by Pat McNees (updated 5-15-19; orig. published 11-11-15)
Why are our medical bills so high? Why aren't drug prices regulated, as they are in other countries? Where is most of our health care budget spent? Where can we improve the system? Why do we overtreat the rich and undertreat the poor? Who is in charge, when a patient needs complex chronic care? Has our market-driven medical care system served us well or do we suffer from its perverse incentives? Ours is the most expensive health care system in the world but it is not delivering the most effective health care. What can we do? Here are links to key articles explaining the high cost of medical care in the United States -- and whether we're getting what we're paying for.
• The Health Insurance Hustle: Why Your Health Insurer Doesn’t Care About Your Big Bills Patients may think their insurers are fighting on their behalf for the best prices. But saving patients money is often not their top priority. Just ask Michael Frank. (Marshall Allen, ProPublica, 5-25-18)Hospital Financial Analysis: True Cost of Healthcare (David Belk MD, True Cost of Healthcare). What do the carefully researched numbers reveal? "The revenue for any health insurance company is tied directly to its expenses. In other words, the more a health insurance company spends each year, the more revenue they can earn (through premium increases the next year). Therefore, the last thing any health insurance company would want is for their overall expenses to drop. If their expenses were to drop, they couldn’t justify raising (or even maintaining) the amount they charge policy holders in premiums. That would be a disaster for them.
Since hospital utilization has been declining overall, it would be hard for private health insurance companies to continue to show an increase in their costs each year unless they deliberately overpaid hospitals, so that’s exactly what they do. Hospitals don’t mind being overpaid, so they’re not complaining. Since hospital bills always show enormous discounts from the insurance companies (due to persistent over-billing) most people wouldn’t suspect what the insurance companies are really doing. This way, both sides can work together to profit from our ignorance."
• Marshall Allen Unearths Waste in Health Care ( Rachel Zamzow, Open Notebook, 2-13-18) "In 2012, ProPublica reporter Marshall Allen came across a staggering statistic: The U.S. health care system wastes an estimated $765 billion each year....Last year, Allen decided to root out the sources of squandered funds within the system—an investigation that culminated in a series called Wasted Medicine. Allen discovered how hospitals discard unused medical supplies, how some drug expiration dates are meaningless, and how drug companies knowingly make oversized eyedrops—a story that prompted a group of U.S. senators to introduce legislation to reduce wasteful packaging of medicines.
• Wasted Medicine: Squandered Health Care Dollars (ProPublica Series). Includes A Hospital Charged $1,877 to Pierce a 5-Year-Old’s Ears. This Is Why Health Care Costs So Much. (Mars)hall Allen, ProPublica and NPR's Shots blog, 11-28-17). When a surgeon doing surgery on a child offers to throw in ear piercing as well, think twice about accepting.
--Paying Till It Hurts In her series on the cost of health care, Elisabeth Rosenthal interviews patients, physicians, economists, hospital and industry officials to examine the high price of health care. Buy her book: An American Sickness: How Healthcare Became Big Business and How You Can Take It Back . And read the series here--including the readers' comments (from both patients and doctors).
• Part 1: Colonoscopy: A case study in high costs The $2.7 Trillion Medical Bill: Colonoscopies Explain Why U.S. Leads the World in Health Expenditures (Elisabeth Rosenthal, Health, NY Times, 6-1-13) While the American medical system is famous for expensive drugs and heroic care at the end of life, a more significant factor in the nation’s annual health care bill may be the high price tag of ordinary services.
• Part 2. Pregnancy: Cash on delivery. American Way of Birth, Costliest in the World (Elisabeth Rosenthal, Health, NY Times, 6-30-13). Cash on delivery.
• Part 3. Joint replacement: A trip abroad. In Need of a New Hip, but Priced Out of the U.S. (Elisabeth Rosenthal, NY Times, 8-3-13)
• Part 4. Prescriptions. No room to negotiate. The Soaring Cost of a Simple Breath (Elisabeth Rosenthal, NY Times, 10-12-13)
• Part 5. E.R. Visit As Hospital Prices Soar, a Stitch Tops $500 (Elisabeth Rosenthal, NY Times, 12-2-13)
• Think the E.R. Is Expensive? Look at How Much It Costs to Get There (Elisabeth Rosenthal, NY Times, 12-5-13) Ambulances, once free, are now generally run as businesses that contribute to America’s escalating medical bills.
• Part 6. Dermatology. The high earners. Patients’ Costs Skyrocket; Specialists’ Incomes Soar (Elisabeth Rosenthal, NY Times, 1-18-13) Check out reader responses on three questions: In your experience, do doctors and patients discuss cost as part of care, and, if so, how does that affect the doctor-patient relationship? When do costs influence care? If you are a provider, how have the financial incentives of the current payment system in the United States affected your practice? If you are a provider, how have the financial incentives of the current payment system in the United States affected your practice?
• Part 7. Chronic illnesses. Even Small Medical Advances Can Mean Big Jumps in Bills (Elisabeth Rosenthal, NY Times, 4-5-13)
• Health Care’s Road to Ruin (Elisabeth Rosenthal, NY Times, 12-21-13) There are ways to lower costs. Is there the will?
• Why do drug companies charge so much? Because they can. (Marcia Angell, Washington Post, 9-25-15) "Unlike every other advanced country, the United States permits drug companies to charge patients whatever they choose. ...Drug companies say high prices are necessary to cover their research and development costs" but most drugs "are invented not by the companies that sell them now but by someone else. Then, like big fish swallowing little fish, larger companies either buy small firms outright or license promising drugs from them. Very often, the original discovery occurs in a university lab with public funding from the National Institutes of Health (NIH), then licensed to a start-up company partly owned by the university and then to a large company. There is very little innovation at the big drug firms. Instead, their major creative output is trivial variations of top-selling medications that are already on the market (called “me-too drugs”), to cash in with treatments just different enough to justify new patents." Pharmaceutical companies are among the most profitable and "they spend more on marketing and administration than on R&D." ... "Congress has blocked Medicare from negotiating the price of drugs or creating a formulary for patients. It’s time that we, too, move to stop price-gouging by the pharmaceutical industry — even when no one notices."
• CVS Health Is Sued Over 'Clawbacks' of Prescription Drug Co-Pays (Jef Feeley and Jared S Hopkins, Bloomberg, 8-9-17) CVS Health Corp. was sued by a California woman who accused the drugstore operator of charging customers co-payments for certain prescription drugs that exceed the cost of medicines. CVS, the largest U.S. pharmacy chain, overbilled consumers who used insurance to pay for some generic drugs and wrongfully hid the fact that the medicines’ cash price was cheaper. Woman says she paid $166 for medicine that actually cost $92. Chains worked with benefit managers on billings, suits say.
• When the Patient Is a Gold Mine: The Trouble With Rare-Disease Drugs (Benjamin Elgin, Doni Bloomfield, and Caroline Chen, BloombergBusinessWeek, 3-24-17) With a flagship treatment that helps fewer than 11,000 people, how is Alexion making so much money? In the U.S., an orphan drug is defined as one that treats a disease affecting fewer than 200,000 people in the country. Orphan drugs accounted for a disproportionate share, 41 percent, of all medications brought to market in 2014. These drugs have helped millions of people...but have also caused a seismic shift in treatment costs....A fraction of a teaspoon of Soliris, administered in a single 35-minute treatment, costs more than $18,000, and patients might need 26 treatments a year for the rest of their lives. With this single drug accounting for almost all its revenue, Alexion has created enormous wealth out of an estimated 11,000 customers." This is an ugly story about drug company marketing practices".... History: "To address neglected research areas, Congress in 1983 passed the Orphan Drug Act, which gave drugmakers federal grants, tax incentives, and seven years of marketing exclusivity for new rare-disease treatments (vs. three to five years of exclusivity for a more common new drug). In the ensuing 34 years, more than 600 orphan drugs have been approved in the U.S., compared with 10 in the decade before the law was passed. But government-protected monopolies, combined with desperate patients, led to today’s prices." Do your homework. Read this article.
• Reducing Medical Costs Where to start.
Collusion between Hollywood script writers and pharmaceutical companies isn’t new. Nor is the call to regulate it. (Mary Chris Jaklevic, HealthNewsReview.org, 6-1-17) 'Plenty has been written about a recent “disease awareness” plotline in ABC’s General Hospital that indirectly promoted ruxolitinib, the only prescription drug approved to treat a rare blood cancer called polycythemia vera (PV). The drug’s manufacturer, Incyte, said in a news release that it “teamed up” with the show and actress Finola Hughes, whose character was diagnosed with PV, “to raise awareness and inspire patients and caregivers impacted by these under-recognized blood cancers.”
non-branded “disease awareness” campaigns aren’t regulated like traditional direct-to-consumer ads, which are subject to explicit requirements including balanced portrayals of a drug’s efficacy and risks. Coverage highlighted an opinion piece in the Journal of the American Medical Association, in which oncologists Vinay Prasad and Sham Mailankody said disease awareness efforts “can lead to unintended consequences, including wasteful diagnostic testing, overdiagnosis, and inappropriate therapy.” They said “attempts may be necessary to regulate disease awareness promotions” including “collaboration and input from the FDA regarding the content of advertisements or disease awareness campaigns.”
• What Broke My Father's Heart by Katy Butler (NY Times Magazine, 6-18-10). How putting in a pacemaker wrecked a family's life. Katy Butler's father drifted into what nurses call “the dwindles”: not sick enough to qualify for hospice care, but sick enough to never get better. She writes, of her parents: "I watched them lose control of their lives to a set of perverse financial incentives — for cardiologists, hospitals and especially the manufacturers of advanced medical devices — skewed to promote maximum treatment. At a point hard to precisely define, they stopped being beneficiaries of the war on sudden death and became its victims." Do read the whole article. Here's another excerpt: "Had we been at the Mayo Clinic — where doctors are salaried, medical records are electronically organized and care is coordinated by a single doctor — things might have turned out differently. But Middletown is part of the fee-for-service medical economy. Doctors peddle their wares on a piecework basis; communication among them is haphazard; thinking is often short term; nobody makes money when medical interventions are declined; and nobody is in charge except the marketplace." You may also want to read Knocking on Heaven's Door: The Path to a Better Way of Death
• Pharmaceutical Product Hopping: A Proposed Framework For Antitrust Analysis (Michael Carrier and Steve Shadowen, Health Affairs blog, 6-1-17) One "reason for high prices has flown under the radar. When drug companies reformulate their product, switching from one version of a drug to another, the price doesn’t dramatically increase. Instead, it stays at a high level for longer than it otherwise would have without the switch. Although more difficult to discern than a price spike, this practice, when undertaken to prevent generic market entry, can result in the unjustified continuation of monopoly pricing, burdening patients, the government, and the health care system as a whole."
• The Healthcare Industry and the USSR (YouTube video, Jeanne Pinder's wonderful talk, Ignite Health Foo 2013). See also Taking the mystery out of health care prices and the wonderful stories about Clear Health Prices.
• Bitter Pill: Why Medical Bills Are Killing Us (Steven Brill, Time Magazine, Health & Family, 2-10-13). In the longest article Time has published, Brill tries to answer the question: “Why exactly are the bills so high?” Long but worth reading, on the outrageously excessive prices hospitals, pharmaceutical companies, doctors, and equipment manufacturers charge and how Medicare and other insurers deal with it, or not. See Steven Brill’s 26,000-word health-care story, in one sentence (Sarah Kliff, Wonkblog, Washington Post, 2-23-12). (The sentence: "The American health-care system does not use rate-setting." (In other countries, which set rates for what both private and public plans can charge for various procedures, health-care costs have not risen so much.) And don't ignore the Comments.
• Equitable Access to Care — How the United States Ranks Internationally (Karen Davis and Jeromie Ballreich, New England Journal of Medicine, 10-23-14) "Notwithstanding Americans' impression that other countries ration care, for lower-income adults, obtaining timely primary care is a bigger problem in the United States than in other industrialized countries... even Americans with above-average income...are more likely than adults with above-average income elsewhere to report that during the past year, costs kept them from visiting the doctor for medical problems, from filling prescriptions or taking all recommended doses, or from getting recommended tests, treatment, or follow-up."
• Patenting the PKU Test — Federally Funded Research and Intellectual Property (Diane B. Paul, New England Journal of Medicine, 8-29-13). "Norms governing what should count as a freely available public good have fundamentally changed since 1965. The shift began in the 1970s, when an 'economic competitiveness agenda,' prompted by the oil crisis and concern about Japanese competition, began displacing narratives of science's role in fighting communism and defeating disease." " The Bayh–Dole Act was followed by other bills promoting the commercialization of publicly funded research, a phenomenon soon exported worldwide. Aggressive commercialization of university research has since become the norm, with universities embracing patenting as an efficient way to transform knowledge into products, generate new income sources, recoup product-development costs, and motivate scientists." " The key principles debated in the Guthrie case underlie the conflicts that remain to this day between political and economic imperatives to commercialize research and the social and moral imperatives to promote public health."
• Money-Driven Medicine: The Real Reason Health Care Costs So Much by Maggie Mahar. Among other points made: Today's market-driven medical system emerged over the past century thanks to trends that gradually stripped power from doctors and gave it to corporations, turning patients into profit centers.
• 5 Things I Didn't Know About Health Care (Until I Got Sick) (C. Coville, Cracked, 3-11-14) Three of them: The medical system is outdated, it doesn't allow for mental limits in the sick, if it doesn't understand your condition it will think you are crazy. "Sick people with potentially curable illnesses are shunted around between separate specialists who don't pay attention to anything except the body part they've been trained to focus on, a problem known as care fragmentation... Because of care fragmentation, sick people often have to coordinate their own care if they want to get treated correctly. But that's not as easy as it sounds, because ..."
• Lies, Damned Lies, and Medical Science (David H. Freeman, The Atlantic, 10-4-10). Much of what medical researchers conclude in their studies is misleading, exaggerated, or flat-out wrong. So why are doctors—to a striking extent—still drawing upon misinformation in their everyday practice? Dr. John Ioannidis has spent his career challenging his peers by exposing their bad science.
• Home Alone: Family Caregivers Providing Complex Chronic Care (Susan C. Reinhard, Carole Levine, and Sarah Samis, AARP's Public Policy Institute, Oct. 2012) "In a fragmented health care system, it is often difficult to pinpoint individual or institutional responsibility for action. As a result, people with chronic conditions and their family caregivers too often move from the care of one professional to another or from one care setting to another without a clear sense of who is in charge. All too often, no one is in charge. Expecting family caregivers to perform the medical/nursing tasks described in this report without substantial professional involvement is unrealistic and unacceptable."
• The Diseases We Spend Our Health Dollars On (Drew Altman, WSJ, 3-3-15) An excellent chart breaking down our health spending dollar by disease. "The BEA found that spending for common illnesses such as a cold or strep throat grew faster than anything else over the 10-year period. Then came spending to treat endocrine disorders such as high cholesterol or diabetes. The bureau also found that the cost of treatment–-a combination of price and the complexity of services and technology used in treatment–-was the main culprit behind spending increases for diseases, not the number of cases treated."
• The Thousand-Dollar Pap Smear (Cheryl Bettigole, New England Journal of Medicine, 10-17-13). "The first time a patient called me to say that she'd been billed more than $600 for her Pap smear, I was sure it was a mistake. The second time, I was less sure, and these days I am no longer surprised to find laboratory charges of $1,000 or more for a test that until recently cost only $20 or $30. ... we physicians and our staff are responsible for ordering these unnecessary tests and hence responsible for the huge bills our patients are receiving. Yet we are not doing this alone. Laboratories have learned that one easy way to increase revenue is to make it easy for clinicians to order more tests" Do read this one!
• Treating vs. Healing: Understanding What Wellness Means to Patients (Johnny Hourmozoi,, Pacific Standard, 3-31-15) For those accustomed to Western medicine, it may seem crazy to refuse doctor-prescribed medicine. But to truly be a healer, doctors must understand what makes a patient feel well. "Evidence is the currency of contemporary Western medicine... In Iran, the emphasis is placed on healing, a concept intimately tied to notions of spirit and comfort—not morbidity and mortality."
• How We Do Harm: A Doctor Breaks Ranks About Being Sick in America, a book by Otis Webb Brawley and Paul Goldberg, exposes the underbelly of healthcare today—the overtreatment of the rich, the undertreatment of the poor, the financial conflicts of interest that determine the care that physicians’ provide, insurance companies that don’t demand the best (or even the least expensive) care, and pharmaceutical companies concerned with selling drugs, regardless of whether they improve health or do harm.
• Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer by Shannon Brownlee. Our health care is staggeringly expensive, yet one in six Americans has no health insurance. We have some of the most skilled physicians in the world, yet one hundred thousand patients die each year from medical errors. Brownlee dissects what she calls “the medical-industrial complex” and lays bare the backward economic incentives embedded in our system.
• Medicine’s Top Earners Are Not the M.D.s (Elisabeth Rosenthal, NY Times, 5-17-13) "The biggest bucks are currently earned not through the delivery of care, but from overseeing the business of medicine. The base pay of insurance executives, hospital executives and even hospital administrators often far outstrips doctors’ salaries."
• U.S. Health Care Lags Worldwide for Those Over 65 (Paula Span, Caring and Coping, NY Times, 12-12-14) A Commonwealth Fund report card comparing health care in industrialized countries since 1998 shows "mortifying lapses and problems" in the U.S., "despite spending more on health care than any other country in the world." The U.S. Medicare system provides "excellent coverage" overall, provides good coverage for seniors, but what Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland and the United Kingdom "share (aside from doing a better job for their elders than the United States, at lower cost) is that their systems cover all ages. Their elders are less likely to arrive at 65 trying to catch up after years without adequate medical care....Before they became Medicare-eligible, American seniors may have forgone preventive treatments or let conditions worsen because they couldn’t afford care."
• How much are U.S. doctors worth? Depends who you ask (Harris Meyer, Modern Healthcare 6-24-14). High U.S. physician pay is only a minor component of sky-high U.S. healthcare costs (and U.S. doctors face a higher cost of medical education and medical liability premiums than doctors elsewhere). "And other professionals in healthcare, notably hospital, health plan and pharmaceutical executives, generally make even more money."
• Why Are American Health Care Costs So High? (John Green on YouTube, 8-20-13) A little hyper, but worth a listen.
• Hospitals Fail To Protect Nursing Staff From Becoming Patients (Daniel Zwerdling, All Things Considered, NPR, 2-4-15) Most hospitals have not taken aggressive action to protect the nursing staff from back injuries from lifting patients. Only slowly, reluctantly are hospitals adopting patient-lifting equipment. (Part 1 of a series on injured nurses.) Part 2: Even 'Proper' Technique Exposes Nurses' Spines To Dangerous Forces (2-11-15). And Part 3: Hospital To Nurses: Your Injuries Are Not Our Problem
• Cost of medical school: USA vs France (Kevin Pho, KevinMD.com, 5-8-14) Visuals show dramatic differences. "If you want to pay me like a French doctor, also give me the French cost of medical school and the French medical malpractice system."
• The Malpractice Mess (Atul Gawande, Annals of Medicine, New Yorker, 11-14-05) Who pays the price when patients sue doctors? "General surgeons pay anywhere from thirty thousand to two hundred thousand dollars a year in malpractice-insurance premiums, depending on the litigation climate of the state they work in; neurosurgeons and obstetricians pay upward of fifty per cent more." Paying into an insurance fund for those actually harmed by doctors might mean fewer mammoth, random windfalls but under the current system in America most of those who are harmed are not compensated (except the lawyers).
• When Health Costs Harm Your Credit (Elisabeth Rosenthal, NY Times, 3-8-14)
• Benefits Questioned in Tax Breaks for Nonprofit Hospitals (Elisabeth Rosenthal, NY Times, 12-17-13) Cities still reeling from the recession are challenging the billions of dollars in tax breaks granted to the nation’s nonprofit hospitals.
• When Doctors Sell Out, Hospitals Cash In (Community Oncology Alliance, 7-8-13) Everything was the same about Mike Rosenberg’s routine visit to Atlanta Cancer Care in February – everything, that is, but the bill. Rosenberg went to the same office and saw the same staff to get the same blood work and the same medication he gets every month. But the cost difference was remarkable: Rosenberg’s out-of-pocket charge increased from $20 to $212. What his insurer had to pay exploded from $2,735 to $5,661.
• New Analysis Shows Many 340B Hospitals Provide Minimal Charity Care; Small Percentage of 340B Hospitals Provide More (Community Oncology Alliance, 3-25-14)
• Health Plans Seek Leverage When Physicians Submit Extremely High Bills (Joseph Burns, Managed Care, Aug 2011). One doctor demands $39,000 for a child’s surgery; another bills $56,890 for a bedside consultation. Aetna sued several New Jersey physicians over medical bills for out-of-network care, bills Aetna said were unconscionable.
• How Doctors Are Paid Now, And Why It Has to Change (John Carroll, Managed Care, Dec. 2007). Everyone knows about the perverse incentive of fee-for-service medicine, but that hasn’t had much effect on its use. warped the way medicine is practiced, devaluing vital services such as doctor-patient discussions while pumping up rewards for expensive procedures and bigger volumes.
• Patents, Profits, and the American People — The Bayh–Dole Act of 1980 (Howard Markel, N Engl J Med 2013; 369:794-796, August 29, 2013, DOI: 10.1056/NEJMp1306553). It's time for Congress to recalibrate Bayh–Dole. "When the Bayh–Dole Act was written, its aim was primarily to stimulate economic growth by more efficiently mining the untapped scientific riches of hospitals, laboratories, and universities. Much has changed since then.... Profits and patents can be powerful incentives for scientists, businesspeople, and universities, but new and ongoing risks — including high prices that limit access to lifesaving technologies, reduced sharing of scientific data, marked shifts of focus from basic to applied research, and conflicts of interests for doctors and academic medical centers — should be mitigated or averted through revisions of the law. All Americans should be able to share in the bounties of federally funded biomedical research."
• Data uncover nation’s top Medicare billers ( Peter Whoriskey, Dan Keating and Lena H. Sun, Washington Post, 4-9-14). "Jonathan S. Skinner, a Dartmouth economist..."there are people who are operating in the gray area of health care who are causing Medicare to spend enormous amounts on health care that may be harmful to their patients.'”'
• The top 10 Medicare billers explain why they charged $121M in one year (Jason Millan, Wonkblog, 4-9-14) "Some doctors said they were just passing through the payment to drug companies. But the Medicare payment system also incentivizes physicians to choose more expensive drugs, since they’re reimbursed for the average price of the drug plus 6 percent." See comments section for links to articles about pending big changes in Medicare payments to providers.
• Manufactured Medicare outrage (Charles Lane, Opinion, Wash Post, 3-18-15) "Last fall, the Department of Health and Human Services released a comprehensive analysis showing that MA costs grew faster than they would have under fee-for-service between 2004 and 2013 — and that only upcoding, not patient demographics or other neutral factors, could explain this.
Fading Out: Aging and Beyond RSS feed
by Pat McNees (updated 5-15-19; orig. published 11-11-15)