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  • Writer's picturePre-Collegiate Global Health Review

Examining Increasing Healthcare Costs and Their Impact on Poverty

Updated: Apr 18

By Vishruth Puttu, BASIS Scottsdale, Scottsdale, Arizona, USA 



During the 1890s in the United States, a pivotal development of healthcare emerged when Washington-based lumber companies began compensating physicians to deliver essential care to their workers. This early integration of healthcare and insurance laid the groundwork for future global models. Although not yet labeled as healthcare or insurance, this initiative set the stage for modern-day healthcare and insurance systems. The formalization of healthcare and insurance came with the creation of Medicare by President John F. Kennedy in 1961 (Health Market, 2021). Along the way, the price has increased along with its growth (Figure 1). Many people are contributing thousands of dollars from their income into healthcare; in fact, many can’t afford healthcare and fall into debt. But why has the cost of healthcare increased so much? In this article, we will examine some of the causes.


Figure 1: The rapid increase in the cost of healthcare in the United States between 1960 and 2020 (Peter G. Peterson Foundation, 2023).


One of the reasons for the rapid increase in healthcare costs is the introduction of new and innovative healthcare technology that has led to more expensive procedures and outcomes (Peter G. Peterson Foundation, 2023). As hospitals are the ones using and maintaining these new technologies, they must take up the burden of paying for them. As a result, hospital networks must pay a lot of money towards this and thus compensate for the money lost to technology by increasing patients' hospital bills. Insurance companies in turn increase the prices of their insurance plans so that they can continue to cover their patients’ hospital bills. In the end, it is a losing game for the patients because they now must pay extra money to insurance companies and also pay the amount that their insurance can’t cover to hospitals. 


Another reason for the substantial increase in the price of healthcare is a lack of competition amongst hospital networks (Peter G. Peterson Foundation, 2023). This lack of competition occurs due to many hospital networks consolidating the number of hospitals they run and trying to shift to urban areas where they can attract more customers. This leads to rural areas having few hospitals if more than one and thus a monopoly exists in which the hospitals set prices that customers can’t argue with as they have no alternative. As a result of the increased prices, insurance companies increase their prices to be able to cover the bills and the patients once again are at the losing end of the game. 

 

However, in America and other developed countries, laws like the Affordable Care Act help with paying for healthcare for those who need it. But what about developing countries? Are individuals able to pay the bills? Well, unfortunately, the answer is that they can’t. 

 

The first reason for this is inadequate resources (Oleribe et al., 2019). For example, let’s take consider countries in Africa. In Africa, many people don’t have access to affordable healthcare because the healthcare system itself isn’t even developed enough due to multiple factors such as there not being enough trained individuals to run hospitals and clinics in regions of need. As a result of this, not only can they not get affordable healthcare, but in many areas people cannot get healthcare at all. Even if they want to improve healthcare by training people to become licensed medical professionals, countries do not have adequate financial means and appropriate framework to execute this  (Racoma, 2019). Brain drain has become a huge part of this over recent years; people who managed to get a decent education end up emigrating to highly developed countries for a better life with more money, thus depriving less developed countries of the chance of even having healthcare. This leads to another problem, which is inadequate budget allocation (Oleribe et al., 2019). Many African countries are currently spending budgets on things like infrastructure and billions of dollars are lost to corruption (Transparency International, 2019). Because of this, barely any money, if any, is allocated towards healthcare. There is also significant inequality of healthcare services (Racoma, 2019). Doctors and hospitals are also like insurance companies; they only serve those who they believe can pay them. As a result, many impoverished individuals in these countries can’t access healthcare at all. In fact, they consider themselves lucky if they get a physician’s appointment (Racoma, 2019). As a result of this, many people end up having to pay out-of-pocket for healthcare as they can’t rely on the government (Songwe, 2022). This leads to most people spending most of their savings if not all on healthcare. This has led to 11 million people in Africa going into poverty, solely due to expenditures for their healthcare (Tessema et al., 2022).


The same problem exists around the world. Globally, 50% of people can’t access basic health needs due to a lack of affordable healthcare (Tessema et al., 2022). Countries like Afghanistan, Egypt, Iran, Pakistan, Papa New Guinea, Syria, and Yemen also face extremely similar healthcare conditions to that of countries Africa, making the lack of affordable healthcare truly a global one (Shvili, 2020). Finding methods to lower the cost of healthcare has become a huge factor in the struggle to rise from the clutches of poverty. Through solutions such as multi-national collaboration and grass-roots initiatives, developing countries may have a chance at gaining affordable healthcare and fighting poverty. To do this, all nations, particularly developed ones, the World Health Organization, and other non-profit organizations must work together with local partners to achieve a better healthcare future for all.

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