High Cost of Care – Bad and Getting Worse

Four in ten Americans report that within a year illness caused a severe family financial problem.  Americans obviously have not solved the problem of rising health care cost.  During the past 50 years insurance seemed like the answer.  If insurance premiums were the same as 20 years ago who would complain? The situation has changed.  Now some can not afford insurance and almost no one can afford the cost of catastrophic illness. Businesses that provide insurance to employees are strained, so insurance  deductible levels are higher.   Pooled risk (insurance) has concealed the lack of health care cost control for a long time — hindsight is great.  Now we wish we had paid more attention.

According to the Kaiser Family Foundation  31% of the healthcare dollar is spent on hospital care and 20% on physician and clinical services.  Furthermore, major drivers of health care cost are:

  • Technology and prescription drugs
  • Rise in chronic diseases
  • Administrative costs (currently 6% for medicare and 30% for private insurance)


The “where” we spend more money and “why” we spend more money are interesting facts but do sick people feel a lot better as a result?. America spent $2.6 trillion in 2010 but the “Sick in America Poll” very clearly shows dissatisfaction.  The World Health Organization ranks U.S. health care at number 37 just after Costa Rica.  In simple language, Americans are not getting a good bang for the buck.  The phrase “drivers of health care cost” might be associated with the image of someone driving a car, following a map and getting good mileage.  Erase that image.  Replace the word drivers with “culprits” to get the right picture.  We spend too much for technology and prescription drugs, we spend too much on chronic disease and we spend too much on administrative cost.  The philosophy of each category needs to change to help solve the financial problems:

  • Technology and prescription drugs:  the current philosophy is “safe and effective”, the new philosophy needs to be “safe and cost effective”
  • Chronic disease:  the current philosophy is treat the same as acute disease, the new philosophy is prevent, treat early, follow-up to prevent progression.  Also, exercise more, eat less sugar and remove nicotine from all products.
  • Administrative costs:  the current philosophy is to “manage complexity”, the new philosophy needs to be “keep it simple”.  Reasonable efficiency demands 94% of premiums for all public and private insurance should be used to pay for care.   By some estimates 30% of all health care cost is related to “paperwork”.


The current US health system is perfectly designed to deliver high cost low quality care with an ocean of paperwork.  What a mess.  Fortunately, there are islands in the paperwork ocean where low cost high quality care is delivered.   There is hope. 

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