U.S. Healthcare Costs: How We Got to $2.6 Trillion

U.S. Healthcare Costs: How We Got to $2.6 Trillion

In my last post, I mentioned that total U.S. healthcare spend was estimated to be about $2.6 trillion in 2010. Health Affairs released an interesting chart that showed how those dollars were allocated. The big guzzlers were, unsurprisingly, hospital care (31%) and physician/clinical services (20%). Why were those percentages so high, and is there anything we as employers, healthcare professionals, and everyday consumers can do to affect some of the critical levers*?

The rise in chronic diseaseswas a major contributor to the trillion-dollar spend, accounting for over 75% of national health expenditures. The big influencer? Obesity rates. But by focusing on consumer education, wellness programs, and incentives — all things we’ve talked about in the Healthcare Payment Insider — those numbers may be reduced, resulting in better overall health and potentially significant savings.

Administrative costswere a key factor, too. The Kaiser Family Foundation points to the administration of government healthcare programs and the net cost of private insurance, but there are other considerations, as well. Online payments to providers, for example, represented just 12% of gross dollar volume in 2011, although 70% of consumers want the option. That means there’s a tremendous opportunity to lower administrative costs by simply making available a form of payment that patients want and expect.

Technology and prescription drugsrepresent a third critical component. There’s an ever-increasing demand for better medications and state-of-the-art medical technologies. Everyone wants the wonder drug or the cutting-edge procedure that will improve the quality and quantity of life. But those advances come at a cost. Of course, it would be ridiculous to suggest we go back to bloodletting and castor oil, but consumers can have the conversation with their physicians about whether a test or medication is great because it’s new and pricey or because it’s really the right choice.

*Source: Kaiser Family Foundation