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This is the question that’s at the heart of the matter. And it’s
what we need to understand before we can try to control costs.
It’s important to look at the real drivers behind high and rising
health care costs and health care premiums.
More expensive technology, used more often — No
doubt, modern medicine is amazing and can save lives.
And as better tests and more expensive equipment
and pharmaceuticals emerge, we can expect to see an
increase in the use of these services. Technology is the
key driver of health spending, accounting for an estimated
half to two-thirds of spending growth.
Inflation — Just as we spend more today for a gallon of
milk than we did 20 years ago, we spend more today for
the same medical services than we did in years past. This
medical price inflation outpaces general inflation and is
driving 51% of the growth in health care spending.
Cost shifting — When government programs like Medicaid
and Medicare underpay for medical services that patients
receive, private insurance companies have to pick up the
balance. A 2008 report — issued by an independent firm that
researches health care trends — estimates the total annual
cost shift from Medicare and Medicaid to private insurers is
more than $88 billion. The report also estimates cost shifting
accounts for $1,788 of the annual health care costs for a
typical family of four, or 10.7% of their total costs.
Government Regulations —
Private health insurers spend over $339.2 billion in order
to comply with government health care regulations. While
we spend some of this money paying for benefits that
we’re required to cover like certain screenings and certain
prescription drugs, more than half of the money is spent on
regulatory costs such as filing and reporting requirements.
Patient lifestyles — Increasing numbers of patients
who are challenged by obesity, smoking, drug abuse,
poor nutrition and physical inactivity contribute to an
increase in the use of, and therefore the cost of, health
care services.8 These preventable risk factors9 can also
contribute to chronic diseases, which account for 75% of
the money spent on health care in the U.S. each year.
Obesity — The percentage of obese adults now
exceeds the percentage of healthy weight adults.
Tobacco use — One in five adults smoke.
Sedentary lifestyle — Less than one-third of adults
report getting regular exercise.
Poor nutrition — One in six adults has high cholesterol
