Why American Health Care is So Expensive

By Wayne Caswell, Founding Editor, Modern Health Talk

This video by Vox and Ezra Klein explains why American health care is so expensive, and it does so simply and effectively. It mentions each of the top issues I write about at Modern Health Talk, including the political influence of a medical cartel that profits from treating illness and injury with a fee-for-service business model.

The video gives me an opportunity to highlight the many issues contributing to our high costs, with a short description of each, along with reference articles from my website.

  1. There’s No Easy Fix
  2. Market Forces Don’t Work in Health Care
  3. A Medical Cartel Influences Public Policy
  4. Direct to Consumer Advertising Influences Public Attitudes
  5. Incentives are Misaligned with Goals
  6. Health is Not a Policy Objective but a Political Weapon
  7. Inequality affects Health Wealth, Opportunity & Influence
  8. Single-Payer is Not Enough
  9. Public Health Programs are Effective
  10. Medical Schools teach Diagnosis & Treatment, not Prevention
  11. Disruptive Business Models Break From Fee-for-Service
  12. Tech Solutions Define the Future of Healthcare
  13. Aging Populations Stress Support Systems
  14. Important Documentaries

1. There’s No Easy Fix

It’s interesting to compare what Donald Trump said before the 2016 election, and after he became President:

  • October 2016: “You’re going to have such great health care at a tiny fraction of the cost. And it’s going to be so easy.”
  • February 2017: “Nobody knew that health care could be so complicated.
  • March 2017: “I never said repeal and replace Obamacare. You’ve all heard my speeches. I never said repeal it and replace it within 64 days.”
  • May 2017: “This is a repeal and replace of Obamacare, make no mistake”
  • July 2017: “We’ll just let Obamacare fail. We’re not going to own it. I’m not going to own it.” (Others call his actions intentional Sabotage, and they’re preparing a lawsuit.)

For over seven years the Republican Congress tried and failed to repeal Obama’s Affordable Care and Patient Protection Act (ACA) and replace it with something better. Each attempt was along party lines with bills crafted in secret and without public hearings, debate or testimony from stakeholders with different perspectives.

Just shifting the burden of who pays for care is not nearly enough and makes no fix, so we must wonder if they had other motives. A true fix would impose also price controls, improve care delivery, and reduce the need for care in the first place through wellness, but that was never part of Republican plans. As we see from the issues below, fixing health care is not easy to do. It must be approached holistically and systemically and address divisive politics.

2. Market Forces Don’t Work in Health Care

Don’t the laws of Supply & Demand encourage innovation and create vibrant competition? Well, NO — not in healthcare. That’s because there’s no such thing as Free Market Capitalism without rules governing Property, Monopoly, Contracts, and Bankruptcy. And who makes those rules? Unfortunately, it has become those wealthy enough to buy influence and elections, which is why I submitted an earlier article about Saving Capitalism from Corruption.

Patients don’t behave like consumers in other industries. When they’re afraid, in severe pain, or unconscious, they are in no position to comparison-shop or negotiate prices. And when they face endless suffering or death, they will pay anything for relief, so it’s easy to take advantage of them. That’s why governments in other advanced nations negotiate for them and impose strict restrictions on the cost of drugs and services. We don’t do that but should.

3. A Medical Cartel Influences Public Policy

America is Snake BitAlthough few people realize it, American health care functions like a monopoly, with a medical cartel of wealthy hospitals, insurers, drug companies, testing companies, equipment providers, and the American Medical Association wielding immense political power.

According to Seven Brill and his famous Bitter Pill report in TIME, “The health-care-industrial complex spends more than three times what the military-industrial complex spends in Washington.” That’s to protect their perverse $3.5 trillion/year revenue stream from treating illness and injury, with no financial incentive to prevent it. Clearly, Big Money in Politics Corrupts, and some of the actions of this cartel make our healthcare system seem downright evil. The profit motive tends to do that to people, especially CEOs of public corporations who are legally obligated to serve the investment interests of shareholders rather than the public.

Medicare is often criticized as being a bloated entitlement program and a drain on the economy, but let’s contrast health insurance costs in the public and private sector. Brill describes Medicare as probably the most efficient part of our healthcare system. The agency’s administration and management cost of processing over one billion claims a year is less than $3.80 and in some cases as low as $0.84. That’s far lower than Aetna’s cost of about $30 to process less then 230 million claims, and Aetna is said to be one of the most efficient private insurers.

Even Medicare, however, could be made more efficient. It’s currently not allowed to negotiate prices with hospitals and doctors, and thanks to the political influence of pharmaceutical lobbyists, Medicare can’t negotiate lower drug prices either. As a result, many patients buy their drugs from Canada or overseas. They’re forced to buy prescription drugs illegally because the costs is so much less than the same drug developed & tested here, manufactured here, and then shipped abroad, before being shipped back here again.

4. Direct to Consumer Advertising Influences Public Attitudes

Drug companies spend more than $5 billion/year advertising directly to consumers (DTC). You know the ads: they make medicine look fun and sexy but list a ton of side effects, including possible death. They usually end with a call-to-action such as, “ask your doctor,” knowing that patients will ask and doctors will comply.

The U.S. is one of only two nations that permit direct-to-consumer advertising by the pharmaceutical industry. It started in 1997 when the FDA first allowed such marketing. Before then, policymakers thought only doctors had the medical expertise needed to make informed decisions about prescription drugs. But wealthy drug companies argued that patients have a right to know all of their options and that TV advertising would benefit them. Regulators eventually bowed to industry pressure, and now the TV ads also promote medical devices and scooters.

DTC advertising drove increased drug use and higher prices. Beyond that, some worry that “The limited resources of the FDA’s Division of Drug Marketing and Advertising are a major barrier to successful regulation of the pharmaceutical industry’s multi-billion dollar marketing budget.” Recent efforts under the Trump administration to defund federal agencies and deregulate industries will likely criple the FDA, impact patient safety, and further increase drug prices.

5. Incentives are Misaligned with Goals

MotivationFixing our broken healthcare system requires getting the incentives right, aligned to the right goals and objectives. But what exactly are our goals as a nation? And what’s the objective of healthcare policy? Is it to shift the burden of who pays for care, or is it to extend lifespan and dramatically lower costs through wellness and innovation?

I write often about the potential of saving over $1.5 trillion/year in healthcare costs, but the total economic impact of good health is even greater than that. And the savings I write about can occur every year, not spread across ten.

While some companies see employee salaries as expenses to be cut, others view employees as strategic assets, and they invest in their health, skills and productivity. Shouldn’t policymakers look at our population our greatest national asset too? Think of the economic benefits of policies and incentives that are aligned with the goal of improving the health, skills and productivity of our entire workforce. Imagine the impact on absenteeism, profits, wages, GDP, and global competitiveness, not to mention happiness and trust in government.

That world view can extend beyond healthcare policy and prompt similar changes focused on poverty, the food supply, the environment and more. It all comes down to getting the incentives right — matched to the right objectives.

In Get the Health Incentives Right, I explore the different incentives of (1) capitalism and private sector organizations that measure success in business terms such as profit, ROI, and payback period, contrasted with (2) the public sector, which measures success quite differently and over much longer time periods. To combine the best attributes of public and private organizations, we might want to craft a hybrid public/private healthcare model that exploits both.

In “Is Health Care a Right or a Privilege,” I conclude that to answer requires us to dig deep into our souls and understand the plight of others before deciding on goals. I pondered what it must be like for those living a life of privilege.

I like to think I’m a compassionate person, but I found that’s not always easy. The embedded video had such an impact on me that I hope it affects you too. It certainly relates to our political debates over fixing healthcare.

6. Health is Not a Policy Objective but a Political Weapon

Democracy thrives when elections and policy debates are fair and transparent, but it seems that ‘Winning at all Cost, without ethics” is the new normal in politics. I can’t help but question the goals and motivation of our current President and Republican Congress, because they seem less interested in improving health care and more driven by a need to win and satisfy wealthy donors.

The best example of that was when they passed trillion-dollar tax cuts for the wealthy while refusing to fund the Children’s Health Insurance Program (CHIP) and repealing the ACA insurance mandate, knowing that it would result in some 13 million people losing all healthcare.

In Politics and The Modern Killing Fields, I describe policies that would intentionally deny certain populations access to health care as a form of voter suppression, allowing them to die early as a result. The article is very critical of such tactics and describes them as a form of political genocide. (Yes, I know it’s a harsh term, but…)

7. Inequality affects Health, Wealth, Opportunity & Influence

People often talk about the widening income & wealth gap, but for people below the poverty line, there’s also an Opportunity gap that keeps them in their place, and that resulting political inequality threatens our democracy. Because people have no idea what inequality really looks like and how bad it has become, this article starts with an excellent video infographic and summarizes key points from embedded videos.

It’s important to understand what’s behind the current and trending wealth & income inequality. One benefit of our capitalist form of government is to encourage risk-taking, investment and innovation among those with capital to do so, but that same system also causes the capitalists to seek profit by almost any means. That includes either replacing workers or augmenting their performance with skills training, automation, AI, robots, and outsourcing. Over time, those capital investments, and the accelerating pace of tech innovation, has helped to dramatically increase worker productivity; but studies show that almost all of the benefits have gone to the owners, not the hired workers. Now as Republicans with the trillion-dollar tax cuts directed toward wealthy people and corporations, the rest of us worry about automation (income from capital) replacing jobs (income from labor).

8. Single-Payer is Not Enough

Democrats like Bernie Sanders and Robert Reich argue that basic healthcare should be a right and guaranteed for all Americans, and they’ve proposed a Medicare-for-All system. I certainly agree with that but can’t completely endorse their call for a Single-Payer Universal Health Care system. That’s because I think Medicare-for-All is Not Enough.

Although Medicare is far more efficient than any private health insurance, it’s just another way to pay for care. And because it doesn’t reduce the need for it in the first place, there would not be a trillion dollar cost reduction. For that we need to focus on health, wellness and prevention.

To reach my $1.5 trillion/year savings potential, however, politicians must also provide policies, funding and incentives to improve care delivery, along with incentives to inspire innovative new technologies and disruptive new business models. Today’s fee-for-service business models simply encourage more — more testing, more doing, and more prescribing.

9. Public Health Programs are Effective

Public Health, which started with mass vaccinations to control and prevent infectious diseases, has proven to be one of the most cost-effective investments in the health of our nation. It has since grown to include food safety, smoking cessation, sewage & water treatment, and more.

Going forward, however, federal, state, and local public health agencies face major funding pressures and an uncertain future. So to better understand that and envision alternative futures, the Robert Wood Johnson Foundation and the Kresge Foundation funded Public Health 2030: A Scenario Exploration. It’s a futurist investigation of possible scenarios to help shape decision-making and strategic public investments.

In A Disease-Creation Economy, Dr. Mark Hyman presents ways to improve our Food Policy to encourage the production of fruits and vegetables. He notes that 80% of government subsidies presently go to soy and corn that are used to create much of the junk food we consume. He also recommends changes to Public Airwaves, Public Schools, and Medical Education, all aimed at improving public health and wellness. Hyman is a practicing physician and an internationally recognized authority in the field of Functional Medicine — a revolutionary business model that emphasizes health and wellness.

10. Medical Schools teach Diagnosis & Treatment, not Prevention

Even Benjamin Franklin knew two centuries ago that, “An Ounce of Prevention is worth A Pound of Cure.” You’d think Washington politicians would know that too, and more, but they’re influenced by special interest lobbyists like The American Medical Association. The AMA also controls state boards of licensing and much of the curriculum. As a result, new doctors spend precious little time learning about wellness and the pillars of health (nutrition, exercise, and sleep). Obviously, that’s because prevention is less profitable than the fee-for-service business model — MUCH LESS.

Consider this (from Dr. Hyman’s article referenced above): “All of the major drivers of disease and health care costs are lifestyle — and therefore preventable — factors. If these factors were addressed, we could eliminate 90% of heart disease and diabetes, yet only 1-in-4 medical schools have a nutrition course, and only 28% of schools meet the minimum 25 hours of nutrition education recommended by the Institute of Medicine. Most of those nutrition hours are about nutritional deficiencies disease like scurvy and rickets.

If we were successful in reducing heart disease by half or reducing diabetes (along with its complications) by 80%, hospitals would go bankrupt, pharma would see their profits plummet, and many physicians would be looking for another line of work.”

11. Disruptive Business Models Break from Fee-for-Service

New payment models aim to provide superior primary care from excellent, energized and satisfied practitioners at a reasonable cost. The vision is to not only do disease management, but prevention of illness and preservation of well-being. Examples include medical tourism, telehealth, private memberships, and concierge services. These approaches are driven by doctors who are pressured to see more patients and frustrated by having little time to listen, think, or do other critical activities. But patients are frustrated too.

Dr. Stephen Schimpff  thinks insurers may start buying memberships or retainers for their clients as cheaper alternatives for better care. They’re already starting to pay for medical tourism procedures and telehealth video calls when it makes good business sense to do so.

In The $49 Remote Doctor Visit, I introduce telehealth as an alternative to searching for a doctor, calling for an appointment, taking time off work, and then driving to the doctor’s office and waiting. Just connect online with video from your phone, tablet or computer. Rural patients especially like having remote access outside of office hours and find it’s often as good as an office visit but much more convenient.

Telemedicine, a related term, describes the added ability of doctors to remotely access data and images from medical devices. This lets them  check the vitals of chronically-ill patients in real time and with context to understand what they may be doing to affect measurements. Remote docs can even adjust medicines or treatments without requiring the patient to come in.

Telehealth and telemedicine markets are gaining steam as they overcome regulatory roadblocks such as requiring in-person visits before allowing remote ones. Such roadblocks were put in place to guard against a remote service competing with local physician practices. Modern Health Talk strongly endorses relaxed regulations that allow telehealth to reach across town and across state lines or even international borders.

Medical Tourism is another growing trend. Over 8 million people worldwide, and 1.3 million Americans, crossed international borders for better and cheaper care in 2014. That trend will only increase with high-deductible insurance policies that encourage consumers to seek the best value in health care and make better lifestyle decisions. They’ll find it cheaper and usually better to visit a specialist in the Cayman Islands, which is known for excellent healthcare facilities, inviting coral-sand beaches, laid-back island culture, and tax-free status. Other destinations for great care include Argentina, Brunei, Cuba, Colombia, Costa Rica, Honk Kong, Hungary, India, Jordan, Lithuania, Malaysia, The Philippines, Singapore, South Africa, Thailand, Saudi Arabia, UAE, South Korea, Tunisia, and Ukraine.

The Future of Medicine is … Not Medicine. That’s the subject of a talk Dr. Lane Sebring gave at a World Future Society dinner. He described studying anthropology to understand why, even with modern medicine, so many of our diseases today didn’t even exist 150 years ago. Heart Disease was almost unknown, and Cancer was rare, not even making the top 10 as a cause of death. And then there’s Alzheimer’s, which appeared about the same time as the electric light bulb, causing many to see a connection between light, sleep, and the disease. The more Sebring looked into the cause of illness, the more he became disillusioned and frustrated with modern healthcare, and the traditional practice of providing “sick care” with just another pill to “manage disease” with no cure.

To focus his practice on health & wellness, Sebring became an expert in Functional Medicine, which he describes as a form of evolutionary, integrative, holistic, or alternative medicine. Sebring attributes much of today’s disease to changes in diet, exercise, and sleep, because these are the three pillars of good health. He and others like him believe functional medicine can replace 70% of traditional medicine, and I agree. But that naturally goes against the profit interests of traditional medicine.

12. Tech Solutions Define the Future of Healthcare

As digital stethoscopes, medical imaging devices, and related diagnostic tools keep getting exponentially cheaper, smaller, more accurate, and easier to use, much of medicine will move down-market — from doctors in clinics and hospitals to consumers at home. Whether it’s mom taking care of a sick child or a nurse practitioner making a house call, they’ll have access to new tools, like the Star Trek medical tricorder, and they’ll go online for help when needed. That could be a video consultation with a doctor or specialist, or electronic help from an expert system like IBM’s Watson. Imagine speaking to Siri on your iPhone and having Watson search through its global database to recommend personalized treatment based on your personal health record, and knowing how your unique genotype and phenotype differs from the millions of other patients with similar conditions. This is the Big Data analytics challenge the two companies seem ready to accept.

While Big Tech is in cloud services, Tiny Tech today is wearable, ingested, or implanted. It’s disappearing into our environment in the Internet of Things: light bulbs, doorknobs, clothing, and your toothbrush. And it’s enabling the eventual blending of science and technology (INFO + NANO + BIO + NEURO).

13. Aging Populations Stress Support Systems

Projected Population Growth
As the population ages and more people retire, that leaves fewer working-age people to support them and contribute to the economy.

Aging is a global problem, but much more so in the U.S., where health care costs already exceed $3.5 trillion/year and are the highest in the developed world. It’s telling that the U.S. makes up almost half of the global healthcare sector, consuming about 18% of GDP. Compare that to Netherlands (the next highest at 12%), Canada (11%), and UK (10%).

Even with all we spend, we still live sicker and die younger, according to the World Health Organization. Our Life Expectancy is ranked 25th in world, which is below Chile & Greece (Japan leads). And Infant mortality, at 47th, is 2nd lowest in the developed world. Still, Congress chose to defund the Children’s Health Insurance Program (CHIP) so it could give massive tax breaks to wealthy people and corporations who are already flushed with cash.

At the current pace, our health care costs could reach $13 trillion by 2030 and bankrupt the nation, thanks largely to obesity and the 70M Baby Boomers who will soon retire and take Social Security. This “boomer” generation is a huge demographic that has strained institutions every step of the way. 76M boomers were born between 1946 and 1964, and America wasn’t prepared for that growth. Neither were other nations. There weren’t enough hospitals or pediatricians, or schoolteachers, textbooks or playgrounds, or even bedrooms in our homes. Boomers as infants and children had no voice, but now they’re politically active, and they represent a substantial voting bloc.

Given these statistics, and more from my growing collection, a dramatic new approach to health care is needed, and its urgency is near critical. But politics are guiding our decision-making, not common sense.

14. Important Documentaries (most link to my site)

  • Escape Fire: The Fight to Rescue America’s Healthcare is like An Inconvenient Truth for the healthcare debate, presenting our current path as unacceptable so we’ll commit to changing it.
  • Money-Driven Medicine: Understanding America’s Healthcare Crisis reveals how a profit-hungry medical-industrial complex has turned health care into a system that squanders millions of dollars on unnecessary tests, unproven and sometimes unwanted procedures and overpriced prescription drugs.
  • The Waiting Room is like a punch to the gut for people cast off and left out of our U.S. medical care system, what some call the best in the world.
  • Sicko is a Michael Moore documentary that takes an in depth look at how the state of healthcare in the United States is harming its citizens.
  • The Weight of the Nation is a four-part HBO documentary about America’s uphill battle with obesity, intended to focus our attention on nutrition, wellness, and poverty.
  • Choosing to Die is Terry Pratchett’s documentary about Assisted & Dignified Death.
  • The Line is an important documentary about poverty in America. It covers stories of people across the country who live at or below the poverty line. They have goals. They have children. They work hard. They are people like you and me. Across America, millions are struggling every day to make it above The Line.
  • A Place at the Table shows how hunger has serious economic, social, health and cultural implications for our nation, and how the problem of hunger can be solved once and for all.
  • Fed Up is a Katie Couric documentary about the food industry that reveals a 30-year campaign by the food industry to mislead and confuse the American public. What’s worse is that the resulting obesity epidemic was aided by the federal government and special interest lobbying, and the food lobby has been fighting back with misinformation to discredit the movie.
  • Food Chain$ is an exposé about Florida farmworkers’ battle for fair wages and working conditions, against the $4 trillion global supermarket industry.
  • Inequality for All features former Labor Secretary Robert Reich and is described as “a game-changer” in our national discussion of income inequality.
  • Saving Capitalism is about widening economic inequality, growing distrust of our political system, and the rise of Donald Trump. It’s streaming now on Netflix for free.
  • The Corporation describes the curious history, inner workings, controversial impacts and possible futures of the corporation as a legal entity.
  • Wall-E is a warm-hearted commentary on environmental pollution that portrays future humans as super-obese couch potatoes living in a robot & technology dominated world.
  • Robot and Frank shows the challenges and benefits of companion robots for the elderly who don’t warm easily to technology.

About the Author

Wayne Caswell is a retired IBM technologist, market strategist, futurist, consumer advocate, and founding editor of Modern Health Talk (www.mhealthtalk.com). He  brings a unique Big Picture perspective and Holistic approach to his articles about healthcare policy, future directions, and solutions for independent living. That perspective caused him to become a strong advocate of progressive policies and candidates.

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