Posted by Bill Sandweg on 21 November 2022.
Next time you are visiting someone at the hospital and have a few minutes to spare, take a drive through the doctor’s parking lot. If you live in a major metropolitan area, you will see luxury car after luxury car. In areas more remote from the big cities, there will be nice cars, but probably not as many really expensive ones. What does this have to do with our broken health care delivery system? Well, pretty much everything.
In order to afford those fancy cars, doctors must make a lot of money and many of them do, particularly the specialists. Not so much for the family care doctors or the pediatricians. So chalk up part of the problem to high fees charged by segments of the doctor population. Not to be outdone, hospitals have very high “sticker prices” for their services, off which they offer discounts to some people and some insurance companies. Tough luck, however, if you are forced to go to a hospital that is not “in network.” You are likely going to get soaked.
Another part of the problem, and there are many parts, is how we pay for our health care. In most cases, we pay for our health care by the service performed. This is the “fee for service” model. The more a doctor or hospital does for you, the more you are charged. There is a built-in incentive to do more to get paid more. There is also an incentive to divide a service up into as many parts as you can and to bill separately for each of them. This may be where the airlines learned to charge separately for food, drink, bags and leg room. In the fee for service model, the emphasis is on the service performed as opposed to the result achieved. Under the current system, no one really cares if the service results in a cure or not. There should be an incentive for getting your patient healthy and keeping her healthy.
Hospitals are also extremely secretive about how much they charge. Probably no business in America has as many different charges for the same service as do our hospitals. Not only do they have different charges for the same service depending on who is doing the paying but the differences can be huge. In a recent blog post, I discussed the case of a woman who had a breast biopsy for which the hospital charged $18,000. For patients with no insurance, the hospital charges only $1,400 for the same biopsy. Hospitals don’t want you to know what they charge. They consider their price list to be a trade secret. However, without knowing what the hospital charges, consumers cannot make rational decisions about where to go for hospital care. Our capitalist system relies on rational decision making to keep prices down and to encourage efficiency. Hospitals gum up the works on purpose.
Drug companies play a big role in our broken system. They have enormous financial power and have been very effective lobbyists. For decades, Big Pharma has prevented Medicare from negotiating the price of drugs that it covers for seniors. That changed recently but only for some drugs and the change is to take place over a period of years. The drug companies also game the patent system to keep prices high. They virtually conspire with the insurance companies to keep prices high, which allows the insurance companies to charge higher premiums. We have, and will for the foreseeable future, pay more for the same drugs than anyone else in the world.
The health insurance industry makes big profits from the current broken system and has no interest in seeing it change. Every time reform is suggested, the health insurance companies start the scare tactics to convince Americans that the health care apocalypse is just around the corner and they can kiss their doctor goodbye, if any changes are made. It has been a quite successful tactic for them.
In spite of the success of the Affordable Care Act, there are still many living in this country who have no health insurance or whose insurance is terrible. For obvious reasons, these people don’t go to the doctor very often. By the time they show up at the hospital, they are often very sick. Under federal law, the hospitals are required to accept them as patients and to provide to them the care they need. When they cannot pay the bill, the amount of their bill is added to the bills of all of us who do have health insurance so as to keep the hospital from going broke. Those who think that having people without health insurance is no concern of theirs don’t understand the situation. They are paying for the uninsureds, whether they realize it or not.
As regular readers of this blog know, we pay more for health care in the United States on a per person basis than any other country in the world. Do we get the best health care in the world for all that we spend? Not by a long shot. By any objective measure of health care outcomes, such as infant mortality, life span, obesity, etc., we are way down on the list of successful countries. We are not just way down on the list, we are dead last. It is no coincidence that we are also the only industrialized country that does not have universal health care.
Our broken health care delivery system traces its roots to price and wage controls put in place during World War II. Health insurance became a fringe benefit that could be used to attract workers when wages were frozen. From there the system just kept on moving forward and creating companies with huge financial stakes in preserving the status quo.
Only Congress has the power to wipe the slate clean and to create an efficient system of delivering health care to our citizens. Sadly, with the degree of partisanship we are currently experiencing, we are unlikely to have the bipartisan majorities needed to make the necessary changes any time soon. Even if bipartisanship were to suddenly spring up, the lobbying power of the doctors, insurers, drug companies, and hospitals would make real change hard to come by. Guess we are just going to have to live with it for a few more decades. Maybe our grandchildren will do better.
