By Mark A. Kelley, MD |3/28/18
Founder, HealthWeb Navigator
Why is U.S. health care so costly compared to other developed countries? A recently published report provides some insights.
In a study of 11 countries, Harvard researchers found that while the United States has the highest health costs relative to its GDP, its use of services is average. More specifically, the U.S. ranks lower than nearly every other country in doctors’ visits, hospitalizations, hospital days, and consultative services.
The difference is that the U.S. uses more expensive technologies with high numbers of surgical and cardiovascular procedures and imaging studies.
Other sources of high costs include brand-name drugs and administration of insurance programs. And while the U.S. has fewer physicians per capita, our physicians earn more than counterparts in every other nation.
With fewer doctors, hospitalizations, and office visits, one might conclude that U.S. health care is poor. In some respects, that is true. The U.S. has a low life-expectancy and high maternal and infant mortality compared to other wealthy nations.
One explanation is that the U.S population is larger and more geographically and economically diverse compared to its peer countries. As the Harvard group explained, if the state of Minnesota were compared to a similarly prosperous European country, it could hold its own. In contrast, Mississippi, a poorer state, would rank much lower.
The message is that if you cannot access the U.S. health system due to income or distance, your wellbeing is at risk. The ACA tried to fix this problem by expanding insurance eligibility with federal support. Surprisingly, some states whose citizens would have benefitted refused to cooperate.
The Harvard report suggests two remedies for curbing health care costs: price control of new brand-name drugs and curbing the proliferation and costs of new technology. These ideas are not new—as the famous economist Uwe Rinehart once wrote, “It’s the prices, stupid.”
Some countries like Great Britain and Canada have taken measures to control such costs. But little has been done in the U.S.
What we are left with is a dysfunctional system that creates high costs, expensive drugs and technology, and lacks a stable national health insurance plan. Is it any surprise the U.S. healthcare system has been ranked last among developed countries?
Worse, we may soon have another embarrassing statistic to report—medical bankruptcy. As healthcare costs continue to rise, many patients can’t afford to pay their medical bills. A recent study revealed that many patients deal not only with hefty hospital bills, but also lost wages and even unemployment when they are ill.
It’s also important to remember that medical bills remain the number one reason for bankruptcy in the United States.
Four years ago, experts in medical bankruptcy grew tired of seeing families lose their homes because of medical debt. They founded a nonprofit organization called RIP Medical Debt (RMD) to solve this problem.
Like a mortgage, some medical debt is discounted and sold on the open market as a commodity. In some cases, the debt can be purchased for pennies on the dollar. The buyer then owns the debt and recovers whatever payment they can.
RMD purchases such debt and then raises donations to settle the account. For example, a donation of $100 can settle a debt of $10,000. A donation of $15,000 can retire $1M of medical debt. Over four years, the organization has retired millions of dollars of debt for patients and their families. While I applaud this program, its very existence speaks volumes about the inadequacies of health insurance in the U.S.
As I write this blog, the stock market has fallen dramatically due to the looming threat of trade warfare between the United States and China. If this crisis continues, the price of imported goods will rise for American businesses and consumers. It’s possible that companies may trim their healthcare benefits to cut costs, shifting the burden onto employees through higher premiums and/or higher deductibles. Such changes will nudge many employees even closer to financial ruin if they get sick.
An equally depressing but plausible scenario is that patients will choose to go without routine care because they cannot afford it.
The current national political agenda is aimed at creating more jobs for Americans. Unless those jobs offer adequate health insurance, medical bills will devour wages.
If elected officials are serious about helping Americans, they should stop playing political football with health insurance.
Only a stable single-payer system, similar to Medicare, will keep the average American family secure in times of illness. And armed with the same power of national price control enjoyed by Medicare, such a plan can tackle the escalation of health care costs.