WHY HEALTH CARE COSTS SO MUCH IN THE USA

The Journal of the American Medical Association, (JAMA), early last year, with a scholarly researched Special Communication, (Health Care Spending in the United States and Other High Income Countries), and extensively referenced editorials, laid bare the reasons as to why America’s health care costs are double, (ten thousand dollars per person), as compared to those of ten other high income Western Countries. 

The principle finding was that America, which spends eighteen percent of its Gross Domestic Product, (three and a half trillion dollars), that is one of every six dollars, has worse health care indicators in longevity, immunizations, fetal and maternal mortality. In addition the US covered only ninety percent of the population as compared to the six selected European countries and Japan, Sweden, Australia and Canada, who covered all of its citizens. 

With Trump and the Republicans’ number one item on their agenda being to reverse Obamacare, it is no wonder that the issue topmost on voters minds in the 2018 midterm election was the availability and cost of healthcare. An independent unrelated study revealed that only nineteen percent of Americans were satisfied with the current health care system

THE REASONS FOR THE HIGH COSTS IN THE USA

One of the myths of the high health care expenditure in the US was that it was mainly due to over utilization by patients. This argument was not supported by the Special Communication. What appeared to be the major drivers of the doubling of health care costs were the far higher cost of   drugs, labor and other goods such as procedures, imaging, operations, medical equipment and devices and administrative costs.

Medical Administration.

The disproportionately high US administrative costs in this study, (8% of health care costs), were from two and half times to eight times greater than those of the other nations. It is uncertain how this figure was derived at in this study because other reports have shown between twenty and thirty percent of the American dollar goes to administrative expenditure. 

In another JAMA article, (Tseng et al), on the costs that just the just billing of services caused, it was found that this amounted to between 3% to 25% of the professional costs of the physician. In addition to this physician time spent outlining their activities for billing purposes, large sums of money are paid to the coders and the staff just to bill and collect the money. Nurses wander around with computers on wheels with complex programs to see that every penny is billed. CEOS of Health Care Systems and hospitals are paid obscene sums of money even in non profit entities. There is little doubt that with this multiplicity of organizations employing endless persons for administration are a big financial drag on the system.

Higher Costs of Pharma, Imaging, Medical Procedures and Excess Operations 

The drug bill in the USA in spite of a high generic penetration is double that of the ten nations . Daily reports of exorbitant prices for medicines punctuate the news. 

There were fifty percent more coronary revascularizations and knee operations as well as significantly more Cesarian deliveries, coronary angioplasties, and cataract surgeries in the US per 100,000 population. Coronary revascularization costs two to five more times more, computed tomography  twice to ten times more, while MRI’s were two to three times the going rate as compared to the ten nations. 

Physician salaries were twice as much in the US on average but the authors argued that bearing in mind the large student loans the doctors had, $300,000 t0 $400,000 and the pittances that they were paid in long residencies explained the differences in pay. They also did not include physician pay as one of the reasons for the higher American health care costs. Physicians in fact are, for the main, employees and are answerable to the number crunchers. Ironically they have far less power than their Canadian and British counterparts, for example, who, although working under national health systems, are independent contractors. 

WHAT THIS STUDY DIDN’T TAKE INTO ACCOUNT.

The authors argued that the percentage of primary care doctors in the other countries were similar to those in the US. The significance of this finding was that the low percentage of primary care doctors in America is often give as a reason for the high costs. 

The problem is the JAMA Special Communication failed to recognize that America includes specialties such as Internal Medicine, Pediatrics and Gynecology as Primary Care that are not regarded as such in other countries. In addition the Communication did not take note that the US shortage in generalist primary care physicians has been met by an ever growing number of mid level providers. There are ninety six thousand of the latter of which the majority are nurse practioners. There would be no need for the latter if the US had enough primary care physicians of the type in the ten comparative countries.

Studies have shown for the same symptom the costs of going to a sub specialist is exponentially higher than seeing a generalist with health outcomes that are not statistically different. What the JAMA Special Communication misses is that in other countries the Primary Care Doctors are mainly generalists and can see any patient whether it be a child, male or female. The American equivalent of these general practitioners are family physicians which make up less than twenty percent of the doctor population as compared to about fifty percent in Canada and seventy percent in the UK. Thus while a family physician can provide care for the whole family if they are not the primary care physician the family may need an internist, pediatrician and a gynecologist. This obviously will result in greater first contact use of sub specialists which will increase costs as the studies have shown. 

Then as every US physician will inform the specter of litigation hangs over practice and this will result in over utilization of tests. This apparently was not found to be a cause of the higher American costs. Also one of the US over utilizations reflected upon in the JAMA article, Cesarian Section has to be as a result of fear of litigation. 

Contrary to all reports that malpractice fear plays no part in costs Jay H. Ell has yet to find a physician who agrees with that belief and they practice accordingly. Malpractice lawyers increase their advertising every year. It was gone up 68% in the past eight years to nearly a billion dollars. There has to be a reason for their “investment”.

Then there are other costs that were not taken into account that at the end of the day will be added to the patient bill. One glaring example are the payments for advertising and “sponsorship” of events and activities by health care entities. The former amounts to nine billion dollars a year with the bulk being from Pharma. This type of direct advertising is unique to the USA. Then health care systems  sponsoring a road race or an arts and crafts fare is reflective of the broken system health care in the United States.

In order to decrease the number of high cost imaging, for example, empires of authorization bodies for the investigation have sprung up. This requires physician time to apply and high cost to the insurance companies to hire the certification companies.

There is no transparency in pricing and different hospitals charge different prices for the same service. Recently Vox, an online news outlet, published an article showing the variation in costs of differing Emergency Departments. In addition unbeknown to the patient some of the doctors he or she might be receiving treatment from could be out of network resulting in the patient being responsible for the whole bill. What hospitals charge different insurance companies and non insurance companies is a mystery and is as unfathomable as air ticket pricing. 

Finally it shoud be noted that while the introduction of Obamacare cut down the bankruptcy rate due to medical bills by half, unpaid health care costs still remain the commonest cause for sequestration of estates in the USA. 

WHY THE CONVENTIONAL MARKET FORCES DO NOT APPLY TO HEALTH  CARE

America with a unique mixture of liberal democracy, market economy and some social safety nets has achieved the highest standard of living in the history of mankind. Like in most countries income inequality has increased, over the past thirty years, putting it into the thirtieth percentile globally. However this does not tell the whole story as even the lowest income earners in the USA are comparatively well off with only eight tiny rich homogeneous European countries having more average income annually. 

This all begs the question why America’s poorest who have what would be considered luxuries in the world are more likely to miss an appointment due to cost than the ten comparitive countries. Twenty - three percent of patients versus nine percent in the comparative nations failed to go to the doctors' office because of finance. In addition its affluent middle class are at risk to be sequestrated for their portion of unpaid, usually, hospital bills.

The crisp answer in economic terms is that while the market economy, freedom of choice and transparency exists in most goods and services enterprises in the USA very little operates in the field of medicine. This is extremely relevant to healthcare as the latter is regarded as a business pure and simple whereas in the other ten countries surveyed it is mainly seen as an essential service pursuant to a right that society must provide. 

While anti trust, (monopoly), laws exist they are poorly applied. Put simply the reason for this discrepancy is that government finds it extremely difficult to regulate hospitals and health care systems, which are increasingly taking over the business of medicine. The latter whether they are for profit or not for profit institutions are not overseen like conventional businesses. 

WHERE WE ARE NOW

The situation in 2019 is that Health Care Systems have become increasingly integrated swallowing up hospitals, physicians, every other health care worker, pharmacies and even insurance instruments. As their sole objective, as is any business, is profit, anything goes.  

As matters stand the situation will only get worse. Corporations much like in the 1990’s are recognizing the danger to the economy. At the end of the twentieth century Lee Iacocca backed Bill Clinton because the car mogul claimed how could America compete with Japan if health care costs of $800 were added to every car while the Japanese costs were minimal. It is history that the Clinton plan failed due to powerful lobbying by special interests. In addition the Clinton era ushered in a new income generator, the digital revolution, and motor vehicles became a much smaller component of the overall economy. 

Three of the largest corporations have now combined to investigate the introduction of a health care model that will deliver a high standard of care and contain cost. Warren Buffet of Berkshire Hathaway, Jamie Diamond of J Morgan Stanley and Jeff Bezos of Amazon have set into motion a task force to come up with answers.

Of course there are initiatives in the political sphere. Many of the Democrats that were elected in the anti Trump wave in the midterms focussed on solutions to the health care problems. There is every hope that at the end of the day they will at least blunt the threats on Obamacare and address the many problems facing the area. The mantra has been a Universal single payor - Medicare For All. In the Senate Bernie Sanders has once again reintroduced the Bill and to indicate the shifting sands of public opinion there are sixteen Democratic cosponsors when last year he received none. Nancy Pelosi has set up a commission to investigate all the possibilities. As she has pointed out the Obamacare legislation is in fact more generous to citizens than Medicare where if additional insurance is not taken out the patient can be saddled with burdensome co pays.

There are massive lobbying efforts to thwart any progress. Obama to achieve his limited yet significant progress had to compromise with the insurance and drug companies. In fact the largest stumbling block to any progress is the health care lobby. In 20018 nearly $10 billion was payed to this group for their services. As the health care industry costs $3.5 trillion that represents an incredible return. 

Scandals abound. For example, with the introduction of payment for Medicare Prescription Drugs, CBS Sixty Minutes produced a segment as to how every individual, staffer and Congressman alike, for removing the bidding process from the procurement of the drugs received big benefits some in the form of lucrative job opportunities. Big Pharma just were given an expanded market with no price controls. 

One matter is for sure that the gravy train and the license to print money has to stop and that the whole process is due for an overhaul. Ironically, the best bet lies in the companies that are subsidizing their employees health care payments and there is little doubt that Messers, Buffet, Bezos and Diamond may well produce the blueprint that rectifies the inequities in the system. 

AT THE END OF THE DAY/

The myth that competition and market forces will reduce health care costs is a grave mistake and has been the Republican mantra for decades. Every cent overspent means less for education, infrastructure, social services and other necessities. What has worked for fast food and television prices is the wrong model for an essential service such as healthcare which is a right. Mercifully the electorate signaled their fury in the midterms. 

Hopefully between the Big Three and Congress some revolutionary changes may follow. It has to stick in the crawl that Americans are paying double for inferior healthcare that doesn't even cover all its citizens.