Why is Healthcare So Expensive?

Healthcare reform has been in the news for years now – and long before the Affordable Care Act, it was an issue that returned every few years, and with good reason. The cost of healthcare has continued to increase faster than inflation, meaning that it is objectively growing more expensive for individuals to acquire medical care. Meanwhile, we aren’t getting any younger, and more and more people are requiring that increasingly expensive healthcare. Consequently, many people are wondering why it is so expensive to go to the hospital or see your doctor or receive basic medical treatment, and a lot of finger-pointing has resulted.

by Simplee.
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The Easy and Incorrect Answer Most people like to blame doctors. They make so much money, goes the thinking, and a lot of that must come from overcharging their patients. This has turned doctors into the bad guys of the industry, but the truth is that these accusations are inaccurate, and made by individuals who know little of how the medical industry actually works. The truth is that doctors are yet another victim of how medicine is practiced in America today. A large part of a doctor’s salary goes towards insurance – in some cases, 60% or more will go towards insurance payments. Many doctors are sued on a yearly basis, with the overwhelming majority of those lawsuits thrown out of court the second they arrive. Still, lawyering up for a malpractice battle can initially cost a fair amount of money, and so it is important for a doctor to have the insurance to cover that. Because of the common need for the insurance to be used, insurers have jacked the cost of that insurance up. Those costs, then, are passed on to you.

Going Up the Food Chain… and Still Wrong Even then, however, the salaries that doctors are collecting – most of which, again, is going to insurers – is but a pittance compared to what the hospital is receiving. Doctors make as little as 1/10th of what the hospital makes from a single procedure, operation, or visit to the ER. For-profit hospitals are obviously bundling this money into, well, profit, but what are other hospitals doing with all of this money? Some like to accuse hospital administrators of accepting fat paychecks; another claim is that even not-for-profit hospitals are actually making quite a bit of money. Given the doctor’s discretion as far as the medication and procedures ordered, it would, at first, seem as though doctors are responsible for the skyrocketing price of a visit to the hospital, but as doctors see little of the money that is being spent on these procedures, it is unlikely that they are ordering these medical procedures purely out of a desire for money. A Big Problem With an Easy Solution The truth is that a lot of the money that goes into a hospital is spent on medical supplies and equipment. If you want state-of-the-art medical treatment, it begins with a highly-trained doctor and medical staff, but ultimately, none of that can do much for you without the tools and technology that makes modern medicine what it is. Much of the high cost of medical care in America today can be traced back to hospitals investing in the tools and technology that is used to save lives every day. Sadly, these supplies are growing more expensive every year, driving up the cost to use and replace it. Thankfully, there is a way to deal with the problem of increasing healthcare costs – actually, there are many solutions, but a simple one that any hospital can adopt is to seek to seek out and buy from more affordable suppliers. Affordable in this case does not necessarily mean “cheap” or ineffective; medical supplies are held to an industry standard that must be met in order to be sold on the open market. There are, however, ways to reduce costs, either through buying wholesale or through working with suppliers whose own suppliers are more affordable. As in any market, finding resources that offer a competitive advantage over your rivals is a pathway to market success. Hospitals only need to realize that they have options when it comes to whom they buy their medical supplies from and what the cost of those supplies is. Many of the problems that Americans face today in the field of medicine could be solved with frugal, intelligent spending.