This year, Americans will spend more than $4 trillion on health care, and over the next seven years, that number is expected to increase to more than $6 trillion, according to government projections. The cost of health care is rising faster than the economy, and many people’s premiums and out-of-pocket expenses are covered by their employers or private insurers. With such high costs, business owners like Tom Savidge are left fretting about how to budget for their workplace health insurance. The rising cost of health insurance for his staff has been a problem for Savidge ever since he launched his first mental health clinic in Greenville, North Carolina, 17 years ago.
Further, a significant hospitalisation might have far-reaching financial consequences. One of our employees suffered a heart attack and was hospitalised at one point,” Savidge explained. There was a rise of almost 30% in just that one year. Savidge has spent more time than he would like fretting over medical expenses. He has been presented with preventative health programmes and has changed insurance carriers many times. He went so far as to establish a pharmacy there, selling medications at reduced prices. Even yet, he claims that the cost of staff healthcare has nearly quadrupled since he first started out, forcing him to make sacrifices elsewhere.
“It had an effect on pay increases and incentive payments,” Savidge added. “Especially when yearly markups reached 10, 15, 20, 25%,” she said. With inflation taken into consideration, the cost of medical care in the United States has more than doubled in the previous three decades, according to the Kaiser Family Foundation. And according to health policy expert and Johns Hopkins professor Gerard Anderson, a lot of the responsibility has been placed on private companies like Savidge and people with their own insurance plans.
Anderson noted that while the Medicare programme paid around 1.5 times as much as private insurers, the private sector paid 4.5 times as much as the rest of the developed countries.
Hospital expenditures are used to determine Medicare’s payment rates. However, private payers must bargain with each medical facility and practitioner individually. And Anderson claims that a major contributor to this issue is the absence of competition. If we take the Charlotte area as an example, there are three major hospital networks: Atrium Health, Novant Health, and the relatively smaller CaroMont Health. According to him, that’s typical of major cities all around the United States. “If you’re an insurance, you have to have that specific health care system in your network, & so they can charge whatever they need because you, as an insurer, can’t say no,” Anderson explained.
According to Anderson, a further issue is that, for many large, self-insured employer plans, insurance firms may not even be driven to reign down expenses because they get a share of the price. So long as they can keep the firm running, Anderson argues, “they have no motivation” to shop around for the best deal. Hospitals and healthcare networks have been actively merging and acquiring other facilities and medical practices during the past three decades. It’s a well-known fact that healthcare costs rise when hospitals merge. According to the neutral RAND Corp., commercial insurance plans often pay 247% more than Medicare. That’s just the average throughout the entire country. RAND analyst Christopher Whaley claims that North Carolina hospitals charge private payers 273% of Medicare fees. The national average is 3%, so that’s nearly a 100% increase, as Whaley pointed out. Many hospitals have claimed that merging is not the issue. North Carolina Hospital Association CEO Cody Hand concedes that private-payer pricing is high, but he argues that hospitals must do so because Medicare pays too little.
As Hand put it, “Medicare is a pretty low payer across the board.” (For the most part, at least) they only pay a portion of the actual costs. That means we need to find a way to make up the difference from someplace else if we need to keep our doors open. However, Whaley argued that this would lead to higher costs for private patients in hospitals that serve large numbers of Medicare patients. But that isn’t supported by the statistics. It’s not true, as Whaley points out, that hospitals with a higher percentage of Medicare & Medicaid patients charge more. According to Hand, excessive costs associated with personnel and machinery in hospitals also contribute to high prices. Professional medical staff in the United States are paid more than their international colleagues. According to a recent study (2018), the average salary for a specialist in the United States is $316,000. This is more than double the salary seen in nine similar nations. And, according to Hand, hospitals are ready to pay more for the best doctors.