The independent news organization of Duke University

Cost beyond means

the picture of health

Last week, Republican lawmakers pulled the American Health Care Act (AHCA), the bill they touted as the replacement for the Affordable Care Act (ACA), from consideration by the House. One of the primary concerns raised by opponents of the ACHA was access to healthcare—the Congressional Budget Office estimated that 24 million people would lose insurance coverage under the Republican plan. The fundamental issue that both the ACA and ACHA sought to address is the fact that without government or employer assistance, the cost of medical insurance and medical care is beyond the financial means of most Americans. Simply put, the cost of medical care, and thus medical insurance, is so expensive that most Americans are priced out of the market.

Both the ACA and the AHCA sought to increase access to health insurance by reducing the cost of entry into the marketplace. The ACA increased access by subsidizing plans available through the health insurance exchanges and by increasing the number of individuals covered by Medicaid. The AHCA proposed to decrease regulation of the market, in the hope that increased competition would result in lower cost options for consumers. However, they both bills contained limited provisions to fundamentally address the greatest issue facing the American Healthcare system - cost.

There are many ways to evaluate the cost of American healthcare. One way is to just look at the pure numbers. The cost of an appendectomy in the U.S. is $13,000 while a hip replacement costs over $38,000. Coronary artery bypass surgery costs just under $68,000 and the average cost for a single day in a hospital is $3,949. Approximately 62 percent of Americans have less than $1,000 dollars in savings. While this raises concerning questions about the financial choices of the American public, it also highlights how discordant the cost of healthcare is from the resources available to the average American.

Another important way to gauge the cost of care is by comparing US expenditures to peer nations. In 2010, health care expenditures amounted to 17.6 percent of US GDP, nearly twice the OECD average. Our per capita expenditures were $8,233, about $3,000 more than the three next highest spenders (Norway, Switzerland and the Netherlands) which manage to comprehensively cover a much greater portion of their population with their funds. In short, Americans are paying a lot in absolute terms, and in comparison to other industrialized nations.

Books have been written about the American Healthcare System and cost of care—which is probably the proper amount of writing that is needed to address the issue properly. The factors leading to our incredibly expensive care are multifaceted and complex. This is no one factor driving cost, just as there will be no silver bullet to fix the issue. The U.S. spends less on social services that other nations. This means that issues such as homelessness, substance abuse, and food insecurity are often addressed in medical settings. Concerns about malpractice lawsuits drive providers to practice defensive medicine—ordering unnecessary tests and imaging. A fee-for-service system financially rewards the delivery of services, procedures, and medication—not the attainment of health. Consolidation of independent medical providers and hospitals into large healthcare systems decreases the ability of insurance companies to negotiate aggressively. Many lifesaving drugs cost $100,000 or more for a course of treatment. The American government, unlike many peer nations, does not take a role in regulating the cost of medical care. There is little to no cost transparency in the American healthcare system. Few patients and few provider know the cost of the services they either use or provided; there is little ability to compare prices. These issues just represent a subset of the factors increasing the cost of care.

During the debate over the AHCA, House Representative Chaffetz stated, “Americans have choices, and they've got to make a choice. So rather than getting that new iPhone that they just love and want to go spend hundreds of dollars on that, maybe they should invest in their own health care.” The U.S. would be in a much less precarious situation if access to healthcare could be achieved by opting for a flip phone instead of a smartphone. However the cost of healthcare is many orders of magnitude greater than this difference. The cost of a brand new iPhone ($700) is quickly outpaced by the average cost of an individual premium, $393 per month. This comparison is particularly weak since a premium is just the baseline cost of having insurance—using insurance means paying for co-pays and coinsurance as well. Cutting back on discretionary spending is not enough to put health care within the reach of many American.

Until legislation is passed to explicitly address the issue of cost of care, access will always be a problem. Comprehensive legislation must be multifaceted, addressing the myriad drivers of cost. There are many barriers to change; many powerful actors, including hospitals, drug companies, device manufacturers, and physicians, have a vested financial interest in maintaining the status quo. Nevertheless, meaningful access to care cannot be achieved without addressing cost.

Lauren Groskaufmanis is a graduate student in the school of medicine. Her column, “the picture of health,” runs on alternate Fridays.


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