Why is HealthCare Expensive in the United States ?

The American healthcare system has become so expensive that it is now a make or break issue in national politics. It was a major bone of contention and regularly featured in Donald Trump vs. Hillary Clinton debates.

Some people are for Obamacare whereas there are others vehemently against it. Healthcare has begun to arouse deep emotions in the United States. This is because of the sad state of affairs for those who desperately need healthcare. A lot of people in America need healthcare but cannot afford it because it is very expensive, so many of them travel to third world countries to get the same procedures done at a cheaper cost. This is called medical tourism.

In this article, we will try and understand what is the underlying problem which makes healthcare in America so expensive? And what can be done to resolve the issue?

More Money Spent Per Capita in the United States

It is a common belief that people in countries like Canada, Australia, and United Kingdom pay more in the form of taxes for better healthcare services. The belief has an underlying assumption that “more is better”. However, this belief is not based on facts!

People in the United States pay larger amounts on a per capita basis towards healthcare. However, still, the tax dollars are nowhere close to sufficient to meet the healthcare expenses of the nation. In fact, the government insurance penetration is the United States is very low. Employers provide most of the insurance. It is, therefore, incredibly strange that Americans spend such massive amounts of money on healthcare and yet are not able to completely reap its benefits. This raises questions about the effectiveness of spending since there are other countries in the world that are able to achieve much more with very less expenditure.

Common Reasons Cited

The higher expenses are justified with the reason that more expenses are required because Americans tend to get sick more often. The common reasons cited for this are that Americans consume more fast food and are therefore more obese than their European counterparts. This is because of the standard American diet (SAD) which is high both in salt as well as in refined sugars. However, that cannot be the only reason. Europeans have a higher number of smokers whereas the United States has all but banned smoking and Europe also has much more alcohol consumption than the United States. Yet the healthcare costs per capita are only a fraction of what they are in the United States.

Everything is Expensive

The fundamental reason behind healthcare being so expensive is the fact that all procedures and drugs are expensive in the United States. In fact, they are so expensive that a lot of Americans smuggle their prescription drugs from across the border in Canada where they are cheap. This can be attributed to faulty regulations which allow pharmaceutical companies to profiteer from the misery of the sick people. Companies are allowed to price their drugs to make them very expensive citing research and development costs that were incurred during the development of the drug. This can be continued for a long period of time before the drug is branded and other companies are allowed to sell them. In the absence of competition, profiteering is easy!

Countries like Canada have laws prescribing the maximum that can be charged for medicines. The American government has tried implementing something similar in the Affordable Care Act i.e. Obamacare. However, that has been done on a small scale, and that too has not been very successful.

Aging of Population

Probably the biggest reason behind the rising healthcare costs is the aging of the American population. America has a large number of baby boomers in its population. The older people have a higher life expectancy due to improvements in medical science. However, the higher life expectancy also comes with a higher price tag. Increased demand for healthcare services creates a shortage of supply allowing the providers of such services to charge a premium.

Complex Administration System

The healthcare system of America has become increasingly complex. Different insurers have their own requirements. As a result, hospitals have to create a wide variety of paperwork depending on the patientís insurer. They are unable to standardize the process and cut costs. The costs that are incurred because of these customized requirements also end up making the American healthcare system more expensive.

Threat of Lawsuits

Americans also tend to undergo an incessantly large number of diagnostic tests as compared to the rest of the world. This can be attributed to the lawsuit-prone medical system of the United States. Doctors find it better to be safe than to be sorry. Hence, they prescribe a wide variety of diagnostic tests just to rule out the possibilities. A lot of times these tests may not be actually required, and doctors are overly cautious. While exercising this extreme caution, they tend to drive the medical costs higher.

Specialists vs. Primary Care Physicians

Last but not the least Americans tend to take advice from specialists only. The country has very few general physicians. Specialists are more expensive, and hence consultations with specialists drive up the cost of healthcare programs for everybody.

To sum it up, the United States healthcare system is extremely complicated. There are a wide variety of factors that are driving prices up. And it seems unlikely that these factors can be reined in within the near future.


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