The Rise of Patient Costs - Management Resource Group, LLC The Rise of Patient Costs - Management Resource Group, LLC

The Rise of Patient Costs

The Rise of Patient Costs

The Rise of Patient Costs

Man in Blue Shirt Stacking Coins Higher

Here is a fun fact (very tongue in cheek): U.S. hospital prices are 60% higher than in Europe, which begs the question, why? Why are hospital prices so much higher in the U.S.? And what impact does this have on patient costs?

The answer to the first part of this question, why hospital prices are so much higher in the U.S. boils down to two factors: Government Policy and Lifestyle Changes.

  • The fundamental difference between the U.S. and European healthcare systems is the U.S. system relies mainly on employer-sponsored private health insurance. The U.S. puts the onus of providing healthcare coverage on the employer. The Medicare and Medicaid plans were developed to cover those individuals without coverage. In the case of M and M, the government takes on the role of the employer. By pushing the responsibility of providing healthcare to employers through private health insurance plans, the U.S. government has spurred the demand for healthcare. This demand has driven the escalation of prices for services.
  • The second factor driving up the cost is chronic illnesses, such as diabetes and heart disease. As of 2010, more than half of the population in the United States suffers from at least one chronic disease. The cost of care for chronic diseases amounts to 85% of all healthcare spending. As the rate of chronic illness continues to grow, so does the cost of care. In 1960, the cost of healthcare comprised 5% of the U.S. GDP. In 2010, the cost of healthcare accounted for 17.7% of the U.S. GPD. Healthcare costs have increased over 300% over the past 40 years.

So we have defined two of the factors driving the increase in overall healthcare costs. We will now address the second part of this equation: What is the impact on patient costs?

As healthcare costs have skyrocketed so has the patient’s burden of these costs. From 2002 to 2016, patient responsible healthcare expenditures have increased from 10% to over 30%.

Employer-sponsored private health insurance plays a very big role in making up the large increase in patient financial responsibility. Although employers are responsible for providing healthcare for their workforce in most cases, the employers are not responsible for paying 100% of the total cost. Employers often pass along these cost increases to their employees or at the very least, a portion of it.

Making matters worse, healthcare costs are increasing at a rate far greater than the increase in annual wages. In 2018, premiums paid by employees on average increased over 4% over the previous year, while the average wage increase rose by only 3.4%.

As healthcare costs continue to rise at an unaffordable rate, many are finding it difficult to bear their burden of these costs. Our system is seeing an escalation in collection and bankruptcy activity because patients cannot afford their responsibility. These bad debt accounts are causing health systems to continue to increase their costs to deliver care.

As it stands today, the U.S. finds itself in an endless circle of rising costs with really no end in sight. We should not expect to see the patient responsibility in this equation to decrease either.

In part 3 of our series, we will provide you tips on best patient collection practices and define what steps you can take to help alleviate the patient financial burden.

Our Partners

Aligning ourselves with business partners that offer the same high level of service, integrity and comprehensive healthcare solutions is the cornerstone of our business model and complements our mission to serve our clients.

  • logo1
  • logo3
  • logo4
  • logo5