Why does healthcare cost so much in the US?

The US spent 3.2 trillion dollars on healthcare in 2015, an astronomical figure that is hard to comprehend! Yet, our health outcomes are no better than developed countries such as the UK or France. According to the non-profit organization, The Kaiser Foundation, the UK on average spends $3,749 per person vs the US which spends $9,237, while life expectancy is 80.9 years in the UK vs 79.1 years in the US.

Healthcare spending in the US is the highest in the world not because we go to the doctor or hospital more often. On average, we see a doctor four times a year, and Americans also go to the hospital relatively infrequently (126 visits per 1,000 people vs 252 in Germany) according to The Commonwealth Fund in 2015.

So what’s driving the cost?

  • For the past 20 years, most healthcare is reimbursed by the fee for service model. The more services provided or tests ordered, the larger the bill. This system rewards doing more, but as mentioned, this has shown no better outcomes for the patient.

  • Cost of medication. Drug manufacturers in the US have a government protected monopoly rights on new drugs, often times tweaking a drug to maintain its patent for longer. People are constantly bombarded with commercials on new drugs that do not necessarily have better outcomes than older proven drugs.

  • We pay more in administrative costs. In the US, this cost accounts for 25% of hospital spending, the manpower to move claims through the system and negotiating payment rates separately with each payer.

  • Fewer regulations on control cost. Outside of Medicaid and Medicare, which negotiate prices on behalf of their millions of members, it’s a free-for-all. Healthcare organizations can charge whatever they can get away with, partly because of the obscurity of cost.

How can direct primary care benefit patients?

By providing care on a membership model, the doctor can focus on taking care of the patient and not on insurance reimbursement requirements.

  • We are cognizant of the cost of medications, and will offer prescriptions for proven generic medications. We also offer resources such as GoodRx that provide discounts for self pay.

  • By cutting out insurance, we are able to control administrative costs. This enables our practice to pass those savings on to our patients. 

  • We believe in cost transparency. All tests and services outside of what’s included in the membership, will be provided up front with no hidden fees.