Healthcare Costs Are Rising, but Why?

Stock photo of $100 bill and stethoscope. | Image by Getty Images

The cost of healthcare is rising all across the United States.

Last week, local healthcare professionals gathered at the 2022 North Texas State of Reform Health Policy Conference to “bridge the gap between health policy and political reality.”

The summit was kicked off by Dr. Fred Cerise, M.D. delivering a keynote speech on the rising cost of healthcare.

Dr. Cerise, who serves as the president and CEO of the Parkland Health & Hospital System, argued that the market has failed to achieve equitable, affordable healthcare, evidenced by the fact that medical debt is the leading cause of personal bankruptcy in the United States.

He advocated for a “totally different structure” than the “semi-market” model currently employed by the United States.

“There are so many contributors,” to rising healthcare costs, he told The Dallas Express.

“Prices are going up because prices in a market will go up as high as the market will tolerate,” he said. “Prices are what’s driving up the cost.”

“Now, you’ll say, what’s driving prices?” he continued. “Well, it’s new drugs. It’s new technology. It’s things that are providing health benefits, but they’re doing so at prices now that a lot of the middle class is having difficulty affording.”

Cerise told The Dallas Express that the United States cannot rely on market competition to drive prices down “because it’s not a perfect market.”

“We haven’t accepted the fact that people will be denied care. When people come to an emergency room with an emergency, there’s a federal law that says the hospital [must] provide care,” he told The Dallas Express. “There’s not a federal law that says if that person can afford insurance, they have to buy insurance. So, you can take somebody who’s chosen not to have insurance, [they] come to a hospital, and the hospital has to provide care. That’s not a market, right?”

“You don’t have the same market dynamics around pricing and discretion from the purchaser that you do in other markets,” Cerise continued. “50% of the healthcare dollars are spent by 5% of the people who are really sick and need healthcare. They are not price sensitive because they already can’t afford it,” he said. “80% of healthcare is consumed by 20% of the people. It’s people who have chronic healthcare — serious healthcare needs — and it’s not discretion.”

A study published last year by JAMA Network Open found that roughly 5% of Americans account for 50% of healthcare spending.

“What do markets do?” Cerise asked. “Markets create disparities, ration services, and that’s not what we want in our healthcare system.”

However, economist Todd Furniss, author of The 60% Solution: Rethinking Healthcare, told The Dallas Express he believes the largest factor contributing to the rising cost of healthcare is the cost of labor.

“Salaries, wages, and benefits have gone up remarkably over the course of the last two years,” he said, adding that the next largest contributing factors are medication and supplies.

Furniss agreed that the United States cannot rely on free market competition to drive prices back down.

“The answer is sadly, unequivocally, ‘No,'” he said. “Now, the reason for that is because it’s very, very difficult once wages have gone up to reduce them, and it’s also very difficult to make technology costs go down.”

Furniss’ proposal for reducing the cost of healthcare in the United States is to “really drive consumerism into the industry, which does not exist today.”

He said if one were to ask his orthopedic surgeon what the price was for a knee replacement, the response would be, “What are you talking about? I don’t know. Go ask the front desk.”

Then the front desk would say, “Well, the price depends,” according to Furniss.

“So, until we can get consumerism really working, it’s going to be hard,” he said.

While Dr. Cerise said America needs a “totally different structure” to lower healthcare costs, Furniss said he believes, “There are ways you can do this and make it very, very efficient. And we have tools that I’ve talked about that make this very possible using the existing paradigm. We don’t have to go change the entire way we think about healthcare to solve the problem.”           

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1 Comment

  1. John Botefuhr

    “‘He said if one were to ask his orthopedic surgeon what the price was for a knee replacement, the response would be, ‘What are you talking about? I don’t know. Go ask the front desk.’
    Then the front desk would say, ‘Well, the price depends…’”

    As a provider, I can tell you this is the exact problem with healthcare. I would love to be able to tell patients the cost of things. Providers are very sensitive to the economic status of their patients, but with varying allowables from several different entities; cash, Medicare, private, insurance, third-party insurance, etc. not to mention reimbursements, and coding issues within 45 days of billing, it’s impossible. Even policies within the same company are different patient to patient .

    And a good doctor, these days has not chosen healthcare, and a life of service for financial reasons, so administering healthcare, with money in mind is unethical.

    While the cost of actual healthcare itself has slowly climbed through the decades, the administrative costs (costs attributable to people in the industry that are not actually licensed or healthcare providers) of healthcare has skyrocketed four or five times over.


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