One of the primary reasons why there is an ongoing health care crisis in the United States is the high cost of health care that makes services inaccessible to millions of Americans. This article explores and discusses the factors of or the reasons for the high cost of health care in the U.S.
Reasons for the High Cost of Health Care in the United States
1. Economic Factors and Market Failure
Inflation due to cost-push inflation generally explains why American health care has become expensive over the years. Increasing prices of goods and services and the rising cost of living have a direct impact on the cost of producing and delivering relevant services. After all, normal responses to inflation include increasing the wages of medical and non-medical professionals, as well as an increase in the cost of supplies and equipment and the price of medicines, among others.
Setbacks in the economy can also make accessing medical services and products less affordable. The 2008 Financial Crisis in the U.S. resulted in high unemployment and underemployment rates that left individuals unable to afford necessities such as health care services. The same had been observed in various economic downturns like during the initial months of the coronavirus pandemic, the 2021-2022 Global Supply Chain Crisis, and high inflation during the Biden administration.
However, aside from inflation and other economic factors, it is important to note that as an industry, the health care system is characterized by a market failure because it does not follow the classic rule of supply and demand, as well as the basic tenets of a free market. Professors Leiyu Shi and Douglas A. Singh explained that health care in the U.S. does not meet the basic requirements of a free market to include consumer information, unrestrained competition, and buyer and seller independence.
Shi and Singh noted that a health care system that follows the basic tenets of a free market should provide patients with information about the availability of various services and the price and quality of such. The patients should have the direct capacity to make decisions about the services they want to receive. Providers should base their price on the interaction of supply and demand. There should also be unrestrained competition between providers based on price and quality.
2. Inefficacy in the Delivery of Health Care Services
Another primary reason for the high cost of health care in the U.S. centers on the advancements in science and technology or specific developments in the field of medicine. Economist Arnold S. Kling explained that these developments have complicated medical procedures and have forced patients to pay for the different components of a particular medical case. Many providers have essentially developed a habit of burdening their patients with excessive services.
Note that a supposed simple checkup for an undiagnosed ailment could lead to a battery of tests. In another example, a treatment of a disease might involve a series of therapeutic procedures and medications. Remember that testing, therapies, and medications are important for diagnosing and treating a patient properly. But it cannot be denied that there are several instances when some of these are plain excessive because they did not produce satisfying results.
Central to the argument of Kling is that abundance characterizes the health care system of the U.S. He specifically noted that the country has one of the highest ratios of specialists to general practitioners. This tends to promote the use of expensive medical procedures or require patients to undergo various medical procedures. American hospitals are also providing premium medicine characterized by specialist consultations and the use of advanced medical technologies.
Some of the demonstrated examples of abundance in the U.S. health care system include the high prevalence of heart bypass surgery. The particular rate of this surgery in this country is thrice as high as in France and twice as high in the United Kingdom. Angioplasty is also more prevalent in the U.S. than in other developed countries. It is also worth noting that spending for medical imaging services has drastically increased during the last decade.
3. Excessive Commodification in the Health Care Industry
Comparable to the explanation of the market imperfection in the industry and the concept of abundance is the excessive commodification of health care. Specifically, although there are proposals and actual policies aimed at promoting the use of a social welfare model to make relevant services more accessible, the fact remains that the entire health care system is an industry and hospitals and related services are businesses that need to earn revenues and generate profits.
Science and medicine reporter and a non-practicing physician Elisabeth Rosenthal has argued that the health care system in the U.S. has been dominated by organizations dedicated to making a profit by exploiting the needs of the population. These include not only hospitals but also related businesses like pharmaceutical companies and insurance providers. She considers this especially true for those with vulnerabilities due to their critical medical needs or conditions.
Furthermore, to demonstrate her argument, Rosenthal mentioned that hospitals do not follow a single standard for billing. They simply follow the rule that there is money to make in billing for anything and everything. She also noted that the rise of hospital conglomerates and alliances have given them a competitive advantage that raises their bargaining power to demand high rates from patients and health insurance providers and increase the entry barriers from competitors.
Providers of health insurance are also another reason for the high cost of health care in the U.S. It is worth mentioning that insurance premiums have become more expensive due to factors like inflation and absence of price regulations. These increases have rendered health insurance unafforable to a significant portion of the population. Some insurance plans also have limited coverage and increae out-of-pocket expenses while others have high cost-sharing requirements.
Takeaway: Why Health Care in the U.S. is Expensive?
The rising cost of health care in the United States is a product of the complex interactions of several factors. Economic factors are responsible by default but there are other drivers of costs based on the analyses of different subject-matter experts. Nonetheless, the lack of adherence to free market standards, coupled with the inefficiency of delivering the services and their excessive commodification are indicative of the fact that the American health care system is severely flawed.
REFERENCES AND FURTHER READINGS
- Kling, A. S. 2006. Crisis of Abundance: Rethinking How We Pay For Health Care. Washington, DC: Cato Institute. ISBN: 1-930865-89-9
- Rosenthal, E. 2017. An American Sickness: How Healthcare Became Big Business and How You Can Take it Back. New York: Penguin Books
- Shi, L. & Singh, D. A. 2004. Delivering HealthCare in America: A Systems Approach. Boston: Jones and Bartlett Publishers