Healthcare Costs

Everybody knows that healthcare costs have ballooned way past expectations over the last few decades.  A lot of people have a hard time explaining why it is so expensive.  Also, it has been a conundrum to lawmakers and economists alike as to why the costs cannot be controlled.  There are a few reasons that I have noticed from being in the hospital and interacting with patients.  I am one of the few examples in which a business oriented mind actually gets thrown into the depths of medicine and sees how everything works by going through medical school. 

One study found that healthcare costs have outpaced inflation by about 6% a year since 2000.  In fact, the same study found that since 2000, healthcare costs rose by 48% whereas the Consumer Price Index (CPI) rose by 26%.  Naturally, healthcare has also outpaced the growth of GDP.  There are probably a million reasons for this such as the fluctuating government subsidies to healthcare programs, private sector hospitals and insurance companies trying to make more money, and of course the laws regarding healthcare have changed.  However, one reason which I get to see on a daily basis is that Doctors are not businessmen, and they have no interest in controlling costs.  People will argue that physicians run too many unnecessary tests in order to make more money.  However, that has not been the case in my experience.  Doctors most often make impeccable healthcare decisions.  They have so much training, how could they not?  The disconnect lies in the fact that when treating patients, money is the last thing on the mind of a doctor.  They have the patient’s interest at the forefront of everything, and generally speaking their ownership interest in any business decisions comes last.  Most doctors do not consider costs of tests, length of hospital stay, et cetera if they know the patient has insurance.  They do consider every indication for any test and all of the potential side effects.  Most doctors know everything about medicine and very little about managing costs.  This disconnect almost certainly fuels the skyrocketing healthcare costs.  Where else do you have a multi-billion dollar industry at the hands of professionals who know nothing about money management? 

The other reason that I see on a daily basis comes from the patient’s perspective.  To put it simply people value their own life more than money.  Why wouldn’t they?  This seems like an obvious point, but medical debt is one of the most common reasons for bankruptcy in the United States.  People will spend all of their money and all the money they don’t have in order to receive healthcare.  It comes down to the simple fact that money is nothing without life.  Life is and always will be the number one priority.  That is not a problem, and I would do the same if I was in a horrible situation with my health.  The problem is that companies know this, and they can charge more and more every year without having an effect on the demand of their product.  There are laws against raising prices too much and as such healthcare is the most regulated market in the world; however, the fact that healthcare is one of the few pure examples of a market that has a 100%-complete disconnect between supply and demand HAS to be a factor in ever rising costs.  No amount of money will stop people from pursuing their own life.  This can already be seen with huge medical debts in the United States.  I am not faulting people’s mindset, as it is my own, but that is clearly a huge factor in rising costs in my opinion.  If the average hospital visit was $500,000 would you not go to the hospital if your life depended on it?  A lot of people counter this argument by saying, if this is the case then why do other countries not have the same problem as the United States?  This comes down to culture.  Some cultures accept death when it comes, and they say goodbye.  The United States on the other hand has the culture that encourages people to keep loved ones alive on life support regardless of their quality of life.  This can be very expensive.  No amount of regulation, or groundbreaking reforms, or inspiring speeches can change the culture of one of the most successful countries in history overnight.  It takes an unknown amount of time for a culture to change depending on the necessity for change or what people like.  The way that the United States culture affects healthcare is here to stay for a long time.  I am afraid this will have an overall negative effect on healthcare costs.  To sum up our culture:  You cannot put a price on life, so do everything you can to preserve it.

I do not know the answer to control healthcare costs, and the current system is a mess.  There are a myriad of reasons responsible for this, and I just wanted to relate to you the ones I see on a daily basis.  It is an interesting challenge that faces the industry.  Although it seemingly affects the United States the most, it is a challenge to the industry around the world.  It will be very interesting to watch how everything unfolds in the future.  Hopefully I will be able to contribute to the solution given my unique position in medicine with my background in business. 

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