The Cost Problem

Fragmented Care

Nearly 50 percent – or more than 150 million Americans – live with at least one chronic condition requiring care from a number of doctors.¹ The current system contributes to a fragmented view of a patient’s overall health. When doctors treat one symptom at a time instead of looking at the patient holistically, health outcomes suffer and costs increase.² Poor coordination among doctors leads to overuse, misuse and duplication of procedures, and to other inefficiencies.

An estimated 30 percent of medical spending is due to overuse, misuse and duplication of procedures and other inefficiencies.

An estimated 30 percent of medical spending is due to overuse, misuse and duplication of procedures and other inefficiencies.³

Unnecesary Treatments and Facility Duplication

More is not necessarily better. According to the Institute of Medicine, the U.S. spends approximately $765 billion a year on wasteful healthcare, such as unnecessary medical tests and procedures.⁴

The number of medical facilities also is proliferating. As a growing number of doctors open facilities that perform specialty and outpatient procedures, patients are funneled away from larger hospitals.

Hospitals, already burdened with costly emergency room business, have fewer profitable procedures. As hospitals lose revenue, the cost of services provided to other patients must increase.⁵

In 2010, 70 percent of hospitals had fewer patient visits and elective procedures; about 90 percent said uncompensated care increased.

In 2010, 70 percent of hospitals had fewer patient visits and elective procedures; about 90 percent said uncompensated care increased.^6,7

Medical Errors

When we talk about medical errors, people often think of misdiagnoses or drug interactions. But in health care, even a small mistake – like delivering the wrong hospital meal to a diabetic patient – can have a big impact. Just 10 types of errors account for two-thirds of the total cost of mistakes. The top error? Bedsores, which can be prevented with position changes.⁸

Measurable medical errors that harmed patients cost $17.1 billion in 2008.

 Measurable medical errors that harmed patients cost $17.1 billion in 2008.⁹

Lack of Cost Transparency

The copay system keeps consumers in the dark about the true cost of care. The $30 copay on a prescription drug or an office visit is only the tip of an iceberg – only a small portion of the total cost.¹⁰ Medical cost inflation continues to rise higher than copays and deductibles, so employers are picking up the bulk of premium costs – keeping wages flat and making the consumer less aware of total costs.¹¹

Consumers' share of the burden of medical costs has gone down steadily since the 1960s.

Consumers' share of the burden of medical costs has gone down steadily since the 1960s.¹²

Cost Shifting

Medicare and Medicaid reimbursements to doctors can be 30 percent lower than what private insurers pay. This situation causes doctors and hospitals to charge private insurers more to help make up the difference. According to a study by the actuarial firm Milliman, Inc., this cost is passed along to insurance customers, resulting in a ‘hidden tax’ of $1,788 to insure a family of four.¹³

Healthcare professionals often subsidize services by charging private insurers more. A 2012 study revealed that commercial insurers paid 14 percent more for knee replacement surgeries and their associated costs.

Healthcare professionals often subsidize services by charging private insurers more.  A 2012 study revealed that commercial insurers paid 14 percent more for knee replacement surgeries and their associated costs.¹⁴

The Uninsured/Underinsured

The U.S. spends anywhere from $100 - $200 billion each year to treat uninsured individuals. This cost is paid primarily by taxpayers and private entities and often covers the treatment of preventable diseases, which physicians could have treated more effectively and efficiently with earlier diagnosis.¹⁵

Hospital stays for uninsured patients grew 21 percent between 2003 and 2008, to 2.1 million admissions.

 Hospital stays for uninsured patients grew 21 percent between 2003 and 2008, to 2.1 million admissions.¹⁶

Defensive Medicine

When healthcare professionals order unnecessary tests out of fear of being sued for misdiagnosis or other malpractice, it drives up the cost of care. The degree to which doctors say they practice medicine defensively is alarmingly high, costing tens of billions of dollars every year.¹⁷

More than 70 percent of doctors say they’ve practiced some form of defensive medicine.

More than 70 percent of doctors say they’ve practiced some form of defensive medicine.¹⁸

Tobacco Use

Tobacco and second-hand smoke kill 450,000 people in the U.S. annually and sicken millions, costing $96 billion in direct healthcare spending and an additional $97 billion in lost productivity.¹⁹

Tobacco use in the U.S. drives up medical spending by $96 billion every year.

Tobacco use in the U.S. drives up medical spending by $96 billion every year.²⁰

Nutrition and Exercise

Obesity and its complications cost an estimated $147 billion in medical costs in 2008. It is estimated that medical costs are $1,429 higher for people suffering from obesity.²¹

Medical spending on conditions associated with obesity nearly doubled from 1998 to 2008.

Medical spending on conditions associated with obesity nearly doubled from 1998 to 2008.²²

Workplace Stress

More than one-third of workers say they regularly experience job-related stress,²³ and one in five rate their level of stress at 8, 9 or 10 on a 10-point scale.²⁴ That stress can have real impacts on health — and the cost of health care.

Workers with high levels of stress are more likely to get colds and develop heart disease — and their healthcare costs are nearly double those of other coworkers.

Workers with high levels of stress are more likely to get colds and develop heart disease — and their healthcare costs are nearly double those of other coworkers.^25,26,27 

Technology

Technological advances enable many life-enhancing and lifesaving benefits, such as the widespread adoption of hip, heart and knee replacements. They allow for greater survival rates for premature babies and cancer patients, among countless other advantages. Unfortunately, the cost of technology is incredibly high, and it is often over-utilized. In the U.S., we have one-third more CT scanners and two and a half times as many MRIs per person than the average in developed countries. While an X-ray machine costs about $175,000, a CT scanner costs $1 million and MRI machines up to $3 million.²⁸ We get MRIs when, many times, an X-ray might suffice.29

From 1996-2010, MRI use in the United States increased from 17 to 65 per 1000 enrollees, representing 10% annual growth.

From 1996-2010, MRI use in the United States increased from 17 to 65 per 1000 enrollees, representing 10% annual growth.³⁰

Prescription Drugs

Prescription medications can prevent and treat illness and improve quality of life. It is the fastest growing component of care, thanks to the emergence of biologic medications. However, these medicines, produced from living organisms, can cost patients and insurers between $20,000 and $200,000 per year.³¹ And while the costs of developing a new drug are exorbitant³², profit margins enjoyed by pharmaceutical companies are the highest within the healthcare industry.³³

Among several healthcare related industries, the pharmaceutical sector had the highest average profit margin in 2010: 15.9 percent.

Among several healthcare related industries, the pharmaceutical sector had the highest average profit margin in 2010: 15.9 percent.³⁴

Lack of Awareness

While doctors have an increasing number of therapies available to them, many have no idea what various therapies cost—and therefore aren’t considering costs when prescribing treatments.

About 6 out of 10 large hospitals don’t educate medical students on the cost of procedures.³⁵ Solving the cost problem will take collaboration. We all play a role in contributing to rising costs. Blue Cross Blue Shield companies want to find ways to work together–creating real solutions that will rein in medical costs and improve the quality of medical care for everyone.

We know that more good ideas are out there. But we need to hear them. Let’s create a healthier America, and help get medical costs under control. Be part of the solution!

We know that more good ideas are out there. But we need to hear them. Let’s create a healthier America, and help get medical costs under control. Be part of the solution!

About 6 out of 10 large hospitals don’t educate med students on the cost of procedures.³⁶