High Costs of Healthcare: Where is all the money going?

High Costs of Healthcare Where is all the money going
President Barack Obama and Charles Gibson discuss health care cost and other related concerns.

The per capita cost of health care in the United States is the highest in the world. However, providers do not feel that they are properly compensated even when government spending coupled with health care insurance has increased through the years. The main reason for the dissatisfaction of providers on health care funding is that a large percentage of the fund for health care is actually allocated for non-hospital or non-care services and for goods used for health care. Only 21% of the total expenditure for health care goes to physicians and other service professionals and health service providers. Thus, service providers do not feel any significant increase in their compensation even when the total spending for healthcare increases over time.

Majority of the funds for health care are spent on hospital operations and maintenance, medicines, administration, investments, and other related costs. The expenditure for hospital operations and maintenance is different from the spending for professional health care service providers. The service providers are the persons responsible for the delivery of health care services, while the hospital operations and maintenance expenses are spent on technology, facility development and personnel involved with basic non-medical operations, such as janitors and engineers. Also, the price of real estate and the costs of maintaining facilities increase along with real estate values and the cost of labor. The biggest chunk of the funds for health care goes to hospital facility development, operations and maintenance, and not to the individual health care service providers.

Cost of Health Care Technology

The costs of health care technology are generally high, especially when the technologies implemented in health care organizations are new or fairly novel. The technologies used in hospitals are a major contributor to the hospital costs in the US health care system.

Cost of Medicines

The high costs of medicines are also a major contributor to the high costs of health care in the United States. A major portion of health care spending is for purchasing drugs from pharmaceutical companies. This cost eats away from funds available for health care service providers.

Health Care System Administration Costs

Administration costs of the health care system accounts for about seven percent of the total expenditure of the US for health care. These costs are needed to maintain the offices that oversee the entire health care system. These offices are responsible for implementing health care programs and policies at the federal, state and local levels.

Final Note

Even though the per capita cost of health care in the United States is the highest in the world, majority of the spending is not for the health care service providers, but for hospital operational costs, administration costs of government health care programs and policies, costs of medicines, and other expenses such as investments in the health care system. The funds used to pay for providers’ services are just a minority component of the total budget for health care. Even though the per capita costs of health care has increased through the years, health care service providers still do not feel that they are adequately compensated, commensurate to the increasing requirements and complexity of the health care system.


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