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Why is healthcare so expensive in America, United States?
The healthcare cost in the U.S. is one of the most significant challenges people face, sick or sound. The expensive healthcare system affects everything from the economy to individual behavior. Nowadays, all it takes is one medical bill to send an individual into financial debt or bankruptcy.
So, what makes U.S. healthcare so expensive? Here are a few reasons.
1. Multiple systems in healthcare cost
Administrative costs are often said to be a reason behind excess medical spending. However, the U.S. healthcare system is highly complicated- it has different rules, funding, enrollment dates, and more. Then, there are Medicare, Medicaid, domestic plans from healthcare.gov, and insurance plans from private insurance companies.
Each sector comes with different eligibility and levels of coverage. Depending on the plan, individuals pay deductibles, copays, and coinsurance. Insurance providers need to deal with various regulations about plan usage and billing. These lead to the largest share of administrative costs.
2. Rising drug costs
On average, U.S. citizens spend twice as much on pharmaceutical drugs compared to citizens of other countries Rising costs of drugs are the biggest reason for overspending in the U.S. compared to Europe, where the government regulates drug prices. In the U.S., there is little regulation of drug prices. As a result, the costs are 2.56 times more than the other 32 countries, as per RAND’s latest report.
In 2019, the U.S. spent $1,126 per capita on prescribed medicines, while comparable countries spent $552 on average. On average, per capita, prescribed medicine spending grew by 69% from 2004 to 2019. In contrast, other countries increased by 41%. Private insurance companies in the U.S. can negotiate prices with drug manufacturers. Still, Medicare is not allowed to negotiate prices and pay
s for a hefty percentage of the national drug costs.
3. Payment of doctors and nurses
On average, physicians in the U.S. earned the most ($316,000) per year, followed by Germany ($183,000) and the U.K. ($138,000).
The average physician’s net worth was ranked as follows:
- United States – $1,742,000
- United Kingdom – $657,000
- Germany – $441,000
- France – $425,000
- Italy – $269,000
- Spain – $228,000
- Brazil – $95,000
- Mexico – $67,000
Besides doctors and specialists, the average salary for a U.S. nurse is around $74,250. Minnesota and Nevada offer the highest salary ($93,000), followed by Texas and Washington ($91,000).
4. Hospitals focus more on profits.
Americans spent $6,624 per person on care, while other countries spent an average of $2,718 per person. The U.S. also spent more on preventive care than peer nations – $309 compared to $175 per capita. The only category in which the U.S. spends less than most comparable countries per person is long-term care.
In 2020, health spending per person was $11,945, which was $4,000 more expensive than in any other high-income nation. Hospital care accounts for 31% of the nation’s healthcare costs. Hospital expenditures grew 6.4% in 2020 to $1.27 trillion.
According to the International Federation of Health Plans, the average price of angioplasty in the U.S. is 183% higher than in Australia, and coronary bypass surgery is 129% more than in Switzerland. In addition, the hospitals perform more cesarean sections than most comparable countries. Though cesarean section deliveries may be necessary for some instances, they are often performed unnecessarily, are more expensive, and pose more risks for mother and child.
5. The prices vary greatly.
The healthcare costs in the U.S. are more than in any other developed nation. The costs vary greatly even inside the U.S., depending on the location and insurance plan one chooses. Because of the system’s complexity and lack of price regulations, providers are free to charge any price. As a result, the amount paid for the same healthcare service can differ significantly for government programs and private insurance plans.
Final thoughts about why is healthcare so expensive?
In most other developed nations, the government takes charge and controls the prices. These governments can negotiate drug costs, medical equipment, and hospital costs. Consumers may have fewer choices, but costs are controlled. But, in the U.S., the government does not play a decisive role in negotiating healthcare prices.
The domestic plans may have helped people get treated at an economical rate, but they also come with different eligibility and enrollment periods. If individuals miss the open enrollment period, they must choose a plan from a private insurance company to get them covered. In short, people are not left with much choice but to pay the price quoted for any treatment.