Healthcare is Expensive

The U.S. as a nation spends more on health care than any other developed country but has worse health outcomes. How is this possible?

Amid the coronavirus epidemic, many of us have been living in fear of needing health care. For some, it’s due to the risk of catching COVID-19 during a doctor’s office or hospital visit.

For others, it’s because of how expensive health care is. These days, all it takes is one surprise medical bill to send a patient into bankruptcy.

The United States health care system operates differently from many others in the world, with high costs for the individual as a main, distinguishing characteristic.

The higher prices mean the U.S. spends more on health care than other developed countries.

So, what exactly makes health care in the U.S. so expensive?

Health insurance prices? Government regulation — or lack thereof?

The pharmaceutical industry?

Why is health care so expensive?

The most obvious reason is that U.S. health care is based on a “for-profit insurance system,” one of the only ones in the world.

In the U.S., most health insurance is administered by private companies and individuals must pay for it themselves, even if their employer subsidizes some of it.

The underlying motive to make money has a ripple effect that increases prices.

For example, insurance companies spend an “enormous amount of money on utilization review,” the process that determines whether a medical service is covered under a given plan.

The goal is “to not pay consumers for the care they thought they were insured for.”

Part of our system is that everybody is paying for somebody else’s underpayment, whether they like it or not. People are trying to figure out who else can pay for it instead of them.

U.S. health care is highly fragmented.

Medicare is drastically cheaper because we don’t spend a lot of time trying to deny people the care they need.

We pay per service.

U.S. health care exists in a system where patients are charged based on the services they receive, yet another reason why almost everything is more expensive here.

We have higher utilization of a lot of different services.

In many parts of the health care ecosystem, people are paid for volume, and so that fuels an orientation toward.

It’s in the economic interest of the hospital, the physician, and the health care system when they’re being paid fee-for-service, and the justification is that more is better.

This means quantity over quality.

As a result, there’s lower use of primary care, because the fee-for-service model encourages overutilization.

Instead of taking people in a room, examining them, taking their history, and spending time talking to patients, we do all the complicated stuff.

We’re quick to jump to get the CAT scan and diagnostic test when history and physical exam would provide the correct answer.

The fee-for-service creates an incentive to provide more procedures, instead of helping patients get healthier so that the nation as a whole needs fewer procedures.

The U.S. also spends less than other countries on social support systems and long-term care.

Lack of government regulation

The companies that provide and charge for health care, like hospital systems and drug makers, have more power to keep costs high when they’re negotiating with multiple potential payers, like various private insurance companies.

But when they must negotiate with a single-payer, as the federal government, there’s more pressure to meet the demand to sell their services.

For example, a recent study found that private insurance companies paid almost two and a half times what Medicare would’ve paid for the same medical service at the same facility.

To make matters more costly, the U.S. government doesn’t regulate what most companies in health care can charge for their services, whether it’s insurance, drugs, or care itself.

It’s a poignant argument right now when you can point to companies that are developing COVID-19 vaccines with government money, and they’re going to charge us a fortune for their vaccine.

Consolidation of insurance and hospital systems

While the U.S. healthcare system itself may be fragmented, in many parts of the country, there are only one or two companies providing health insurance or medical care.

This means that, again, there’s little to no incentive for them to lower costs since patients don’t have much of a choice.

We keep approving more and more mergers that raise costs significantly.

Then those hospitals buy up all of the private physicians and the profit motive is streamlined down to your primary-care doctor.

The perfect example of this is HCA. They buy hospitals and physician practices and then they dictate the way they want things done. In most cases, patients suffer and incur huge bills if they have no health insurance.

HCA stresses quantity over quality.

Many physicians have left HCA-owned hospitals or groups of doctors because they were tired of being told they could only spend a certain amount of time with their patients and they were not going to be told how much time they could spend with their patients.

What’s more, healthcare providers are paid, on average, much more in the U.S. than in other countries.

Despite the enormous cost that we have in America for health care, we don’t get the same value of our health care dollars as other nations do.

If you get sick, this is the place to be, no doubt about that, but we don’t have a system with everybody in and nobody out.”