Many factors combine to drive health-care costs up

In a recent My View, Dr. Brian Moench drew attention to pharmaceutical companies and the effects their business practices are having on health-care inflation. I appreciated his willingness as a health-care provider to "throw back the curtain" on that segment of the health-care industry. But focusing on only the pharmaceutical industry fails to acknowledge the complexity of the health-care financing crisis and the many contributing causes of the double-digit health-care inflation in recent years. As one University of Utah business professor put it, when it comes to out-of-control health-care inflation in the United States, "there is plenty of blame to go around." Without minimizing the cost of prescription drugs, here are several other issues that combine to drive health-care costs higher and faster than the economy and wages can grow.

1. Underfunding of Medicare and Medicaid, which results in cost shifting from the public to private sector. This is a particularly insidious problem as those unfunded mandates also tend to raise the level of care we all then expect.

2. Analogous to government cost shifting are the costs shifted to uninsured patients when discounted insurance compensation schedules pay only a portion of the billed amount for insured patients. On the other side of this issue are companies that provide physician billing services that specialize in maximizing insurance payments to physicians. These billing practices are designed to capture every possible penny on each bill.

3. Insured consumers have no disincentive to demanding state-of-the-art care since they are buffered from the cost by insurance companies who pay the bills and their employers who pay the premiums. The uninsured, who are perhaps least able to afford health-care, are charged more than other consumers.

4. In a vicious cycle, as health-care inflation continues to outpace the growth in wages, more small businesses, the self-employed and low-wage service workers are priced out of insurance pools and into the ranks of the uninsured.

5. Malpractice and class action law suits, excessive awards for pain and suffering and the lawyers who profit from them, not only inflate the cost of medical care but also tend to stifle innovation while transferring massive amounts of wealth to a few law firms. Closely related to frivolous lawsuits are the costs associated with defensive medical practices and superfluous lab tests ordered to protect providers in the event of a lawsuit. At the same time we must address the very real costs resulting from human error, malpractice and intentional substandard care provided to reduce expenses to the insurer.