Why does healthcare cost so much? Understanding the real cost drivers and why Americans pay so much more for care Presented by: Michigan Consumers for Healthcare

U.S. Healthcare costs are out of control in comparison to the world Source: International Federation of Health Plans, CHRT graphic

It’s because we are obese, right? Or older? Or because of lawyers? Or because of the poor? Or because we spend more on technology?

Americans are surprisingly healthy! America is healthier than peer nations in 7 out of the top 10 disease classifications! – Institute of Medicine study Lower relative disease prevalence saves the U.S. $70 billion in medical costs annually

It must be because we are older? Japan Median Age: 45.8 Per capita spending: $3,035 USA Median Age: 37.2 Per capita spending: $8,233

It must be because of the lawyers! Litigation costs and malpractice insurance account for 1 to 1.5 percent of total medical costs. -Towers Perrin study As healthcare costs have doubled, medical liability costs have stayed fairly constant.

But our technology is more advanced and expensive, right? All modern healthcare systems have access to the very same pharmaceuticals, medical devices, surgical procedures and imaging equipment. Profits drive the use of imaging equipment

The poor are to blame, right? The bottom 50% of Americans account for only 2.7% of healthcare spending 21.0%

So why is believing in myths bad? It allows the real drivers of high costs to shift the blame It takes pressure off politicians to act It will ultimately lead to fiscal crisis

So what are the real drivers? Unit Prices and Administrative Costs!

What do we get for $140 billion?

Example: Surgeon fee for hip replacement

U.S. Hospital spending is 3 times the global average Source: OECO Health Data, 2011

So who’s on my side Policymakers engage in blame shifting to avoid making tough decisions Unlike in other countries, policymakers create few leverage points to control costs for consumers

Examples of policymakers punting Medicare Part D was prohibited by Congress from negotiating on behalf of the recipients for lower rates. The results: billions in unnecessary out of pocket costs! Medicare physician services are supposed to be capped. Every year Congress succumbs to AMA pressure and overrides the caps.

Balance billing practice continues ACA requires that health plans pay something for out-of- network But ACA allows hospitals to “balance bill” anything the insurance doesn’t pay.

Why no public option? The House passed version of the ACA would have created a public option to compete with private insurance Reimbursement rates would be capped at Medicare plus 10%

Challenges ahead for consumers How do we message (or counter-message) on cost drivers? How to we create a unified consumer policy agenda around cost drivers? How do we move policymakers to act?

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