How Technology Impacts The Costs of Health Care
The USA spends about 3 trillion dollars on health care per year. Medical technologies are expensive, but these aren’t the only reasons why medicines are expensive. There are multiple reasons why health care is more expensive in the USA than in other countries.
The role of technology
Technology has a huge role in our everyday lives today. It is expanding every day inside the medical industry and providing new medical treatments every year. Many treatments we see today weren’t possible 30 or 40 years ago. Moreover, these therapies are extending many lives, but patients end up using periodic checkups or expensive medications for the rest of their lives. For example, a patient who suffers a heart attack in his 50s will require constant care throughout his life. They might need their hip replacement or may end up with diagnose of cancer or similar disease. That is the benefit of longer life costs, I guess. At the same time, new technologies replace the old ones, which adds up to costs and although health care systems have changed, many say that the way patients are treated remains the same.
For example, a patient who suffers a heart attack in his 50s will require constant care throughout his life. They might need their hip replaced or end up with cancer or a similar disease. That is the benefit of longer life costs, I guess. At the same time, new technologies replace the old ones, which adds up to costs. Although health care systems have changed, many say that the way patients are treated remains the same.
The cost of therapies doesn’t drop
Therapies that have been in use for decades are still costly. For example, hip replacement implants, which have been around for decades, are not cheaper than when they were first introduced. Technology actually becomes better, but the prices remain the same. This is also true for consumer electronics, automobiles, appliances, etc. Still, health care is different from standard consumer markets. It doesn’t show the hallmarks as typical markets because it is specific in its own way.
Third-party payment role
Many economists say that third party payment has a significant role in increasing making health care expenses. This is common in the USA, where 88% of health expenses are paid by someone else other than the patient. Back in 1960, patients paid about 96% of their dental care and drugs. In the same year, they paid 60% of their physician, and 21% of their hospital care. However, today, they pay 40% of dental care, 17% of prescription drugs, 9% of physician services, 3% of inpatient care.
Third-party payers determine which treatments they are going to pay and negotiate how much they are going to pay for it. When patients aren’t their customers, it isn’t in their interest to compete on the price. This results in the next situation—instead of a price competition, it takes the form of providers who seek to maximize revenue against 3rd parties’ compensation formulas. In the end, doctors and hospitals aren’t competitors to lower costs for patients; it is providers who try to lower it on their own.
Competition’s role in innovation
The lack of price competition has a deep effect on the cost of technologies. Hospitals, doctors, medical device makers, and drug makers are not competing in beneficial ways that reward cost-saving technology. This leads to the situation where old technology is not sold at a discount. Many people can buy a used car, but can’t save money in this way in health care. What usually happens is that patients decline services that they can’t pay instead of looking for a lower price.
Regulations also play a significant role in making and keeping medical technology and medical care expensive. Drug manufacturers and medical technology firms can’t make innovations as easy as their colleagues in the consumer market. Every new drug must be approved by the U.S. Food and Drug Administration and/or other similar regulatory bodies. It is estimated that the cost of bringing a new drug to a market costs even more than 1 billion dollars. The cost of bringing a new medical device to the market is also too high.
Health care in other countries
Patients have similar problems in many countries around the world. Health care costs are high, and many ways of rationing are used in these cases. Faced with problems of costs, many countries use different methods to hold down the cost of medical care. Some of them are:
—Third-party payers negotiate their prices,
—Single-payer price controls,
—Rationing of equipment and services.
There are dozens of more similar factors that impact the prices of health care in the USA. It will take time for us to see if something is going to change for the better, and for the cheaper!
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