Why are Healthcare Costs Rising?

Overview

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One would think that the biggest complaint about rising costs would be inflation, but healthcare costs are right up there as well. US spending on medical care grew 7.5 percent in 2023, or $14,570 per person. Some reasons are increased costs in medical supplies, disease increases, medication price increases, and AI utilization. In fact, medical costs are the number one reason for bankruptcies in the country. 

Let’s take a closer look at what is causing us to pay more for medical expenses.

      • AI Research: AI systems require significant investment in research. Hospitals require high-performance computing systems, cloud storage, and cybersecurity measures to integrate AI, and highly paid skilled personnel, such as data scientists and AI-trained medical professionals, are needed. Additionally, AI can detect diseases earlier or more accurately, which may lead to increased testing, treatments, or specialist visits.We must add that there is an upside to this. Once medical AI has been proven to work, costs can decrease as AI can help predict disease risks; thereby reducing expensive late-stage treatments by enabling earlier intervention, and that is just one avenue of assistance that AI can bring to the world.
      • Illnesses are on the rise: Conditions such as obesity, diabetes, and hypertension continue to increase. Why this is happening is beyond the scope of this article, but managing these conditions usually involves long-term treatments, doctor visits more often, and potentially expensive medications.
      • Advanced Medical Technology Yields Higher Costs: As healthcare technology gets more sophisticated, the costs aligned with them are higher. More sophisticated imaging equipment and robotic surgeries are just two examples.
      • Medications:

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        The increase in drugs continues. Pharma companies say it’s due to more advanced research and development. Whatever it is, the costs are relayed down to you.

      • Salaries: As inflation increases, so do the wages in the healthcare industry (and everywhere else), and in some locations, this increase is further driven by shortages of skilled personnel.
      • Hospital Costs: One component always on everyone’s mind is the rising costs of hospital care. Some people even avoid or delay going to the emergency room because of the expenses. Increasing operational costs, equipment, and utilities drive hospital bills higher.
      • Health Insurance: Now we saved the best, or worst, as many would agree, for last. The rising costs of Insurance premiums, increased deductibles, and/or cutting back on paying for essential healthcare services have become part of the financial burden to patients, further driving up out-of-pocket expenses. There is a complex set of factors that lead insurance companies to raise costs, and this can be further completed by those who have Medicaid and Medicare. 

Is Donald Trump Going to Lower Healthcare Costs?

Donald Trump has discussed healthcare cost reduction in the past, focusing on policies like price transparency, lowering prescription drug costs, and repealing or replacing the Affordable Care Act (ACA). And with the confirmation of RFK Jr.’s Health Secretary, there are sure to be fireworks ahead. Whether healthcare costs would decrease or increase under RFK’s initiatives depends on how they align with his and Trump’s perspective on medical care, as well as market dynamics and public health needs, although Trump has said he wants to reduce medical costs for Americans.

Completing this however, we must consider how Trump’s tariff policies will fan out and how it will affect costs overall. We all need to stay tuned for this. 

Conclusion

Various factors, including inflation, increased hospital costs, advanced medical technologies, higher salaries, and rising medication prices, drive rising healthcare costs in the U.S.. Additionally, AI implementation is another contributor due to the high costs of research and skilled personnel, though it can potentially reduce future expenses by enabling early disease detection and intervention. Chronic illnesses, such as obesity and diabetes, further strain the healthcare system through ongoing treatments and frequent doctor visits. 

Insurance premiums and hospital costs remain top patient concerns, as out-of-pocket expenses continue to rise. Political shifts and healthcare policies, such as those proposed by Donald Trump and RFK Jr., may have a significant impact on future healthcare costs. Ultimately, whether costs stabilize or rise further will depend on how these factors are addressed in the coming years. Let’s hope for the best!