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Four Reasons Why Healthcare is Expensive in America

By: David Haass
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As an American citizen, it seems to be common knowledge that healthcare in our nation is outrageously expensive. But why is this? In the United States, we see healthcare costs that are nearly double than compared to any other developed nation in the world. Despite our country being one of the most expensive as far as health care costs go, we only come in 37th place among healthcare systems, according to the World Health Organization.

We rank within the top 11 industrialized nations in healthcare. One would naturally assume that if we're paying the most for healthcare, we should be ranking at the very top for quality.
Why does the U.S. seemingly lack exceptional care, yet have outrageously expensive costs?

The High Price of Administration

Healthcare patients may not always be completely aware of the high administrative costs associated with American healthcare, but rest assured, these high prices are there. Administrative costs make up almost 8% of all healthcare costs here in the U.S. in comparison to the average figure of 1-3% spent on administration fees in other nations. What exactly are these administrative costs that we end up paying? Healthcare administration can comprise of:

  • The processing of a patient's medical bills and their payments
  • Quality and patient improvement programs
  • Data collection and reporting for clinical studies
  • Hiring healthcare personnel
  • Payer negotiation
  • Exercising patient privacy, upkeep of information systems, security measures

Large Price Tags on Prescription Medications

The rising costs of prescription drugs seem to influence many people throughout America. So many other countries have specific agencies within their government to help with price negotiations with pharmaceutical businesses when releasing new drugs. However, the United States does not have any particular government agencies to deal with this.

The U.S. permits drug manufacturers to create their pricing. While placing regulations on pharmaceutical companies may seem like the natural solution to astronomical costs, it may not be that simple to do. The U.S. is a leader in the innovation of prescription drug treatments, and by regulating prices, we may see a declination in prescription drug development.

The United States ranks at the top when it comes to finding treatments and cures for diseases. Over half the new prescription medications out there originate from within the U.S. The high prices associated with prescription medications can lead to financial strains on patients in every area of their lives.

Exorbitant Treatments and Testing

Healthcare professionals in the United States seem to perform higher-priced treatments than other countries do, at a much larger rate. A vast number of patients in the U.S. receive treatment from specialists, which results in higher fees than fees associated with primary care physicians. Specialists tend to earn a bigger paycheck, which affects costs for everyone. Providers in the U.S. tend to order procedures and tests with hefty price tags, more so than other providers in different countries do. A few of these expensive procedures include but are not limited to:

  • Cesarean Sections – The United States conducts more c-sections on women than most other countries. These procedures cost significantly more than other leading developed nation's c-section fees. Why do physicians in the United States perform more c-sections than in other countries? With the advancement in technology, are these cesareans completely necessary?

  • Magnetic Resonance Imaging (MRIs) – The U.S. performs tons of MRIs on patients. The U.S. ranked second highest in developed countries to use MRIs. MRI costs are drastically higher than in other countries' average prices.

  • Knee Replacement Surgeries – For every 100,000 people in the world that undergo total knee replacement procedures, the U.S. performs roughly over 200 of these surgeries. The surgeries cost, on average, almost $30,000, which is significantly higher than other developed nations.

With such drastic differences in pricing and procedures performed, it's genuinely no wonder why healthcare in America is so high in comparison to other areas around the world.

High Incomes for Healthcare Professionals

Physicians in America generally make nearly double of fellow countries pay their general practitioners. Not only do American doctors make more money in the U.S., but so do nurses, technicians, and other staff members. Salaries are much higher here in America because of what it takes to become a healthcare professional here, as well as a significant shortage of doctors.

To become a physician, individuals must first complete a residency program – So many other countries don't require this to begin practicing medicine. Medical schools in the U.S. are limited, as are residency program openings. Many of the doctors in America today are part of the baby boomer generation. Baby boomers are retiring at this point in their lives - this helps contribute to the shortage of doctors.

Nursing staff requires several years in a college institution, thus creating a considerable expense as well. Our healthcare professionals are well-trained and well-taught, and therefore, need significantly higher salaries than other nations that may not require the same schooling.

Is Expensive Healthcare Worth it

It's no secret that health insurance can be expensive. However, not having health insurance is more costly.

The best thing America can do is try to increase healthcare price transparency. Having public prices on healthcare could mean a more competitive market.

It would also allow Americans to shop for doctors based on cost, which is excellent for those responsible for deductibles or coinsurances.

I don't know if our healthcare is worth the high costs, but the insurance is certainly worth the coverage.

David Haass is the COO of Elite Insurance Partners & MedicareFAQ. A visionary with experience propelling innovation in the Insurance field, he is highly regarded for driving industry standards in client experience and cutting-edge technologies. Mr. Haass is an active contributor on the Forbes Financial Council, recognized for building brand trust and establishing strong customer relations, motivated by a genuine desire to demystify health insurance options.

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