The reason the United States spends so much more on health care than the rest of the world is not because Americans tend to consume significantly more health care services. The problem is almost entire that we pay dramatically more for the exact same service. The data is overwhelmingly clear but the point is rarely mentioned in the media and almost never in Congress. So it is worth highlight whenever it is pointed out in a big forum like Bill Keller did in the New York Times:
The first problem with P4P [pay for performance] is that it does not address the biggest problem. Americans spend more than twice as much per capita as other developed countries on health care — a crippling 18 percent of the country’s economic output, and growing. Before studying the statistics, I assumed the root of the problem was doctors who, paid piecemeal for the services they provide, load up patients with marginal tests and treatments. In fact, America’s health care system is not much different from other developed countries in the volume of service. Our doctors prescribe more or less the same number of pills and X-rays, perform similar numbers of blood tests and surgeries, as doctors in the best European countries. While there are undoubtedly savings to be had by cutting unnecessary services (shortening hospital stays, for example), the main problem is that our system charges far more for each service — each office visit, each hip replacement, each day in a hospital bed, each dose of antibiotic. “The facile explanation is that doctors do too much,” said Peter Bach, a doctor at Memorial Sloan-Kettering who studies quality of cancer care. “But if you compare us to other countries on volume, we’re not leading in any category. The flip side is, we pay double for a lot of stuff.” (Actually, we lead in tonsillectomies and knee replacements, but his point is generally right.)
Doctors cite a number of reasons our medical treatments cost more — the high price of malpractice insurance being a favorite, and genuine, culprit. But the main reason everything costs less in other countries is that other countries tend to have one big payer — usually the government — with the clout to bargain down prices.
Almost all the cost control reform idea talked about during the Affordable Care Act where premised on this myth that we have a volume problem. Things like increasing co-pays, electronic records, higher deductibles and adopting pay for performance are designed to address a volume problem, but since we don’t have a volume problem they are likely to either do relatively little or even be counterproductive to improving health.
We could radically reduce our health care spending and basically eliminated our deficit if Congress simply acknowledge that hospitals, drug companies and doctors should not be allowed to charge prices way approve international norms. Since there is no political will to take on those lobbyists Congress instead focused on adopting more “politically palpable” solutions for a mostly nonexistent problem.
Photo by Frenkieb under Creative Commons License





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Finally, Bill Keller writes something useful.
This is a good start.
And thx,Jon Walker for the excellent post as usual.
(typo alert: last graph. ‘way ABOVE int’l norms’)
But if you want to reduce the payments to doctors or drug companies they will scream it is “socialist”. Or maybe they will say they need more doctors and then they will find a way to block it.
I don’t think fixing the prices that providers can charge to some sort of “international norms” would be nearly flexible enough to keep the big providers and insurers from gaming whatever price structure we set up in ways that would further harm quality of care and increase costs.
What we need to do is break up the cartels. When an insurer like Wellpointe has more beneficiaries than the whole Canadian health care system, yet fails to use that market power to bargain at least equally low drug prices out of Big Pharma, there could be many particular mechanisms at work, but they all boil down to a clear lack of free market competition. Just on pharmaceuticals alone, a Wellpoiinte that got Canada prices for its meds ought ot be able to kill the competition, except that the other insurers as well would have dunned down their pharmaceutical costs as well. Bt then we’ld all have Canada prices, wouldn’t we?
The problem is that the big providers and the big insurers, even when they are not overtly the very same corporation, function as cartels. They get away with charging their high prices because there is no free market to discipline them, just another branch of the same cartel colluding with them to cheat the rest of us.
Except that he gets right up to the edge of the obvious real problem — the cartel — and punts with some doofus non-solution to what the facts he himself cites exclude as the real problem.
Multiple polls have shown that most doctors at least support a public option, if not single-payer. There are few people who hate the way health care insurance is handled in the US more than a primary care provider. And from anecdotal knowledge, I’d say that many if not most wouldn’t mind a hit to their income if they and/or their staff didn’t have to spend so much time arguing with insurance companies.
As far as hospitals go, the biggest non-medical-staff departments are always the billing departments. Examples in other countries show that major savings in overhead can be attributed to having a single payer.
We’ve discussed this before and it needs greater publicity. Eleven thousand dollars for a night in a hospital bed? That’s a bit much, when in India it’s $236 and in Germany it’s $632. How about:
–pelvic CT scan? US $1481, France $141
–MRI? US $2,758 Spain $245
–Cataract surgery? US $7,806 India $885
You can see it all here.
PS: Which is why I have a popular Medical Tourism website: “Take a trip for your procedure and enjoy a recuperative vacation with the money you save.”
“The point is rarely mentioned in the media and almost never in Congress.”
I may be going out on a limb here, but is that because the folks who own the sick care industry also own the media and Congress (and Barack “I’m-going-to-negotiate-lower-Rx-prices-on-TV” Obama)?
Jon can weigh in himself, but my guess is,he thinks more government involvement like the public,option or single payer is what is needed. That would seem to be about the same as breaking up the cartel. The other way is a whole lot more regulation, which I guess is what you really have in mind. I am not sure what you want with ” free ” market.
Had to go in this morning to our hospital for an MRI and was stunned to see a sign saying “The emergency room is CLOSED.” Where will people go?
My back doctor prescribed some patches for pain and when I went to fill it the cost was $300.00 for 30 patches because my insurer would not pay anything. I declined. I’m not poor but I will not pay an outrageous amount like that. The problem is the patches actually work and I need them but will just have to live with the pain.
The single payer model is socialist. And, that’s a good thing. Providing for the common good is socialist, too. Nobody in the Media or Halls of Congress screams about the the DOD, HSA, CIA, DIA, ad infinitum, being there to provide for the common good, a socialist foundation principle. A safe and secure country being the goal, right? Maybe the MSM doesn’t equate the DOD, etc with the common good because they couldn’t keep from laughing their ass off when reporting on this truth. I think it’s the same with Healthcare, too. Who, in the news business, with a straight face, could tell an audience of viewers that Healthcare is about the common good and, therefore, socialist by nature. I’d like to see that ” bust on a pivot ” Brian Williams attempt such a fete. His ” the pod people got me ” look would shatter in seconds.
Bingo Don. I am the benefits administrator here and have been for over 20 years. I handle the group health and the worker’s comp. I see ALL the bills for 94 employees and it’s unfrieking-belivable some of these charges.
Recent hospital stay for health patiens 9 PLavix tablets $70 each
Cardiac stent (just the stent-not the implantation) – $12,000
Complete cardiac workup, EKG, nucleur stress test, sonagram and other stuff…..$6,000
Oh and a round of antibiotics for an injured workerm 5 tablets….$120
Some people maintain we have the best governmetn money can buy.
I dispute that. I think we could a lot better government for what we spend.
well, duh…
“Medical” tourism has been happening for decades precisely because of this… and it’s the reason why the fraud Obama’s ACA is such bullshit: all the stupid people, especially self-described liberals and progressives who voted for the man based on his “success” re healthcare have their heads stuck in the sand, or perhaps somewhere darker, and choose willful ignorance over taking a stand against the disaster that Obama’s presidency has been from before day one. That he can, without any apparent guilt or responsibility, campaign on and call his crap Affordable Health Care and get away with it on the votes of people who DO know better is damnable. Should have been called the “Already Unaffordable and Woefully Inadequate Health INSURANCE Act” AUWIHIA – the sound “consumers” (roll eyes) make when they get the bill… even if the already have insurance.
“…was stunned to see a sign saying “The emergency room is CLOSED.” Where will people go?”
Easy. In my well to do suburb, “emergency clinics” are springing up like weeds There are now at least three within walking distance of my house. They are not bound by the “must treat” requirements of hospitals and demand to see your insurance card or they place a $300 or more hold on your credit card.
Hospitals are then able to duck indigent care.
There is no doubt that many share ownership with nearby hospitals. And somtimes the on duty doctors also have links to those same hospitals.
This will blow up when all those new Medicaid cards get distributed and it quickly becomes apparent that their is no place to use them.
Canadians. Do you know the answer about the cost of dialysis in Canada??
My friend goes to dialysis 3 days a week for a total of 12 visits per month. His monthly bill is 40K per month. That’s right FORTY THOUSAND PER MONTH JUST FOR THE DIALYSIS, PAID BY MEDICARE. That works out to $3,333 USD per visit. Obviously, he could not receive this treatment without Medicare.
How much does this cost in Canada??? This is a rip off of every man, woman, and child in this country and there is no end to it. We must get rid of these controllers that are sucking us dry.
I have been trying to make this point for years. Healthcare has become and industry and no longer a profession. Profit takes precedence over product. We do not get health care anymore, we are purchasing a product like some cheesy article from Walmart.
Good point, maybe we could rent Norway’s government and throw these losers to the curb. The Lame Stream Media is trying to tell people that Obama has higher approval rates lately. Yeah, my eye.
In Central Florida the vast majority of Urgent Care Clinics are affiliated with Florida Hospital – Adventist World Health. A major rip-off religious hospital.
I knew the minute that they set up ObamaCare to go into effect after the first term that it was a contrived scam and it was. This program is a way for Wall street, who owns and operates the MHI, to suck up more wealth of the people. It’s only obvious.
People have no idea that they will lose property and homes if they can’t pay for health care but own a home or anything of value. And it hasn’t even gotten off the ground yet. I’m just waiting for the the collective sound of millions of minds being blown.
Yeah, well Pet Hospitals and Clinics issue instant credit cards to treat ol’ Bingo for his pet food poisoning ” crisis “. So, maybe that’s the model, eh? A radio station in Portland, KINK FM, has commercials for what you’re describing. The djs read the ads like it’s normal behavior to rush to the clinic when Jimmy’s got the sniffels. They use to be progressive and wouldn’t touch these kinky, price is no object, ripoff venues. But, now they’re a bunch of hacks who’ve joined the sellout circuit. Healthcare, presently, like Pet Care is not the point to all this. The point really is to make people ” believe ” they’re doing all that can when really they’re not doing anything but cost shifting and scamming the people with overwrought health concerns. My mother, one of 12 siblings, said time and rest cures about 100% of people’s health problems. Either you recovered and lived longer or you died, sooner or later. She was 96 when she passed. I suppose you can be sarcastic at that age. I think it’s still funny, though.
You make an excellent point. SCOTUS ruled that the ObamaCare mandate is a tax, so I guess nonpayment could put you (and thereby your wages, property, etc.) at the mercy of the IRS apparatchiks.
You can fool some of the people all of the time.
The didn’t ask me.
They never ask me.
Maybe that is the reason so many people had their home foreclosed on. No home, nothing to lose. /s
We’re flailing in the dark until we know what elements of cost (& profit) go in to make up the cost for every common procedure and hospital charge.
This is the sort of information that any good business person would know about a product or service being offered — but there is NO evidence that anyone has done a cost analysis in the medical field and released it to the public. It needs to be done.
I’ve talked to a hospital administrator who told me that building codes make hospital construction more, or even much more, expensive than regular apartment construction. There are other excessive costs that have been hinted at, like medical liability insurance and medical insurance overhead, but we don’t have the elements of those costs in numbers. We need them.
Healthcare has become an
industrySCAM.Fixed it for ya’. You DID ssee my $70 per pill Plavix at #11???
Well, I have a story.
MY doctor said I had to get an MRI for a probable pinched nerve. Set up appointment at the local hospital. I had insurance. Got there they told me MY SHARE was $770.00. I said WHAT??? They were nice and said we charge $1,500 and the insurance only pays $800. I said that seems high. THey said, We have to charge that much because a lot of people don’t pay. You should call one of the MRI clinics and see what they will do it for.”
So I drive by an MRI clinic on the way to work. Stopped in and asked them what was the deal. THey called my insurance company and they said, “No charge to you”. I asked why, they said, “Here everybody pays. If you don;t have the money or don;t have insurance we don’t do it. Simple as that.”
So the COST of an MRI is $800, not $1,500.
A story was in our local Austin news on January 17 that fits right in with this article. This one should have received national attention!
http://www.kxan.com/dpp/news/investigations/shock-1400-bill-for-sore-throat
I will say this, part of the problem is the insurance companies themselves. I suspect the reason we have jacked prices is because the insurance is based on a partial reimbursement model and we have a tiered system that allows it.
There is a huge discrepency when someone without insurance is billed thousands of dollars for the same procedure that someone with insurance pays merely hundreds.
Japan is interesting. They have lower costs for items like MRIs and they say one of the reasons that they are able to have the cost that low is because it’s considered commonplace which flies in the face of the people who say that costs on tests are high based on overutilisation rather than underutilisation.
Instead of worrying about whether we should teach children not to play football, a little focus on the huge medical expenses imposed by monopolies should become a bigger part of our efforts.
Americans slobber over drivel and miss the big points – twice the minimum wage as here in Australia and France. Virtually free healthcare everywhere except countries replete with huts and the U.S. Paid family leave. No interest student loans.
A little real action also might help. You can’t kill a financial vampire with a silver email.
Going to the link in my #6 comment above there are several widely divergent costs listed for the USA, but not for other countries, which have one cost. USA example:
Scanning and Imaging Fees
MRI ($US)
USA Commercial Low $503
USA Commercial Average $1,080
USA Commercial 95th Percentile $2,758
and in the end-notes:
Because a broad range of prices were available, the national 25th percentile (low), average, and 95th percentile are presented.
So the USA has a broad range of prices but other countries do not, at least for the purposes of the linked document.
That leads to another question, in addition to what are the elements of cost (or price), which is why the wide spread in prices? (Which really goes to cost(or price) elements as well.)
How much does health insurance add to an average medical procedure?
I recently had an eye exam, in and out in 30 minutes. When I went to pay I was quoted $140.00 but when I pulled out my wallet and produced the cash, they said “Oh, no insurance? In that case it’s $95.00″. So for at least this routine exam, insurance added about 1/3 to the cost.
I had a cyst removed from my arm recently. It took my dermatologist about half an hour at the most. (He did good work.) $750 doctor’s fee (= $1500 per hour). Add in $400 for something (assistant?), $110 lab work on cyst, $20 injection, etc. Total = $1462 (on insurance).
We have a health care price problem.
“It is a puzzlement.”
The King, The King and I
Granted I didn’ SEE your cyst. BUt, I recently had a cancerous lesion surgically removed. Took about 30 minutes. Most of the time was sewing me back up. My insurance doesn’t pay for these things. Total cost $680.00
You might have been robbed. HOw good looking was the assistant???
Please don’t forget the very high cost of large laboratory instrumentation. I know for a fact that high-tech machines are WAY overpriced when sold to US hospitals.Same machine sold overseas, much less expensive. We seem to be the suckers of the world.
Chinese man kept alive for 13 years by DIY dialysis
Chinese farmers set up DIY dialysis clinic in battle to reform crumbling healthcare system-
The plight of the ten people who clubbed together to buy second-hand dialysis machines to self-administer their treatment has highlighted the desperate need to improve health care provision for China’s poorest 200 million people.
It’s a cottage industry.
I strongly recommend this paper published in Health Affairs, 22, no.3 (2003):89-105: “It’s The Prices, Stupid: Why The United States Is So Different From Other Countries” by Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey and Varduhi Petrosyan.
They debunk a lot of right-wing claims such as blaming malpractice costs.
Oops! Here is the link to that paper (PDF).
Even if you are not poor, did you check to see if the pharmaceutical company has a patient assistance program? Even though you didn’t say which patches, I’m guessing they are the same ones I use and mine are paid for by the pharmaceutical company. And yes, they work great!
Since no one else mentioned this, if you see a doctor whose practice is located inside a hospital, you’re paying a separate fee to rent the exam room that is likely the same cost as the doctor’s fee!
My favorite part of an ER visit is trying to guess if the attending doctors are part of my network or not. Apparently, an in network hospital can have out of network folks staffing their hospitals.
Only a wholly corrupt government could ignore this truth. Especially given the size of the debt and their insane focus on reducing it during a period of high unemployment and anemic economic growth. Add the fact that 50 milion Americans do not have access to health care and the corruption is even more obvious. I don’t see much hope when a system is this corrupt.
Single payer would replace the insurer side of the cartel with a single, government run insurer. Yes, that single payer would have that much more market power, woudl have a momopsony, in fact. But the problem hasn’t been the lack of market power on the payer side. In my example, Wellpointe has more market power vis a vis US pharamceuticals than Canada’s single payer. Canada uses that power to get low prices. Wellpointe doesn’t.
Medicare doesn’t use its market power either. It’s actually worse than that. Between Medicare, Medicaid, military medicine, VA medicine and the Indian Helath Service, the US already has a market power giant that could dun all the medical prviders down to charging no more than their costs plus the bare minimum they need to stay in business. The US doesn’t do that. It tolerates big providers charging 2-3 times what a market would dun them down to.
Single payer wouldn’t add that much to the market power that the US govt already has. Most demand for medical services is generated by the over-65 crowd. The US already is the single payer for all of that demand. Add in the under-65s not already under the govt wing under one of the opther programs I mentioned, and you less than double the power the US already has. But power is not the problem. The lack of will to use it is the problem. Why would you think a US with a complete monopsony would use market power it won’t throw around with the near-monopsony it already has?
It’s not that I have any great love for, or faith in, markets; and certainly not markets in medicine. My preferred reform would be a National Health Service. It’s my idea, so I get to be Surgeon General.
But a US NHS seems to be my idea and not many other people’s, so we seem stuck with some or another market solution. Not my favored choice, but if we are going to have markets, we better set them up in ways that allow them to do their market magic. They have to be free. Monopolies and cartels have to be rooted out completely, or your market is obviously not free of gross restraint of trade. Of course such an unfree market will get you prices 2-3 times what they should be, and low quality care to boot from the misallocations that a distorted market produces.
We could have done something much more effective than the ACA at cutting costs and getting more people coverage simply by enforcing anti-trust laws already on the books rigorously within the health care and health care insurance industry. The fact that Wellpointe doesn’t dun Big Pharma down to Canada level pharmaceutical costs should trigger civil action and a criminal investigation of both Wellpointe and Big Pharma that would leave neither intact at the end. I’m not an expert in the field, but I believe that we would need to change some existing law, ERISA et al, because many aspects of this industry are specifically exempted from anti-trust. But we don’t do anti-trust anyway in this country anymore, even with industries that haven’t gotten their legislative employees to write them exemptions, so the first step is to redevelope the will to enforce the rules that are basic to free markets.
Either that, or just give up on free markets. Do markets right, or don’t do them. What we have now is crony capitalism, not capitalism. We don’t know what Adam Smith would have made of socialism. But he could hardly be more against it than he was against the crony capitalism he wrote an entire book to refute.
There are now computer programs into which a doctor can type a patient’s symptoms and the computer will tell the doctor what is the most lucrative diagnosis that is consistent with those symptoms.
When Obama squelched the public option and the ACA was passed, I was naive enough to think that people would get angry. I thought they would understand that there had been a real opportunity to reform our broken health care system, and that this opportunity had been squandered because private insurers wanted to suck a few more dollars out of us. Maybe pretending to make the best of things is the only way people can cope; maybe facing reality head-on and raising their voices above the polite whisper they’ve been taught to maintain at any cost is too much for them.