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30-10-2012 | Article

Many factors contribute to costly US healthcare


Free report

medwireNews: There is plenty of blame to go around for the high cost of US healthcare, according to a report from the Bipartisan Policy Center.

In 2010, the USA spent approximately 18.0% of its gross domestic product (GDP) on healthcare, a spending level nearly double that of the United Kingdom (9.6%) and Japan (9.5%), and substantially higher than Germany (11.6%), write Paul Ginsburg and colleagues from the Center (Washington, DC).

Among the most significant determinants of rising healthcare expenditures is the fee-for-service (FFS) model of care, which encourages clinicians to perform tests and procedures regardless of their effect on the quality of care.

"The economic incentives are particularly strong for services with high fixed costs, typically those making extensive use of medical equipment, such as imaging services. Moreover, FFS does not pay for many services perceived to be increasingly important for the management of serious illnesses, especially chronic disease, such as patient education and coordination of care with other providers," the authors note.

The FFS model also contributes to another cost driver - care fragmentation - because physicians have little incentive to coordinate or manage care efficiently. Fragmented care also carries a high burden of administrative costs.

In addition to system-related factors, the "graying" of the US population and an increase in chronic health problems such as obesity and diabetes are significant cost drivers, Ginsburg and colleagues say.

Although technological advances can help to improve health and increase life spans, the overuse of medical technology is another major cost driver. At the same time, however, some technologies, such as digital imaging and electronic health records may actually lower costs with their greater efficiency compared with older tools.

The report's authors contend that economic contributors to rising costs include current tax treatment of healthcare benefits that allow employers to deduct their contributions to employee health benefits from income taxes, and limited patient cost sharing that masks the actual cost of services, and makes patients more likely to use services inappropriately.

Other factors cited in the report are cultural biases that "more is better," provider consolidation that gives large healthcare systems greater bargaining power with insurers, higher prices for services than those paid by other countries, regulatory barriers to system change, fraud and abuse, and medical malpractice costs.

The Bipartisan Policy Center was founded in 2007 by Republican former Senate Majority Leaders Howard Baker and Bob Dole and Democrats Tom Daschle and George Mitchell.

By Neil Osterweil, medwireNews Reporter