Healthcare is expensive and getting more so, according to a report issued last week.According to the national health accounts issued by the Bermuda Health Council, we spend $678 million on healthcare each year. That’s 10.8 percent of gross domestic product, which means that we spend one out of every ten dollars we earn on health.That compares to 8.8 percent of GDP in 2005, so the increase is substantial.To put it another way, each person in Bermuda spends an average of $10,750 on healthcare each year. In 2005, we spent around $6,200 each on healthcare, so we now spend 73 percent more on healthcare than we did seven years ago. That means the cost of healthcare has risen much faster than almost anything else.In a masterful understatement, the report concludes: “Against the backdrop of a decline in nominal GDP, a decline in government revenues, and an average change in the Consumer Price Index during 2011 of 2.7 percent; the pace of growth in healthcare financing and expenditure may present challenges with respect to sustainability and affordability.”What the report does not explain is why healthcare costs rise faster than seemingly anything else. The first step in controlling costs increases is to understand what’s causing them.There are several obvious causes.One is the increasing size of the elderly population. People are living longer as a result of medical advances, and as they age, they need more medical care.A second cause is the increasing availability of high-tech equipment, much of it diagnostic, such as MRIs. There is a trend in medicine for this kind of equipment to be used heavily, and sometimes unnecessarily, when it is available. Patients demand it. Physicians order it, “just to be sure”. And the owners of the equipment encourage its use, in order to recover their investment.The account also reveal some other trends.A peculiarity of Bermuda healthcare is the need for overseas healthcare for treatments that cannot be done in Bermuda. That is compounded by a lack of confidence in local healthcare providers (often based on sometimes horrendous anecdotal evidence) which means patients opt to be treated abroad for ailments which could and should be dealt with in Bermuda. Traditionally, these treatments are more expensive abroad, especially in the US.The accounts reveal that the cost of overseas healthcare surged by around 50 percent in 2009 from $62 million a year to $90 million and has risen somewhat by then. This is largely a result of funding for FutureCare.Similarly, in 2010, the cost of administration in the Department of Health almost doubled. This may have been an accounting change, but it needs explanation.Expenditure on the Bermuda Hospitals Board has risen by 85 percent between 2005 and 2011. Insurers say this has largely been due to the change in the way the BHB bills, which has seen charges for individual procedures soar. As a result premiums surged as well.What is disturbing about the latter point is that the BHB billing change should have resulted in a decline in spending elsewhere, for example in the taxpayer-funded subsidies to the hospitals. But this did not happen.Physicians and prescriptions drug costs are often blamed for the rise in healthcare costs, perhaps because this is where patients find themselves paying out of their own pockets. But the accounts show that this is not the case. Payments to physicians, dentists and for prescription drugs are the three areas where spending has increased the least.The top three areas where healthcare costs have risen the most between 2005 and 2011 in percentage terms are administration of the Ministry of Health (186 percent), overseas care (128 percent) and health insurance administration (93 percent). In dollar terms, the expenditure by the Hospitals Board was the highest, rising almost $150 million to almost $300 million in just seven years.With the exception of overseas care, that suggests Bermuda does not have a healthcare cost problem; it has an administration problem.