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The Crisis in US Healthcare


The US has higher costs per person, but produces worse outcomes.


America's healthcare system is in crisis today.


When it comes to value – outcomes vs cost, arguably the most critical health system metric – the US is the worst amongst developed countries. Healthcare expenditures in the US continue to rise as a percent of GPD, currently sitting at 18.3%. This is up from 17.2% in 2011 and 14% in 2001 (CMS), while the average for OECD countries is 8.8%. Additionally, the healthcare spend per capita in the US is multiples higher than in other developed countries. In the US, it was $12,914 in 2021 (CMS), whereas in the United Kingdom it was £4,188 (about $5,780) (Office for National Statistics, UK), and in the EU it was just over €3,100 (about $3,720) (Eurostat). 


Despite such high costs, the US healthcare system ranks last in performance amongst high income countries across a variety of factors, including access to care, equity and healthcare outcomes.



High costs, late diagnoses, and a system that focuses on acute or late-stage chronic care versus prevention leaves patients in a tenuous financial position.


These high costs are driven by the soaring rates charged by providers (hospitals and physicians) for expensive interventions due to addressing disease in their latter stages, the high premiums charged by insurers, the massive deductibles and co-insurance costs that patients must bear, and the general focus on acute and chronic care – which is much more expensive – than preventative care. 


The average deductible in the US, the amount of money a patient must pay out-of-pocket before health insurance coverage kicks in, was about $1,800 for an employee of a medium-to-large-sized company, and about $2,500 for an employee of a small company – but plans with lower premiums have much higher deductibles. 


As the saying goes, “An ounce of prevention is worth a pound of cure.” And currently, too much of the healthcare system focuses on acute or chronic care rather than prevention. Identifying disease states in their earliest stages means the interventions are much more cost-friendly and the prognosis for survival are much higher. According to the CDC, chronic diseases are the leading causes of illness, disability and death in the US, and are the main drivers of the country’s $4.1 trillion in annual healthcare costs. Chronic diseases that are avoidable through preventative care services account for 75% of the nation’s healthcare spend and lower US economic output by some $260 billion per year (CDC).   


Aside from the problem of late stage diagnosis and costly treatments, most insurance plans require the patient to pay co-insurance, or a percentage of every dollar of coverage beyond the deductible. So, the insurer on average would pay about 70-80% of a given medical bill beyond the deductible that the patient has already paid for, and the patient would pay the remaining 20-30%. But given the high cost of care in America, these co-insurance costs add up quickly. 


For example, for one construction contractor in Tennessee, a trip to the ER for 6 stitches to close up a cut on his knee and a tetanus shot cost him nearly $6,590. Because of his high deductible plan and co-insurance, he had to pay $4,278 of that amount out-of-pocket. Or a woman in South Dakota who battled and beat breast cancer only to have to then beat back bill collectors after racking up more than $30,000 in medical debt due to having multiple surgeries, radiation and chemotherapy. Cancer survivors in medical debt are in much more of a precarious financial position than non-cancer patients because of the major costs associated with cancer treatment. Their rates of bankruptcy, eviction or foreclosure on their homes are much higher compared to non-cancer patients (23% vs. 15%).



Additionally, forty-three percent of working-age adults were inadequately insured in 2022, as in they were uninsured, had a gap in coverage during the previous year, or were underinsured – basically meaning they didn’t have sufficient coverage to properly access the healthcare system (Commonwealth Fund). Essentially, a sudden need for medical services or chronic care management after an acute event during this period could have catastrophic financial consequences for a person. It’s why so many people avoid getting medical attention even when they need it.  



In a recent Gallup poll, 38% of Americans say they or a family member postponed medical treatment due to the high expected cost in 2022, up from 26% in 2021. This is the highest rate ever in the poll’s 22-year history. Of this number, 71% said it was for a very or somewhat serious condition or illness. Lower income households who earn less than $40,000 per year are nearly twice as likely as those with incomes of over $100,000 to say that they or someone in their family delayed medical care for a serious condition. 



The New Epidemic – Medical Debt and Bankruptcy


The high cost of insurance and poor coverage has led to a new epidemic in America – that of medical debt. According to a recent survey by Commonwealth Fund, 41 percent of American adults (ages 19-64) – or 72 million people – have outstanding medical bills or medical debt. That’s up from 2005 when the same figure was 58 million people, or 34 percent of American adults, respectively. Add in the 7 million elderly adults also dealing with the same issue, and that’s 79 million Americans currently suffering from this problem. And it is most intensely and disproportionately experienced by low and moderate income families. 



According to a Census Bureau analysis on household medical debt levels, 17% of US households held medical debt in 2019. The analysis also found that of that number, 23 million people owed significant medical debt – with 16 million people owing over $1,000 in medical debt, and 3 million people owing more than $10,000 in medical debt. The groups holding the largest amount of medical debt are between the ages of 35-49 and 50-64 (just before eligibility for Medicare kicks in but also when earning power is about to drastically reduce). 


The Consumer Financial Protection Bureau estimates that approximately $88 billion of medical debt is reflected in Americans’ credit reports. But they acknowledge that the total amount of debt is likely higher because not all medical debt is visible to consumer reporting companies. Medical debt can also be masked as other forms of debt, i.e. in the form of credit cards – used to pay for medical debt, or when patients fall behind on payments for other things in order to keep up with their medical bill payments.  


Additionally, people with medical debt report cutting spending on food, clothing and other essential household items. Along with these cost-cutting measures, they tend to spend their savings and in some cases borrow additional money from friends, family, or other debt providers in order to pay down their medical bills (Peterson-KFF).   


Worst of all, when the burden of servicing medical debt becomes too overwhelming, it forces many people into the unfortunate position of filing for personal bankruptcy, and in some cases results in the loss of their homes. This also leaves a permanent mark on their personal credit scores and will forever impact their ability to borrow in the future, for example, to buy a house or a car. In a study published in the American Journal of Public Health in 2019, “Medical Bankruptcy: Still Common Despite the Affordable Care Act”, it found that 66.5% of bankruptcies were caused directly by medical expenses, making it the leading cause of bankruptcy in the US. Additionally, 17% of adults with healthcare debt declared bankruptcy or lost their homes as a result of it. Overwhelmingly, Americans (45%) worry that a major health event will bankrupt them.



The System Must Change as it is Unsustainable 


This is the present state of healthcare in America – people living in perpetual fear that they will get sick, get in an accident or develop a chronic condition that requires long-term care, that will, if not bankrupt them, at least saddle them with an extraordinary amount of debt that, depending on one’s earning capacity, could take a lifetime to pay off and permanently impact their standard of living. What compounds this scenario is the fact that in many cases, the diagnoses are coming too late, meaning the disease has developed to a point where the cost of treatment is extraordinary, adding to the ballooning pile of debt. 


We believe it does not have to be this way. Aside from necessary policy changes, with advances in technology and access to information, patients increasingly have the ability to take control of their own health, to alter their lifestyles to avoid chronic conditions, identify diseases in their earlier stages, and generally live longer and better. And they can do this without having to put their financial futures at risk. When it comes to value and improved outcomes, this is the better approach. 



 

Bibliography:

Centers for Medicare and Medicaid Services (CMS) – National Health Expenditure Data

Office for National Statistics (UK) – Healthcare expenditure, UK Health Accounts: 2021

Eurostat – Healthcare expenditure statistics, November 2022

Eric C. Schneider et al. (2021, August). Mirror, Mirror 2021 — Reflecting Poorly: Health Care in the U.S. Compared to Other High-Income Countries. Commonwealth Fund. Retrieved from https://doi.org/10.26099/01DV-H208

HealthPayer Intelligence. (n.d.). How Preventive Healthcare Services Reduce Spending for Payers. HealthPayer Intelligence. Retrieved from https://healthpayerintelligence.com/news/how-preventive-healthcare-services-reduce-spending-for-payers#:~:text=According%20to%20the%20CDC%2C%20chronic,%24260%20billion%20dollars%20a%20year.

The Commonwealth Fund. (2022, September). State of U.S. Health Insurance in 2022: Findings from the 2022 Biennial Survey. The Commonwealth Fund. Retrieved from https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/state-us-health-insurance-2022-biennial-survey#:~:text=Forty%2Dthree%20percent%20of%20working,to%20health%20care%20(23%25).

The Commonwealth Fund. (n.d.). Survey: 79 Million Americans Have Problems With Medical Bills or Debt. The Commonwealth Fund. Retrieved from https://www.commonwealthfund.org/publications/newsletter-article/survey-79-million-americans-have-problems-medical-bills-or-debt

The Commonwealth Fund. (2023, June 15). Survey: 79 Million Americans Have Problems With Medical Bills or Debt. The Commonwealth Fund. Retrieved from https://www.commonwealthfund.org/publications/newsletter-article/survey-79-million-americans-have-problems-medical-bills-or-debt

Gallup. (2022, December 13). Record High Put Off Medical Care Due to Cost in 2022. Gallup. Retrieved from https://news.gallup.com/poll/468053/record-high-put-off-medical-care-due-cost-2022.aspx

Peterson-KFF Health System Tracker. (2022, February 10). The Burden of Medical Debt in the United States. Health System Tracker. Retrieved from https://www.healthsystemtracker.org/brief/the-burden-of-medical-debt-in-the-united-states/

Shakeri, H., Krause, E. M., DeAntonio, M. J., & Varjavand, B. (2019). The Current State of Mobile Health Applications for Pain: A Qualitative Systematic Review. PM&R: The Journal of Injury, Function, and Rehabilitation, 11(3), 311-328. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6366487/

Belluz, J. (2018, October 4). Nobel Prize-winning physicist Leon Lederman spent his last days in a world of painful regret. Vox. Retrieved from https://www.vox.com/health-care/2018/10/4/17936626/leon-lederman-nobel-prize-medical-bills

CBS News. (n.d.). Crowdfunding to cover medical bills has become a booming industry. CBS News. Retrieved from https://www.cbsnews.com/news/health-care-costs-crowdfunding-medical-bills/

Farmer, B. (2021, November 19). The ER charged him $6,589.77 for 6 stitches, a cost that led his wife to avoid the ER. NPR News. Retrieved from https://www.npr.org/sections/health-shots/2021/11/19/1056866145/expensive-er-stitches-skip-care-bill-of-the-month

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