The Three Reasons Why Healthcare Costs Are So High

There’s no denying that healthcare costs are high and continually growing. The average an American citizen spends around $10,345 on healthcare. According to a government study, about 5% of the population accounts for nearly half the spending in a given year. For the most part, the sick and disabled make up the 5%. Aside from the 5%, everyone needs medical care at some point in their life. That’s why it is so important to have comprehensive medical coverage. Unfortunately, the cost of health insurance is exorbitant. Below are the top three reasons why healthcare is so expensive.

High Administrative Cost

According to David Cutler, one of the country’s foremost health economists, there are 3 reasons why healthcare is high. One reason pertains to the administrative costs, which when compared to other countries, we run at a higher cost level. Contributing to 25 % of all health care spending, administrative cost continues to soar, due to the need of so many people being covered while still trying to cover the bills. The government just can’t do it alone.

Spending More Than Other Countries

Another reason, according to Cutler for the astronomically high prices, is the fact that we spend so much more money than other countries doing many of the same things. One example of this is how we buy and sell branded drugs compared to other countries. did an analysis of 8 drugs based on price and compared them to other countries. Seven of those drugs cost more in the U.S. after estimated discounts than in most other high-income countries. Another example would be how much more doctors and physicians get paid in the U.S. compared to other countries. It is also important to point out that most U.S. hospitals are up-to-date with the latest and greatest technology. These machines, although advanced, do come at a price.

High Coverage

Lastly, Cutler states that the extensive coverage Americans receive is another reason why healthcare costs are so high. He uses an example of someone having a heart attack and how we can receive heart surgery if needed. In other countries, that option might not be available. It is also notable to point out that doctors use defensive medicine – the practice of recommending a diagnostic test or medical treatment that is not necessarily the best option for the patient, but an option that mainly serves the function to protect the physician against the patient as a potential plaintiff. These tests alone can run up in the thousands just to figure out what you might have. This type of coverage is not available in other countries. Due to the fact that all Americans are equally able to receive these treatments, the cost of maintaining these services continues to grow.

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