Tag Archives: health care prices

Why Health Care Costs So Damn Much (part 1 of 3)

Do you ever wonder why our health care costs so damn much?

Well, it’s not because our providers are overusing technology.

And it’s not because our doctors are practicing defensive medicine and overprescribing tests out of fear of lawsuits.

And it’s not because poor people are using the ER every time they get a cold.

And it’s not because people like Aunt Sophie go to the doctor every time they have a boo-boo or sniffle.

And it’s not even because prescription drug costs are through the roof.

Okay, that last one contributes a little, but in the greater scheme of things, only a little.

No, the problem is that we’re being grotesquely overcharged for almost every aspect of health care we consume because somewhere along the line, the people involved in providing and administering the provision of health care decided that it wasn’t enough to earn a good living from the work they do, that it wasn’t enough to get really comfortable from the work they do, but that it was now their absolute, positive, god-given, constitutional right to get stinking rich from doing the work they do.

In pursuit of that stinking richness they joined forces with others in their field to create monopolies – they like to refer to it as “consolidation” – that enable them to charge out the wazoo for their services knowing we have no choice but to reach into our own wazoos for the extra money or suffer the medical consequences.

Monopoly and Near Monopoly

One of The Curmudgeon’s leftist magazines, the Washington Monthly, took a look at this matter in its November/December 2017 edition in an article titled “How big medicine can ruin Medicare for all.”  It observed that

Most Americans now live in places where there is little or no competition among medical providers. In market after market, hospitals, clinics, physician practices, labs, and other key health care infrastructure have been merged into monopolies controlling nearly all aspects of health care in the areas in which they operate.

Your doctor tells you that you need some blood tests, so where do you go?  In most parts of the country, you go to a Labcorp lab or a Quest lab and that’s it – or your doctor takes the blood and sends it to one of those labs.  You have no other choice.  If you need an x-ray or a CAT scan, same thing:  just a few choices.  When they know you’re coming, they don’t have to do what most other businesses do:  compete on price. In fact, they know you have no choice and will have to pay the going rate – which only makes the going rate go even higher.  That helps explain why an abdominal CAT scan in the U.S. averages $844 while it costs only an average of $483 in New Zealand, $233 in South Africa, and $85 in Spain – same tests, same machines taking the scan, but an enormous difference in the price.

The Washington Monthlyalso reported that

The UK’s National Health Service produces much more health per dollar than ours, largely because it doesn’t overpay specialists or waste money on therapies and technologies of dubious clinical value. Though they smoke and drink more, Britons live longer than Americans while paying 40 percent less per capita for health care.

Yeah, yeah, The Curmudgeon knows:  you’ve heard bad things about the British health care system, like how people have to wait for months for specialist appointments.  But that’s already going on here:  develop a rash and call a dermatologist’s office and there’s a pretty good chance you’ll be told that the next available appointment is in three months (after The Curmudgeon wrote this but before he finished it and put it online, this very thing happened to his brother, who had a rash, got a referral for a dermatologist, called the doctor’s office in late March, and was told the next available appointment is in June) – and the same is true of many other specialists in many parts of the country.  So look at the benefits of the national health service in England:  the British spend less and they get more.  Isn’t that a good thing?  Shouldn’t we be looking to a system that does more for less in search of ways to do a better job here?  Shouldn’t we be concerned that health care accounts for nearly 18 percent of the gross domestic product of the U.S. while it accounts for less than 11 percent in 10 other “wealthy” countries (United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland, and Denmark) according to a study in the Journal of the American Medical Associationthat compared U.S. health care costs to those in other countries.

We’re NOT Over-consuming Health Care After All

The Washington Monthly observed that

Conservatives often assert that Americans consume too much health care because we don’t pay for it using enough of our own money. Accordingly, they argue that the way to lower costs is to force us to pay more out of pocket through higher deductibles and medical savings accounts, while submitting to narrower provider networks that limit our access to specialists and therefore our consumption of care….

But it turns out that other advanced countries can offer their citizens universal access to government-financed health care, as well as higher volumes of most forms of beneficial treatment, while still having much lower per capita costs. Canadians see more doctors per year than Americans do while spending about 50 percent less per head on health care. Similarly, the average German is seen by a doctor more than nine times a year, compared to four for the average American. Germans also receive far more hip replacement surgeries per capita and about the same number of knee surgeries, and get to stay in the hospital longer while recovering. Yet the average hospital stay in Germany costs just one-third of what it does in the U.S.

Oh, what’s that?  It’s NOT our fault?  We’re NOT overutilizing care?  In fact, we’re consuming LESS care than people in other countries and paying MORE for it even though our outcomes are worse?

How can that be?

The Washington Monthlyboiled it down to one key observation:

So the big reason why Americans pay more for health care than their counterparts in other rich nations is not complicated. As the health care economist Uwe Reinhardt once put it, “It’s the prices, stupid.”

That’s how.

Prescription Drugs

The Washington Monthlycontinues.

Most Americans are aware that they pay far more for drugs than their peers abroad. For the thirty most commonly prescribed drugs, prices in the U.S. are roughly double the average for other rich countries. Yet drugs account for only 10 percent of total U.S. health care spending, so they are not the main reason our health costs are so high.

Yes, prescription drug costs are high.  You don’t have to convince The Curmudgeon of that:  even though he has not a hair on his head, he was spending $40 a bottle for prescription shampoo – who even knew such a thing existed? – until a generic hit the market last year.  And he knows it’s not right that the blood pressure medicine you use costs someone in France or Sweden or Guatemala about a third as much or that per capita prescription drug spending in the U.S. is $1443 a year, more than twice the $680 a year it averages in those ten other wealthy countries, or that a dose of Humira costs $2505 here, more than it costs in England and Canada combined.  Harvoni, the drug that cures hepatitis C, costs $32,000 here and a little more than half as much in Switzerland.  The cancer drug Avastin costs $3900 here but only $470 in England – the same drug made by the same company in the same factory and sold by the same company.  That’s pretty terrible, but it’s not what’s causing people in bad medical health to fall into bad financial health.

(Tomorrow:  Since when must all doctors get rich?  Hospital charges are out of hand.  Drug companies don’t really compete.  Hospitals are killing us.)