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Why Are Health Costs So High?

There’s no one reason why health care costs so much. A lot of factors contribute to the high cost, such as:

  • Individual behavior. More than 75 percent1 of health care costs are due to chronic conditions. While some conditions are genetic, many chronic conditions can be prevented by making better lifestyle choices, such as eating healthy, exercising, limiting alcohol consumption, and staying away from tobacco.
  • Advances in medical technology. Finding new and better ways to treat illness and injury is a good thing, but the research and equipment can be costly.
  • Prescription drugs. The research and development of new drugs and treatments can be very expensive. And even when a more affordable generic equivalent exists, many people still opt for the more expensive brand version.
  • Aging population. As we get older, we need more medical attention. And Philadelphia County in particular has a high population of elderly, with 12 percent2 age 65 or older.
  • Uninsured population. Hospitals and doctors are required to treat those without insurance, which means that those with insurance end up footing the bill.
  • Medicare and Medicaid payments. When payments to doctors and hospitals drop below what the care costs, health insurers are usually required to make up the difference.
  • Provider increases. While it’s important for doctors and hospitals to receive fair and competitive compensation, sometimes their increases exceed the rate of inflation.
  • Fraud and abuse. Health care fraud and abuse not only threaten the quality and safety of care, but it’s estimated they waste billions of dollars3 each year.
  • Fear of malpractice suits. Some doctors and hospitals use more intensive diagnostic testing to confirm diagnoses and reduce exposure to malpractice liability.

1 “Chronic Diseases, The Power to Prevent, The Call To Control: At A Glance 2009,” December 17, 2009, http://www.cdc.gov/chronicdisease/resources/publications/aag/chronic.htm, accessed on March 15, 2013.

2 State & County QuickFacts — Philadelphia County, Pennsylvania, United States Census Bureau, 2011, http://quickfacts.census.gov/qfd/states/42/42101.html, accessed on April 3, 2013.

3 Three Efforts to Combat Health Care Fraud and Abuse, Statement by William Corr, J.D., Deputy Secretary, Department of Health and Human Services, March 4 2010, http://www.hhs.gov/asl/testify/2010/03/t20100304a.html, accessed on April 3, 2013.