The real reason health costs are rising

Health insurance

WE’RE OFTEN TOLD in the media that the cost of health care in the United States has become a runaway train. Hospitals and physicians, we’re told, are making more and more money but providing less and less of a service to the public. But this is misleading, so let me provide some clarity.

All statistics clearly illustrate the cost of health care is increasing exponentially – that much is true. But the rising cost is not because the health care provider now receives more money per patient. The cost is due to the volume of patients in poor health. A deep-dive into the drivers of the increasing cost of health care shows that the main root of the problem is the rising number of people making poor lifestyle choices, which lead to conditions like obesity and diabetes. Chronic illnesses such as diabetes and heart disease are responsible for 85% of health care costs, and almost half of all Americans have at least one of them. Not only are treatments for these conditions expensive but the conditions themselves are also difficult to treat. Meanwhile insurance companies run advertisements that give the impression that risky behaviour comes with few long-term consequences by suggesting that their policy holders are in safe hands regardless of how they choose to lead their lives.

In fact, medical practitioners and providers are being paid less due to reimbursement compression from commercial insurance plans. The traditional major medical plans have all but vanished from the American health care system and been replaced by managed care plans that use strong-arm negotiation tactics. The Medicare pricing is now the benchmark, so insurance companies offer discounts based on that figure. Medicare and Medicaid may have been created to help those without insurance, but they have spurred demand for health care and given providers the ability to raise prices. Other efforts to reform health care and cut costs have also had the opposite effect.

Let’s say that a patient plan will approve billing at 35% of Medicare rates. This amount is only the approved amount; most patients have plans that pay 80% of the approved amount. In other words a claim valued at $100 by Medicare will come to $35. The insurance will pay 80% of that, or $28. The patient will pay the rest. The looming challenge for medical providers relates to their growing inability to collect outstanding patient fees. The average provider that services patients in the home, for example, only collects $0.7 on every $1 owed. Providers are effectively giving patients a discount, but the reality is that restricting care, patient by patient and insurance plan by insurance plan, would create an ever bigger problem for all of us.

Dr. Bruce Lee, M.D. and his team at Johns Hopkins have been researching the health habits of the global population and the effect that lifestyle changes and dietary habits could have the incidence of obesity. Their work will be invaluable in learning what exact actions we have to do to improve health around the world, and will eliminate much of the guesswork that so often seems to appear in health care. What we do know already is that the number of patients with diabetes has risen dramatically in the past 30 years, from 45 million in 1985 to 415 million in 2017. When faced with statistics like these, it’s clear to see that the cost of care has more to do with rates of disease than changes in medical procedures. The runaway cost is driven by a runaway problem when it comes to lifestyle.

We can all agree that the first step to getting people to take control of their health involves greater patient engagement at every level. As difficult as they were to look at, the gruesome ads produced by the anti-smoking lobby were effective, because they drew a parallel between cigarettes and suffering in the most direct and grotesque way. If we can find a way that communicate in a similar way the effect that poor lifestyle choices are having on our health, our medical system and our economy, we can start to reverse a worrying trend.

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