As the USA has transitioned from its manufacturing-based industrial revolution to an economy that is 80 % service oriented, Americans have grown accustomed to rapid disruptive innovation and the development of advanced technological breakthroughs that fundamentally alter the structure and function of markets. In no sector is this phenomenon more evident than in health care. The development of new drugs, devices, services, procedures, and applications not only impacts current treatment paradigms but in many cases also expands possible treatments to new populations. Technological advances often outpace our ability to adequately study their effectiveness, and evidence-based strategies designed to rationally apply them are often replaced by their rapid and unsystematic adoption with unpredictable incorporation into medical practice.

Although the potential exists for innovative technological advancements to decrease the cost of health care by reducing hospitalization or avoiding associated morbidity, most experts agree that the majority of medical technological developments significantly increase the costs of health care [4]. Even when cost reductions are possible, technology expansion and application into broader populations has the net effect of increasing spending. While measuring the direct financial impact of technology can be difficult, the cost contribution of technology on health-care spending can be estimated as the cost residual that remains after accounting for more readily measurable drivers. Using this methodology, the Congressional Budget Office (CBO) estimates that approximately 50 % of the growth in US health-care costs can be attributed to technology, making it the single greatest contributor to health spending, [5]. It is reasonable to predict that desirable technologies will continue to be developed in the future, perhaps at an even greater pace, further complicating our decisions regarding allocation of our limited resources [2].

Although health insurance was initially conceived as a mechanism to reduce the financial impact of catastrophic illness, its role has expanded in attempts to make all types of health care financially accessible and available to the population. As health-care costs have continued to rise, the amount of out-of-pocket expenses paid by the end user has almost inversely decreased [6, 7]. Although causality in this relationship is difficult to directly establish, a classic experiment conducted by the RAND Corporation from 1974 to 1982 provided strong evidence that reductions in coinsurance lead to more people using health services and more services used per person [8]. On the other hand, cost-sharing reduced the use of both inappropriate and appropriate medical services. Whereas this effect had minimal consequences on the health status of the majority of people enrolled in the study, for those who were poor and suffered chronic illnesses, the reduction in health utilization was harmful. The CBO concluded that between 5 and 20 % of the increase in health costs can be attributed to the progressive expansion of more extensive health-care coverage. One economist estimates that the insurance expansion represented by the institution of Medicare in 1965 may explain nearly half of the increase in health-care spending that occurred between 1950 and 1990 [2, 9].

As medical care and its financial components become more complex, so must the infrastructure that sustains it. While the administrative costs required to deliver health care can be difficult to accurately capture and gauge comprehensively, few would argue that the associated expenditures are rising. Historical estimates attribute 3–10 % of rising costs simply to increases in administrative and support functions in the sector. The CBO found that administrative costs have increased approximately 7 % year over year between the 1995 and 2005 fiscal years.

The role of medical malpractice liability on escalating health costs relates both to the measurable impact of rising insurance costs paid by providers and the less quantifiable but arguably more significant contribution of increased costs related to the practice of “defensive medicine.” Because malpractice premiums constitute only 1–2 % of US health-care expenditures, the projected 6 % direct reduction in premiums that would likely result from tort reform would be expected to have only a modest impact on total expenditures [10]. This larger potential issue is also the most controversial – the notion that health-care costs are driven dramatically higher by medical practice that may overutilize medical resources solely to reduce the chance of litigation. Several studies designed to address this issue have provided disparate results, and the relationship between malpractice liabilities and global health-care costs remains in large part unanswered [2].

Because health and wellness are desired states of being, health care as their market-based surrogate is also a desired service. As personal income rises, one’s ability to pay for a variety of health-care services increases. Health care is a normal good, such that aggregate demand for it increases as income increases. Furthermore, because there are few substitutes available to replace it, health care exhibits significant price elasticity of its demand function. Consumers are fairly price insensitive, and this effect is further magnified by the relative disengagement of payment and services that occurs from the interposition of third-party intermediaries. A high per capita income in the USA is often cited as one of the key factors that contribute to our comparatively high health-care costs. The true magnitude of this effect is a matter of debate, but economists have estimated the elasticity of US health care at approximately 0.2, meaning that for every 10 % increase in real income, associated health expenditures can be anticipated to rise by 2 % [11].

In the USA, health-care resources are not distributed equally among the population. To the contrary, the sickest 5 % of the US population accounted for nearly half of all health spending in 2008 and 2009, and just 30 % of the population account for nearly 90 % of aggregate US health expenditures. The elderly are disproportionately represented among this top decile of spenders, comprising 13.2 % of the population, but 42.9 % of the heaviest consumers. Not surprisingly, chronic diseases are more prevalent in the older population, and their presence increases and maintains the elevated costs of health care in this portion of the population [12].

Chronic diseases, which affect older adults disproportionately, are the leading cause of death and disability in the USA, and modifiable conditions such as obesity and smoking are the most significant contributors [13]. In aggregate, the treatment of chronic diseases accounts fully for 75 % of US health-care costs [12, 14]. In the USA, approximately 80 % of individuals over age 65 have at least one chronic condition, and 50 % have at least two [14]. The ten most prevalent chronic disease diagnoses account for nearly one-third of national hospital charges. Of these, the Agency for Healthcare Research and Quality (AHRQ) identified five as sources of potentially preventable hospitalizations given exposure to appropriate health modification strategies and preventive health measures (coronary artery disease, congestive heart failure, diabetes, chronic obstructive pulmonary disease, and asthma). The economic costs of chronic disease are cumulative; treating patients with one chronic condition (25 % of the US population) costs twice as much as treating those without chronic disease. Treating patients who suffer from multiple comorbid conditions costs up to seven times as much as does treating patients burdened by only one chronic condition [13, 15].

In addition to the increasing incidence of chronic disease, the aging process is associated with increasing disability secondary to sarcopenia or progressive loss of muscle mass. Approximately 45 % of Americans over age 65 are sarcopenic, with approximately 20 % of the US population being functionally disabled [16]. When the prevalence of disability and the estimated increased cost for each individual are multiplied by the increasing number of older Americans, the economic burden of sarcopenia alone is estimated at $18.5 billion [16].

The rise in obesity in the USA has been particularly problematic and costly to the US health-care system. Obesity rates in the USA are now the highest in the world and have dramatically increased in all age groups over the last decade [13, 17]. For adults, the obesity rate (BMI >30) has tripled since 1960 while the incidence of morbid obesity (BMI >40) has risen sixfold. Because obesity raises the associated risks of major comorbidities such as cancer, stroke, coronary artery disease, and diabetes, the impact of its effect on health is essentially magnified. In real terms, the relative cost of obesity was $1,429 per year (42 %) higher than caring for the nonobese population in 2006 [18]. When combined with its prevalence, this high cost translated into $147 billion annually by 2008, or roughly 21 % of US health spending – a cost that has now surpassed that associated with smoking [19]. As obesity rates continue to increase in the future, one can expect continued increases in associated chronic diseases and related health costs.