The Usual Suspects

In 2011, Americans paid $2.7 trillion for health care.

That’s more than the economic output of the whole United Kingdom, and over one and a half times more than any other country spent on staying healthy that year. Since then, there’s been no sign of that trend slowing down, not even with the Affordable Care Act.

Which leads to the obvious question: why is our health care so expensive?

As I’ve mentioned, politicians, commentators, and so-called experts get it wrong when it comes to why health care costs are so high. Every news day and election cycle we hear the same old excuses get rehashed; so often in fact they’ve become familiar, like good friends we can call on when we need answers.

When critically examined however, these reasons don’t add up to explain away the staggering costs of health care.

And just like the usual suspects who get rounded up and put in a lineup every time we investigate, each of the following may have been present at the scene of the crime. But none of them actually pulled the trigger:

The elderly, obese, smokers and others with bad habits – almost $150 billion is spent every year taking care of these folks, but that amount isn’t the cause of ridiculous health care prices; it is a result of those inflated prices. Just consider, if cotton balls were priced at $27.00 each, would the media be complaining about spending $900 million a year on them? No, the question would become “Why are we paying $27.00 for a cotton ball?” Well there are plenty of real-life examples just as outrageous as this, but not many are asking why.

Malpractice jury awards – of the $31 billion spent in 2011 on malpractice premiums, only $6 billion went to compensate the actual victims of negligence. It seems this system is in need of a little reform too, but compared to $2.7 trillion, jury awards clearly are not driving healthcare costs.

Malpractice insurance premiums – conversely, of the $31 billion spent in 2011 on malpractice premiums, $25 billion went straight into the pockets of insurers and lawyers. I know I am biased, but I think this amount is crazy and should come way, way down. But how much would be saved on healthcare expenditures if it did? Not a lot, considering these premiums accounted for less than one and a half percent of the $2.7 trillion spent that year.

Pharmaceutical companies – while drug manufacturers may have had an iron fist around drugs – and therefore drug prices – in the past, that grip is slipping as more and more pharmaceuticals lose their patent protection. For almost ten years now cheap, generic versions of medicines that treat the most common illnesses like asthma, diabetes, high cholesterol, depression, and high blood pressure have been available for a few dollars a month. So are antibiotics from every major class that treat most common infections.

Technology – as a radio ad used to say, the price of technology goes down over time. The MacBook that I am using to write this is about a billion times more powerful, efficient, and better looking than the Commodore 64 I got for Christmas in 1985. Yet when adjusted for inflation, my trusty MacBook costs about the same as ye olde Commodore, and I have more than gotten my money’s worth. Even a really expensive piece of technology like an MRI machine will pay for itself when used a few hundred times; especially when an MRI study that can be bought for $400 cash is billed to insurance at $4,000 instead.

The uninsured – what about those who don’t pay their medical bills? In 2008, an estimated $57.4 billion worth of healthcare services were provided to those without health insurance. But there’s room for some fancy accounting here: This statistic represents the charges, not the costs, of services given away for free. And in an industry that has no problem transforming a 13-cent dose of asthma medicine into a $64.40 charge on an ER bill, any estimate of how much the uninsured truly cost quickly gets lost in the markups.

So this is the sordid cast of characters, the ones that are so easy to pick on when trying to explain the costs of health care. And although they do have parts to play in the overall equation, they aren’t really responsible for what is driving health care prices through the roof.

But by constantly shifting the blame, the real culprit is free to roam the streets. Based on circumstantial evidence alone, these suspects have been assumed guilty by association for too long, and it is time their names were cleared.

No, the real reason why the United States spends so much on health care every year is simple – health care is overpriced.

When considering the frightening growth of health care expenditures as part of the U.S. economy then, the real question shouldn’t be why do we spend so much on health care?

We need to be asking, why do we spend so much for health care?

The answer to that is simple, too. Health insurance.

 

It’s not the COSTS of health care that are outrageous…it’s the CHARGES.

Physician. Health Insurance Agent. Author. Health care humorist. Medical satirist. Disruptor. At your service. My name is Kevin Wacasey, and I’ve been practicing medicine since 1994. When I graduated from medical school, I took an oath to do no harm to my patients. To me, that includes financial harm. But since health insurance took over health care over 40 years ago, health care prices have skyrocketed. And despite what we’re told by the media every day, it isn’t the costs of health care that are outrageous; it’s the charges. So if you’ve ever wondered why we spend so much on health insurance and health care, then come along and join me as I explore the crazy world of Healthcareonomics. Health care doesn’t have to be expensive. Let me show you how. For speaking opportunities and to pass along your questions/comments, please email me at drw@healthcareonomics.com.

Leave a Reply

Next ArticleHow Much Was I Worth?