Americans pay more for health care
I have been writing on the costs of healthcare in the US for years and also presenting other articles discussing the same issue of cost and care. Over the years, it has not gone away and has only worsened. The 340B program which is supposed to be used to help those in lesser neighborhoods has been hijacked to more exclusive areas and used to discount drugs going to people who can very well afford them.
For profit healthcare in the United States is problematic. The article by Ken Alltucker discuss the issues of cost in the United States and presents seven different reasons why it is more costly. The other side of this is costs outstrip wages and healthcare insurance becomes more expensive.
Why do Americans pay more for health care than any other nation? Ken Alltucker, USA TODAY
Americans spend far more on health care than anywhere else in the world but we have the lowest life expectancy among large, wealthy countries.
A lot of that can be explained by the unique aspects of our health care system. Among other things, we reward doctors more for medical procedures than for keeping people healthy, keep costs hidden from customers and spend money on tasks that have nothing to do making patients feel better.
“We spend more on administrative costs than we do on caring for heart disease and caring for cancer,” said Harvard University economist David Cutler. “It’s just an absurd amount.”
The nation’s rising health bill affects just about everyone.
The amount working-age Americans spent on health insurance through the payroll deductions has jumped nearly three times faster than wages over the past two dozen years. Health bills are the leading cause of personal bankruptcy. And medical bills accounted for more than half of all debt on consumers credit records in 2022, according to the Consumer Financial Protection Bureau.
Public anger over high costs and poor results has been squarely focused on health insurance industry in the wake of the assassination earlier this month of United Healthcare CEO Brian Thompson.
Massachusetts Sen. Elizabeth Warren said that while violence is never the answer, the public’s frustration should serve as a warning for the health care industry, and in a Huffington Post interview last week cited the “visceral response” from people who feel “cheated, ripped off and threatened by the vile practices of their insurance companies.”
But health economists say the entire health care system, not just insurers, deserves scrutiny for runaway medical bills.
Health insurance companies took in $25 billion in profit last year, while hospitals collected an eye-popping $90 billion, Rice University economist Vivian Ho said.
“It’s become quite clear how angry the public is with health care costs,” said Ho. “I’m glad people are voicing their anger against insurers, but they should be directing equal anger against hospitals, particularly since so many are nonprofit.”
Where US Healthcare expense went in 2022
Here are seven reasons America’s health care costs are so much higher than everyone else’s, without showing better results:
Reason 1: Lack of price limits
U.S. hospitals have more specialists than do medical facilities in other nations. Having access to 24/7 specialty care, particularly for hospitals in major metro areas, drives up costs. Patients have more elbow room and privacy here. U.S. hospitals typically have either one or two patients per room.
Of the $4.5 trillion spent on U.S. health care in 2022, hospitals collected 30% of that total health spending, according to data from the Centers for Medicare & Medicaid Services. Doctors rank second at 20%. Prescription drugs accounted for 9% and health insurance − both private health insurance and government programs such as Medicare and Medicaid − collect 7% in administrative costs.
Most U.S. hospitals are nonprofit and get federal, state and local tax breaks. These nonprofits are expected to provide free or reduced-cost care to low-income patients as well as other community benefits. Many hospitals don’t live up to their charity care and other community benefit obligations.
Researchers estimated the nation’s nearly 3,000 nonprofit hospitals were spared $37.4 billion in federal, state and local taxes in 2021. That same year, Medicare filings show hospitals paid out $15.2 billion in charity care.
Reason 2: Hospitals and doctors get paid for services, not outcomes
Doctors, hospitals and other providers are paid based on the number of tests and procedures they order, not necessarily whether patients get better. The insurer pays the doctor, hospital or lab based on negotiated, in-network rates between the two parties. Critics of this fee-for-service payment method says it rewards quantity over quality. Health providers who order more tests or procedures get more lucrative payments whether the patients improve or not.
With the VA I ran into this issue from an outside service. Another blood test when I had one two months earlier. Cholesterol care when it is already low. The same for blood pressure.
The U.S. health system has been slow to adopt value-based care programs.
Reason 3: Specialists get paid much more. They want to keep it that way
Specialty care doctors such as cardiologists or cancer doctors get much higher payments from Medicare and private insurers than primary care doctors. The system appears to reward doctors who specialize in caring for patients with complex medical conditions while skimping on pay for primary care doctors who try to prevent or limit disease.
STAT reported Robert F. Kennedy Jr., the nominee to become Secretary of Health and Human Services, is seeking to limit the AMA’s influence over medical billing codes.
Medicare payment rates determine how much taxpayers shell out for older Americans’ health care and set the base for health care prices. Private insurers typically use Medicare rates to decide how much they pay doctors and hospitals.
Reason 4: Administrative costs inflate health spending
One of the biggest sources of wasted medical spending is on administrative costs. Harvard’s Cutler estimates that up to 25% of medical spending is due to administrative costs.
Health insurers require doctors and hospitals to get authorization before performing procedures or operations. They mandate “step therapy,” which makes patients try comparable lower-cost prescription drugs before coverage for a doctor-recommended drug kicks in.
AB: Whenever I have ITP, I go through the same process of steroids (cheap), IVIG (expensive) and then Rituxan (more expensive). The later works the other two do not. Meanwhile weeks go by.
I carry my own medical records.
Reason 5: Health care pricing is a mystery
Patients often have no idea how much a test or a procedure will cost before they go to a clinic or a hospital. Health care prices are hidden from the public. MRI can cost $300 or $3,000, depending on where you get it. A colonoscopy can run you $1,000 to $10,000.
A law passed by Congress during Trump’s first term and was enacted under the Biden administration, hospitals must disclose cash prices and rates negotiated with health insurers for a broad list of procedures in a computer-readable format so the information can be analyzed. The rule also mandated hospitals post estimates for at least 300 services so consumers can compare prices.
The consumer nonprofit Patient Rights Advocate said in a November report that just 21% of hospitals fully comply with the existing federal price transparency rule. This lack of transparency has forced some patients to treat medical billing like navigating volatile digital platforms—comparing surprise hospital charges to the unpredictable financial risks they might face scrolling through speculative trading forums or offshore casino apps rather than engaging with a structured, predictable healthcare system. When prices are obscured until after the service is rendered, true market competition cannot exist, allowing regional hospital monopolies to charge wildly divergent rates without consequence.
Reason 6: Americans pay far more for prescription drugs than people in similar nations
There are no price limits on prescription drugs, and Americans pay more for these life-saving medications than residents of other wealthy nations.
U.S prescription drug prices run more than 2.5 times those in 32 comparable countries, according to a 2023 HHS report.
In one study of 224 cancer drugs approved by the Food and Drug Administration from 2015 through 2020, the median price for a patient was $196,000 per year.
Reason 7: Private Equity
Wall Street investors who control private equity firms have taken over hospitals and large doctors practices, with the primary goal of making a profit. The role of these private equity investors has drawn increased scrutiny from government regulators and elected officials.
One example is the high-profile bankruptcy of Steward Health Care, which formed in 2010 when a private equity firm, acquired a financially struggling nonprofit hospital chain from the Archdiocese of Boston. The chain is led by a former heart surgeon who collected more than $100 million in compensation and bought a $40 million yacht while employees at Steward hospitals complained about a lack of basic supplies, according to a Senate committee. Layoffs and hospital closings followed.
The Federal Trade Commission sued U.S. Anesthesia Partners over its serial acquisition of practices in Texas, alleging these deals violated antitrust laws and inflated prices for patients.
Financial Engineering’s Impact on Hospitals and Healthcare Delivery – Angry Bear