Americans spend more per capita on health care than people in any other country and our costs are escalating rapidly. Those who are insured are being asked to pay more of the cost, U.S. employers are reducing benefits and in many cases dropping health insurance altogether, governments are facing major deficits in supporting health programs and the number of uninsured people is growing steadily.

Thus, the cost of health care is clearly becoming the major issue in America today. We now spend $1.7 trillion annually on health care, almost 15 percent of every dollar we earn.

About 55 percent of the nation’s health-care bill is paid by private health insurance and out-of-pocket by patients. The other 45 percent is paid by government health programs, such as Medicare, Medicaid, the military health system and the Indian Health Service. The costs of both private and government health insurance are inflated to cover the $3.5 billion spent on charity health care for the 45 million Americans who are uninsured.

The escalation of health-care costs started in 1966 with the implementation of Medicare and Medicaid. Following the enactment of those programs, U.S. doctors’ incomes doubled in five years. Cost escalation continued throughout the 1970s and’ ’80s, but health maintenance organizations and preferred provider organizations brought costs under control in the 1990s. After managed care cut the fat out of the system, costs have been rising at double-digit rates since 2000.

Most try to blame the doctors, hospitals or insurance companies, who certainly charge more every year. However, an April 2002 study by PricewaterhouseCoopers outlined six root causes of high health-care costs:

Inflation. The medical component of the Consumer Price Index is rising 19 percent annually because of rising provider expenses and advances in technology.

Our lifestyle and the age of our population. Recent studies show that more than $140 billion, almost 10 percent of health-care expenditures, is spent on diseases related to smoking and obesity. One hundred years ago, only 1 of 25 people were over 65; now the ratio is 1 in 5, and when the Baby Boomers turn 65, the ratio will be 1 in 4. Seniors require 3.5 times more health care than people under 65.

The American medical model, in which patients are not really the consumers. Rather, the doctors are the purchasers, and health insurers obscure the price with minimal co-payments. Thus, health-care demand is not sensitive to price increases.

The growth of expensive technology. Research is extremely expensive, and once medical technology is developed, it drives demand for use. Though advanced medical devices are costly, prescription drug costs are worse. The pharmaceutical industry has the highest profit margin of any industry in the United States. Average profits are 19 percent overall, and 23 percent for the top 10 drug manufacturers.

Our multi-payer insurance system, consisting of thousands of health insurers and numerous government programs, results in excessive administrative costs. Recent studies suggest that administrative costs may be as high as 25 percent, and that a single-payer system could cut that in half.

About 7 percent of the health-care dollar is spent on defensive medicine and malpractice insurance. The high risk of being sued causes providers to practice defensive medicine, conducting unnecessary tests and procedures. Large numbers of lawsuits and rising malpractice awards increase professional liability premiums, which in turn increase health-care costs.

All in all, much of our health-care expense is unnecessary, and we’re not getting much for our money. We rank 37th among all countries in terms of 191 health status indicators ranked by the World Health Organization.

Kenneth Johnson lectures on the health-care system and health insurance at Des Moines University and Upper Iowa University.