Although the Affordable Care Act has become a political football, there is an underlying major issue for consumers: healthcare cost. In the U.S., healthcare represented almost 17 percent of gross domestic product in 2015, according to the Organisation for Economic Co-Operation and Development , up from 12.5 percent in 2000. The next most resource-demanding healthcare system among major developed countries is in Switzerland, and that tops out at 11.5 percent of the country’s GDP.
The growth is remarkably high. PwC projects it to be 6.5 percent this coming year, the same as last. However, the analyst firm says rates could speed up again in the future as “new healthcare access points increase utilization.”
One of the most visible issues has been the rapid increase in pharmaceutical costs. Companies take old drugs and find ways to pump up the price, like deflazacort, an old steroid used to treat Duchenne muscular dystrophy, runs about $1,200 a year internationally and $89,000 a year in the U.S. — $54,000 after discounts. It’s just one example of a widespread practice that hurts consumers and practitioners at the same time.
Drug prices represent a relatively low percentage of U.S. healthcare costs. However, they typify a problem that PwC noted. Early in the 2000s, both prices charged and healthcare utilization were problems. Things got more expensive and people used more services. That has changed. Utilization has dropped and the major force behind higher costs is increased prices.
For employers, almost half of employer health costs in 2017, according to PwC’s projections, will be hospitals, both inpatient and outpatient. Drugs will be 17 percent, doctors, 30 percent, and 4 percent for everything else.
Employers find it difficult to keep shouldering the increased burdens — not only increasing premiums, but rising deductibles. So do consumers. According to the Kaiser Family Foundation, the public’s top healthcare priority isn’t the repeal of the ACA, but lowering their own costs. Two-thirds of people name that as a “top priority” for the new administration and Congress. Just over a third of people mention ACA repeal as a major concern.
Put all the data together and it becomes clear that pressure will increase to lower healthcare prices, the pressure will be direct on providers and indirectly through laws and regulations, and that the major solution must be in the way hospitals are run. Greater efficiency, increased early intervention to lower lifetime costs, better effective use of technology, value-based payments, and other innovations will be critical in the industry. Managers and executives will be responsible for developing solutions that can support quality care, improve outcomes, and significantly reduce pricing pressure, not just for future increases, but to decrease current costs.
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