Question

Outside of government itself, the largest industry in the United States is the health care industry. Over the past several decades, costs in the health care industry have been increasing at a much faster rate than the rate of inflation in general. Why?

Answer 1

Public policy is one justification for increasing health-care costs. Providers have been able to raise rates since the introduction of Medicare and Medicaid – services that benefit those without health insurance.

Key factors associated with the increase in health care over time have been:

Growth in population

The aging population

The prevalence or incidence of diseases

Usage of the emergency facilities

Preise and intensity of service

When the population grows, healthcare is more expensive – as people grow older and live longer. It is not surprising, therefore, that 50 percent of the increase in healthcare spending is due to increased service costs , especially hospital care. Nor is it a shock that population growth (23 per cent) and population aging (12 per cent) are the two next highest causes when it comes to increased healthcare spending.

Ambulatory care, including ambulatory hospital services and emergency room care, increased the majority of all categories of treatment studied. Outpatient costs rose from $381.5 billion per annum to $706.4 billion. Emergency department costs rose 6.4 per cent during the same time across all health conditions.

Government systems such as Medicare and Medicaid have boosted aggregate demand for medical services, with higher costs resulting. Increases in the incidence of chronic conditions such as diabetes and heart disease also directly affected increases in medical care costs. Those two diseases alone account for 85 percent of healthcare costs, and nearly half of all Americans have a chronic disease.

Potential solutions include employer-sponsored wellness programs (particularly those targeting chronic illness), increased reliance on medical technology to eliminate inefficiencies, and attempts to achieve greater transparency to help lower costs. For people, keeping a balanced lifestyle, eating well, having plenty of exercise and staying up-to - date with the prescribed health checkups and tests is the primary way to cut costs.