doctors make an average of $186,582 as compared to Australia at $92,844 and France at $95,585. There is an even wider gap among specialists – the average in the U.S. Is $442,450 next to Britain at $324,138, with all other countries coming in at less than $210,000.
2. Drugs are more expensive in the U.S. - In fact we pay 60% more in this country than our European peer countries. Why? Perhaps the power of lobbyists in Washington has much to do with the lack of regulations regarding these prices and with not allowing importing drugs from other countries.
3. Administrative Costs are more – in fact, for every office based physician there are 2.2 administrative personnel, more than the number of nurses, clinical assistants, and technical staff put together.
4. We overuse diagnostic tests – The overuse of diagnostic tests has been estimated to cost about $250 billion dollars a year. This is 10% of the entire cost of health care. Doctors may overuse diagnostic tests because of fear of litigation.

What can be done about these excessive costs? Solutions I've seen have included

1. Encouraging more care from primary physicians rather than specialists
2. Allowing drugs to be imported
3. Better negotiation of drug prices by medicare
4. Adopting more uniform procedures for payment and billing
5. Have centralized database of electronic records
6. Tort Reform to prevent frivolous law suits
7. Promote wellness and preventative medicine

Some of these cost cutting solutions will be introduced under the Affordable Care Act. It has provisions in it to encourage wellness, such as discounted premiums for participants in wellness programs. It also introduces regulations to streamline administrative costs through the use of electronic record keeping. There will be a 15 member Independent Medicare Payment Advisory Board whose task is to study ways to contain Medicare costs and offer solutions. These solutions are supposed to reduce the growth rate of medicare costs while still maintaining or enhancing beneficiary access to quality care. Many are critical of this panel saying that they will ration out health care to seniors and cut access to services. However, it states in the Affordable Care Act that the board is not allowed to offer solutions that ration health care, restrict benefits, raise beneficiary cost sharing or raise premiums. Hopefully their solutions will help bring down the unbearably high cost of medical care, and serve as a model for the rest of the health care industry.

An Example Of Why Medical Costs Are So High

I am very careful about checking on the Medicare site to see what tests and procedures I'm eligible for.  Last November I noticed I was due for an Annual Wellness Exam, and so I scheduled it.  I specifically told the office to make sure it was scheduled as a Wellness Visit, so that there would be no problem with payment.

The Annual Wellness visit is an attempt at preventative medicine.  The purpose of this visit is to sit down with your physician and evaluate your medical history, your current health status and what medications you are taking.  The physician is supposed to check your blood pressure, vision, weight and height, make sure you're current with all your preventative screenings (shots, colonoscopy...).  Further tests may then be ordered depending on what the physician determines from this evaluation.  (For some reason, Medicare doesn't pay for a complete annual physical.  However, I don't think that many doctors are aware of the difference, and incorrectly carry out a complete physical, then bill Medicare incorrectly.)

When I arrived for the Wellness Visit, one of the nurses weighed me, gave me an eye exam, took my blood pressure and gave me a hearing test.  I of course assumed that this was part of the Wellness Exam, and that nothing being done was extra.  The doctor then carried out a brief physical, talked to me about my health in general, and that was the end of the visit.  The visit took probably about 15-20 minutes.

Imagine my surprise when I got a bill for $70.00 six months later.  The office had billed Medicare $160.00 for the Wellness Exam, $45.00 for the hearing test, and $25.00 for the eye exam.  Medicare would not pay for the hearing test and eye exam that was being billed on top of the Wellness Exam.  I wouldn't expect them to - the eye test should have been covered under the $160.00 that they got from the Wellness Exam itself, and the hearing test probably should never have been done at all.

Now it is up to me to fight this bill, and spend possibly hours trying to get things straight.  I have already made six phone calls to the billing department and the doctor's office, arguing that the $70.00 charge should be dropped.  The doctor's office has told me that they don't know what insurance providers cover, that they just go ahead and do a regular physical, and that they are billing the way that they were taught.  They claim that it is not up to them to know what's covered by each patient's insurance.  I tried to explain to them that the Wellness Exam is not a regular physical, and that they should know what's covered so that their patients don't incur unexpected costs, but I got nowhere with that.  I also argued that they are actually double billing for the eye exam, and that the ear exam was something that I never asked for, and that if it wasn't covered they shouldn't have done it.  Again, I got nowhere.

My point to all of this is that in order to bring down costs, the medical providers should know what is covered by Medicare.   It may be difficult to figure out what procedures are covered by other providers, but in the case of Medicare,  it's pretty straight forward.  I believe that there's software to assist the medical establishment with such issues.  Whenever they are going to do anything that will not be covered, they should specifically ask the patient before they carry out a procedure.  Certainly if I had been asked if they should do the ear exam for $45.00 I would have given them a resounding NO!