It goes without saying that Americans cannot afford to purchase healthcare because it is too expensive. Unfortunately, Obamacare failed to make healthcare more affordable for Americans because it effectively increases premiums for various reasons.

The case of cell phones provides a clear example of how high prices restrict access. In fact, few people had cell phones when they cost $3,000 in 1987, but billions of people around the world have cell phones now that they are drastically more affordable. In a similar fashion, if healthcare prices can be reduced, many Americans will be able to ensure that their healthcare needs are looked after, not necessarily make it mandatory. To make healthcare more affordable, the inflated costs present in the current system must be controlled and minimized. As a practicing physician at present and former Executive Vice President of Health Services of a regional HMO, I have come to understand why the healthcare system in the United States is so costly, and I have identified seven major cost-drivers that, if targeted, can make the healthcare system more affordable on the whole.

1. We have the wrong healthcare delivery system. In the United States, healthcare is delivered through a third-party payer system. Since someone else is paying for medical procedures and services, incentives are aligned to increase, rather than decrease costs.

2. Although 70% of illnesses are preventable, not much has been done to combat these diseases. In fact, such as obesity — a massive epidemic in its own right — causes other medical issues that are also expensive to treat. Of course, there are other preventable conditions, such as smoking, drugs, unsafe sex practices, accidents and so forth.

3. Hospital care is a significant contributor to overall healthcare costs in the United States. While accounting for only 10-15% of actual care, procedures and services performed in hospitals consume approximately 40-50% of healthcare dollars. A reduction in the cost of hospital care could be achieved by treating more patients in primary care facilities. For example, a colonoscopy performed in a hospital could cost around $6,000, whereas the same procedure could be performed by the same doctor in his office for $600. This ratio applies to everything they do.

4. Administrative costs figure greatly into overall healthcare costs because they are accounted for at every level. Obamacare allows insurance companies to retain 20% of premiums for administration and profits. The remaining, 80% of premiums are distributed to providers, who also happen to have 20-25% administrative costs. To minimize administrative costs, the current healthcare system should be restructured to deal directly with providers instead of entities that are not involved in actual care.

5. Given the threat of malpractice suits, doctors ordinarily practice defensive medicine, which increases healthcare costs by 10%. Even though certain tests or procedures may not be necessary, doctors will usually go ahead with such tests or treatments in order to avoid legal issues. The fact that 10-20% of a physician’s income is spent to cover malpractice premiums illustrates the pressures that the field exerts in terms of healthcare cost.

6. Brand-name prescriptions also comprise a significant amount of the unnecessary cost expended in the healthcare system. In all, 8-10% of healthcare dollars are spent on prescription medications. However, 25% of all prescriptions are dispensed for brand name medications, which cost 10 to 20 times more than their generic equivalents. Since 98% of brand name medications have generic equivalents, doctors could easily help to reduce costs in this area by prescribing generic drugs instead of their pricier alternatives. In addition, medications cost 10 times more in this country, compared to Europe.

7. Finally, the growing amount of regulations has added to the rising costs in the healthcare industry. To navigate through the maze of regulations, doctors and public need to hire healthcare consultants in addition to lawyers, accountants they already have. Instead of alleviating this burden, Obamacare has contributed to it with around 17,000 more pages of new regulations and counting.

Given the major cost-drivers detailed above, I strongly believe that healthcare costs can be reduced by 60% through targeted efforts in each area. In future articles, I will address each cost-driver in particular and list comprehensive solutions to decrease costs in the respective area. Some of the solutions have already been implemented successfully at AMG Medical Group, where anyone can receive all-inclusive primary care services for a flat fee of $89 per month. To learn more about AMG Medical Group, please visit the website www.amgmedicalgroup.com

John Muney MD FACS
President
AMG Medical Group