Admin Costs Leading Healthcare Upwards

An important study has been published this week in the Journal of the American Medical Association on healthcare in the US. The abstract is not behind a paywall, and contains some facts not broken out in the media release. What component is growing fastest in cost since 2000?

If you guessed administrative costs, you’re correct!

Since 2000, (1) price (especially of hospital charges [+4.2%/y], professional services [3.6%/y], drugs and devices [+4.0%/y], and administrative costs [+5.6%/y]), not demand for services or aging of the population, produced 91% of cost increases; (2) personal out-of-pocket spending on insurance premiums and co-payments have declined from 23% to 11%; and (3) chronic illnesses account for 84% of costs overall among the entire population, not only of the elderly.

My bolding. Again, lets avoid getting sucked into an Obamacare debate. The point I am trying to bring to your attention is that 5.6% yearly growth rate for admin costs. Bringing this growth rate downwards is a huge opportunity for technology, software, and services. And, yes, data standards such as XBRL.

The real difference will only be made by changing the behavior of the American population. Chronic health problems are caused by smoking and overeating. Tobacco should be regulated as a toxic substance and drug. We need to eat less, eat differently, and exercise more. Those are the only changes that will really make a difference in bringing down national health care costs, because those are the differences that will actually make us healthier people.


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