Here’s an article that details some of the factors behind the ever increasing costs of healthcare in the US.
Ken Alltucker
A good doctor can help guide us to a healthy lifestyle. A hip or knee replacement can ensure mobility and relief from pain. A well-run hospital can be the difference between life and death.
But physicians, medical devices and drugs cost a lot. Americans will spend $2.4 trillion on health care this year.
Hospital and doctor bills, especially for the uninsured or those without enough coverage, already can be devastating.
Without a health-care overhaul, the price tag is projected to grow, particularly as Baby Boomers swell Medicare enrollment.
Beware errors in your bill
One way for consumers to take charge of their own medical costs is by scrutinizing doctor and hospital bills, patient-advocacy groups say.
Medical Billing Advocates of America, a Virginia-based consultant, estimates that 80 percent of hospital and medical bills it reviews have some type of error. And those errors can be costly, inflating bills 17 to 49 percent more than they should be, according to Chief Operating Officer Christie Hudson.
Medical Billing Advocates has found a wide swing in pricing among hospitals and doctors nationwide.
For example, one hospital charged $15 per dose of Tylenol or $10 for use of a disposable cup. The hospital charged a patient twice for items such as gloves, swab alcohol, a warming blanket and a daily charge for an IV pump.
To monitor their costs, Hudson said customers should request a line-item bill from a doctor or hospital. She said coding errors are common. So is double billing – for example, charging for a hospital gown when it should already be covered in a hospital’s room fee.
Also, she said patients should make sure a doctor gets prior authorization from an insurance company before conducting a procedure.
The health-care money trail
Perhaps the biggest challenge the nation faces as it attempts to remake the health-care system is rising costs. The nation will spend $2.4 trillion on health care this year, and the health-care tab will only swell as the Baby Boomer generation ages. Reform could mean big changes for hospitals, doctors and other care providers, as well as to the insurance and pharmaceutical industries.
Hospital and doctor fees are made up by:
More treatment
Americans are living longer, and technology, new drugs and devices have brought cutting-edge care. Many of these procedures carry a high price tag, and doctors – paid by how many treatments they provide – have incentive to order more of them.
Wrong emphasis
Many believe the nation’s costly system does not do enough to keep people well. Preventive care that could head off more serious illnesses is lacking. Often-cited factors include a shortage of primary-care physicians and lack of insurance. Also, many cite a lack of personal responsibility by patients for their health.
Emergency-room visits
Lack of access to care and lack of insurance drive more people to seek aid at hospital emergency rooms for minor as well as acute health problems. Hospitals, in turn, charge private insurers more for coverage because government plans such as Medicare and Medicaid don’t fully cover hospital costs.
Cost of needed medical care eclipses the ability of the uninsured to pay
Steve Madonick managed to keep his Central Avenue tropical-bird store open through light-rail construction and the worst economic recession in recent memory. Yet the Flight of Phoenix owner worries another problem may ruin him financially: health-care bills.
Three weeks ago, Madonick was carving a Manzanita tree with an electric saw to build a parrot stand when things went terribly wrong.
“The tree got stuck on the saw, and the thing fires like a rifle shot right into my left eye,” said Madonick, who was rushed to St. Joseph’s Hospital and Medical Center for emergency surgery.
The bleeding stopped, but Madonick needs multiple eye surgeries and a replacement cornea to restore his vision. He can’t afford private health insurance, so he can’t find a surgeon willing to treat him. What’s more, Madonick’s wife, Dale, estimates she owes about $100,000 from a hospital stay to treat a broken pelvis nearly two years ago.
How reform would address hospital and doctor fees costs
The president’s plan
President Barack Obama’s plan would cap out-of-pocket expenses for consumers and eliminate extra charges for preventive care such as mammograms, flu shots and diabetes tests. It also includes incentives to compel hospitals not admit patients multiple times for the same condition as well as Medicare payment pilot programs and other funding for pilot projects such as medical home and liability reform.
Congressional plan
Virtually every health-care interest has agreed to pay fees or reduce costs as part of Senate Finance Committee Chairman Max Baucus’ plan. The plan seeks to bolster the ranks of primary-care doctors and general surgeons with a 10 percent increase in Medicare payments, aims to cut Medicare waste and would reduce payments to private insurers that administer Medicare plans, known as Medicare Advantage. The industry’s payoff: About 29 million uninsured Americans would become customers.
Insurance costs are made up by:
Insurance companies collect money through premiums and sign contracts that allow their members to access care. They pay medical costs – the industry calls it “medical loss” – and extra goes to administrative costs and profit.
Administrative expenses
Arizona’s insurers spent $148.8 million on administrative expenses and collected more than $71 million in pre-tax profits on HMO (health-maintenance organization) plans for the first three months of this year, Arizona Managed Care Newsletter figures show.
Rising premiums
The cost of health insurance for Arizona families has increased three times as much as wages for the state’s workers over the past decade. If medical costs rise at historical rates, the annual family health-insurance bill could reach $30,803 in a decade, the Kaiser Family Foundation reports.
Consumers struggle to get affordable insurance as medical costs spiral
Linda Dean knows how difficult it can be to buy private health insurance.
Dean’s husband owns a small contracting business, so he cannot buy an affordable health plan like larger employers can. So Dean shopped for an individual health plan.
After being turned down by several insurance companies, Dean said Golden Rule Insurance issued a policy for her and her husband. They pay about $1,400 each month for coverage with a $3,800 deductible that must be met before the plan will pay for any medical costs.
Dean said her husband recently developed breathing problems. She worries that the insurance company will investigate her husband’s medical history and drop his coverage.
“My feeling is we’ve been paying them thousands of dollars in profits,” Dean said. “They have never paid anything for our health care.”
How reform would address Insurance costs
The president’s plan
Obama calls for new rules for the insurance industry that would limit an insurer’s ability to exclude people with pre-existing conditions and drop coverage for people who become sick. The president said he favors a government-run health-insurance option but is open to other ideas that could extend coverage to the nation’s uninsured.
Congressional plan
Baucus’ plan would create a non-profit that would compete with private insurers. It also would expand Medicaid eligibility to cover more low-income consumers without insurance. His plan also would require virtually everyone to get health insurance. The House Democrats’ plan calls for a government-run public insurance plan.
Prescription-drug costs are made up by:
Development, innovation
The U.S. pharmaceutical industry spends more money than any other nation on developing new drugs. The cost of innovation, in part, is borne by U.S. consumers who typically pay more for prescription drugs than people in other nations.
Slow growth
Prescription-drug sales in the United States reached $291 billion in 2008, a 1.3 percent increase over 2007. It was the lowest rate of growth in more than a decade, triggered by the slumping economy and lower-cost generic drugs. Yet drugs sold through Medicare plans remain lucrative for the industry.
Advertising costs While the pharmaceutical industry develops new drugs, it also invests billions in advertising. In 2006, it spent $5.4 billion on consumer ads. One study found the industry spent 24 percent of revenues on advertising and promotion, compared with 13 percent for research and development of new drugs.
Medicare-coverage loophole forces self-payment for expensive drugs
Marguerite Floyd, 85, of Sun City, is in great health, but she has a rare neurological disease that can trigger seizures. She must spend $600 or more each month on two drugs, Keppra and Lamictal, to prevent her seizures.
Floyd is enrolled in Medicare’s Part D prescription-drug program. The plan helps cover the cost of drugs until it reaches a minimum trigger of $2,700. After that, retirees such as Floyd are responsible for their full drug costs, a coverage loophole known as the “doughnut hole.”
Studies show a large percentage of seniors skip needed prescriptions once they reach the doughnut hole.
Even though Floyd’s income is limited – she lives on Social Security and her pension from an airline – she digs deep each month to afford her drugs. She believes the drugs are too expensive.
“I haven’t heard of any pharmaceutical company going broke,” Floyd said. “They make a huge, huge amount of money.”
How reform would address prescription-drug costs
The president’s plan
Obama and the Senate Finance Committee have announced a deal with the pharmaceutical industry’s trade group that both sides said would save $80 million over a decade on Medicare’s prescription-drug plan. The compromise would give seniors a 50 percent discount on brand-name drug costs once they reached the doughnut hole.
Congressional plan
Baucus’ plan also imposes a $2.3 billion fee on pharmaceutical manufacturers and also includes the 50 percent savings for the doughnut hole. Neither the Obama nor Baucus plan advocates classifying drug prices at Medicaid levels rather than Medicare levels for the 6.4 million low-income seniors, which would save $30 billion over one decade, according to the Congressional Budget Office.
