Rise in Healthcare Costs

January 23rd, 2012Healthcare Cost0 comments

There’s no question that healthcare costs have been increasing over the years. In the US, the dollar amount has gone beyond $2.3 trillion dollars in 2008. This is three times the amount spent in 1990. And the problem goes beyond the US. Globally, healthcare costs have been increasing, in part due to increasing technology and the costs of that technology. It is up to the government, healthcare providers and patients to work toward getting the costs of healthcare down to acceptable levels.

The poor economy plus the increase in healthcare has put a strain on people’s personal economic situation. Insurance costs have been increasing and this affects the overall cost of healthcare. Government programs that pay for the indigent have been losing money over the years. This is money that comes out of the pockets of the taxpayers. Interestingly, the rate of increase of government spending has been less than that of private insurance payers. Exactly why this is the case isn’t clear.

More than 51 percent of the cost of healthcare comes from hospital care and physician’s care services. Drugs account for ten percent of costs. Administration costs account for 7 percent of care. Things like retail products, home health services, nursing home care and dental care make up the remainder of the services.

Why are healthcare costs increasing? Part of the issue is the increase in technology costs. When a new technology is created, the costs that go into creating that technology go down to the consumer and it costs money to be able to use that service. This phenomenon goes away over time but it often takes several years to drive costs down. The same is true for new drugs as well. When new prescriptions are first put on the market, the cost is high due to the costs of developing the drug. This cost is passed onto the consumer for several years, until the drug becomes generic and the overall cost of the medication goes down. The more money it takes to develop a new drug, the greater the cost passed on to the consumer.

There are increasing costs to treating patients with chronic disease. As the population ages, more people are living with chronic disease, such as Alzheimer’s dementia, Chronic Obstructive Lung Diseases, heart disease and kidney disease. There are more people on dialysis and this is an expensive procedure. Transplant patients are costly to take care of and it takes money to care for patients with AIDS. Not all of these patients can be managed at home. Many must reside at nursing home facilities because they need a higher level of care than could be gotten at home. As the average age of people rises, there will be more people spending the healthcare dollar on nursing home expenditures.

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