Over the past decade, healthcare costs have risen much faster than salaries.
In the time period, 1999 to 2009 average salaries has risen 38% whereas the health care premium have risen 131 %.
A close examination of the data indicates that this blame is misplaced. Something else is revealed by digging deeper into the key components in healthcare spending: Technology, administrative expenses, hospital costs, lifestyle choice and chronic disease conditions have all had greater impacts on rising overall healthcare costs than physicians.
Some critics have suggested that physicians’ incomes and the fact that physicians direct most healthcare spending (80 percent is a frequently used number) are the real culprits in soaring healthcare costs. Yet despite this, physicians are not necessarily the principal beneficiaries of healthcare spending. The bulk of medical procedure payments go to hospitals and device manufactures. For example, in California, Medicare pays on average$18,000 for a total hip replacement – $16,336 to the hospital and $1,446 to the surgeon. This reimbursement disparity is certainly not limited to California, and is representative of a broader trend on a national level. Moreover, doctors’ net take-home pay amounts to only about 10 percent of overall healthcare spending.
In the time period, 1999 to 2009 average salaries has risen 38% whereas the health care premium have risen 131 %.
A close examination of the data indicates that this blame is misplaced. Something else is revealed by digging deeper into the key components in healthcare spending: Technology, administrative expenses, hospital costs, lifestyle choice and chronic disease conditions have all had greater impacts on rising overall healthcare costs than physicians.
Some critics have suggested that physicians’ incomes and the fact that physicians direct most healthcare spending (80 percent is a frequently used number) are the real culprits in soaring healthcare costs. Yet despite this, physicians are not necessarily the principal beneficiaries of healthcare spending. The bulk of medical procedure payments go to hospitals and device manufactures. For example, in California, Medicare pays on average$18,000 for a total hip replacement – $16,336 to the hospital and $1,446 to the surgeon. This reimbursement disparity is certainly not limited to California, and is representative of a broader trend on a national level. Moreover, doctors’ net take-home pay amounts to only about 10 percent of overall healthcare spending.
Once the physician impact on healthcare costs is placed in proper perspective, the true role of other key factors can be examined more clearly.
The first area is technology. There is consensus among experts that technology is the most important driver of healthcare spending increases over time. Installing and implementing electronic health records is costly – often as much as $25,000 per doctor for a system and a monthly subscription fee on top of that – and requires significant resources.
Admin expenses and hospital costs represent two additional areas of significant concern. Physicians are continually frustrated as they see increasing administrative regulations as significant burdens that take away from patient care, and they are deeply pessimistic as they struggle to sustain their practices. Seventy-seven percent of physicians feel negatively about the future of medicine, according to the Foundation’s survey of more than 13,500 physicians. Many independent practicing physicians are seeking employment at larger hospital systems to avoid administrative burdens. Forty percent of primary care physicians today who see patients at hospitals are employed by the hospital, which has doubled since 2000.
Hospital costs during 2010 in the U.S. constituted $814 billion or 31.4 percent of all healthcare expenditures. Furthermore, the cost of care will only continue to rise as we shift into a consolidated healthcare system and programs like Medicare allow higher payments for services performed in hospitals as opposed to independent private practices. One widely reported example found a Nevada patient whose echo cardiogram bill came to $373 before the physicians’ practice had been purchased by a hospital system and then increased to $1,605 after the merger.
Finally, another vital factor to consider is that of life style and chronic conditions. Chronic diseases are the most common and costly of all health problems, but they are also the most preventable. According to the CDC’s National Center for Chronic Disease Prevention and Health Promotion, our common, health-damaging but modifiable behaviors – tobacco use, insufficient physical activity, poor eating habits, and excessive alcohol use –are responsible for much of the illness, disability and premature death related to chronic disease. And people with three or more chronic disease conditions generally fall into the costliest one percent of patients who account for 20 percent of all healthcare spending in the U.S.
Moreover, there is a real issue of health disparities that exists in this country leading to higher healthcare costs. Between 2003 and 2006, the Joint Center for Political and Economic Studies estimated the total direct and indirect costs of health inequities affecting racial and ethnic minority populations, including lost wages and productivity – exceeded $1.2 trillion.
Clearly, to achieve true cost savings in our healthcare system, experts must look at all of these factors that are driving healthcare costs above the gross domestic product, population growth and inflation – and recognize that the literature and data simply do not point to physicians as a primary or even secondary cause of rising healthcare costs. Physicians have been a target of blame for many years, but the facts about what drives healthcare costs indicate otherwise.
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