Why is the U.S.'s Healthcare So Expensive and Lacking, in Comparison to Other Rich Nations?

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Healthcare in the U.S. has the dubious distinction of being by far the most expensive and the lowest performing health system of the 11 "rich" nations that were surveyed recently by the Commonwealthfund.org. The expenses, in the U.S, are near on double the average in comparison to their peers. At the same time, the U.S. was also ranked the lowest among the nations in performance scores.

Why is this?

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Administrative Costs

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Nearly 25% of Health Care costs in the U.S. are attributable to administrative costs. The U.S. has too many varying outlets for medical care coverage that are not coordinated and lack cohesion. Coding medical procedures correctly across the spectrum of platforms is very important if a practice or a hospital wants to be paid for their services.

From Medicare to Medicaid to private insurers, each group has their own methodologies and payment coverage requirements. It takes an army of billing clerks to correctly navigate the system. In an interview with National Public Radio, economist David Cutler brought up the fact that Duke University Hospital has 1,300 billing clerks and only 900 beds.

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Drug Costs

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In all of the countries included in the Commonwealth study, only the U.S. did not offer some form of Universal Health Care. In all other nations, they negotiate costs with the pharmaceutical companies on the price of their drugs. The U.S. only does this with the Veterans Administration and Medicaid. The savings would be astronomical, many billions annually. If Medicare part D were to negotiate drug costs, it would save over $11 Billion annually. That doesn't even include the entirety of Medicare.

The U.S. allows itself to be raped and pillaged by Big Pharma, on a daily basis, when it could easily reduce the cost of health insurance by simply allowing itself to negotiate with the drug companies. This may be attributable to the Political structure of the nation. Lobbying efforts generally pay a handsome ROI and contributions to candidates can have an amazing effect as to what legislation is focused on.

Defensive Medicine

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When practicing medicine in a litigious society, practitioners can become motivated by factors outside of health results. It is a phenomena in U.S. medical practices to call for ineffective and unnecessary patient testing to cover their own hides. In many cases, where a diagnosis is come to, with near certainty, further testing is done, at the expense to everyone, to protect the practice or hospital.

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Expensive Mix of Medicines

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A carryover to the segment on Defensive Medicine relates to the expensive mix of medicines. U.S. primary care is the gatekeeper for seeing a specialist. In many cases, the referral to the specialist is an unnecessary step, that could've been handled at the primary care level, as it is in many of the other nations in the study.

U.S. Doctors also tend to over test their patients, for example, they prescribe 2.5x the number of MRI's as their international peers. They also have a penchant for prescribing the latest and greatest medicines on the market, rather than offering a lower cost, generic alternative.

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Wages and Charges

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Not many industries have a system of service that is as opaque as the U.S. medical community. When you enter a doctor's office or hospital, there is no menu with pricing. In many cases this is dictated by the insurance carrier the patient has and the level of insurance they purchased. There is no price even quotable until all the elements of the transaction are considered. One hospital may charge double for a ventilator compared to their cross town competition.

With the way the referral system is set up in the U.S., to see a specialist means that you need to start with your primary care physician. That's one office visit. Now you see the specialist and they will do further testing on the patient and be able to charge more for their services than the primary. Second office visit. The patient must return to the specialist to hear about the results of testing and a plan forward. Third office visit. The number of charges to the insurance companies are a shared burden.

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Training

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When in residency, new doctors will be molded in their ways by the practices of the community that is teaching them. Whether it be using every new test available to them or prescribing the latest and greatest new medicines. Also, over testing of patients with inconclusive methods that lead to procedures that may have been unnecessary. This is all considered to be wasteful practices and if procedures were in place to better guide the medical decision making, enormous amounts of money could be saved in the U.S.

In a 2012 Journal of the American Medical Association (JAMA) paper, Donald Berwick and Andrew Hackbarth estimated that health care waste, which includes unnecessary treatments, overpriced drugs and procedures and the under-use of preventive care that can fend off more serious illness, makes up a whopping 34% of the U.S.’s total health care spending.

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Conclusion

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It's been drummed into the American psyche that Universal Health Care would take away competition and reduce benefits versus the system that is currently in place. Yet, when taking an objective look at, cost to care, the charts in this article, show that the system the U.S. is using is falling woefully short of it's peers.

Regardless of what system the U.S. eventually concludes works the best, relatively simple steps can be taken to reduce the cost of healthcare in it's present form.

• Negotiate drug prices across the board for the nation.

• Simplify and streamline billing procedures.

• Create a price model for doctors and hospitals, to adapt into their practices, that the patient can see. What the cost/benefit of that extra test may or may not be.

• Limit frivolous lawsuits against the medical community.

• Train residents and medical school students on the practicality of treatment.

To make new policy, on a national scale, will need new recommendations from the AMA and the FDA, studies and task forces and eventually legislation from Congress. This is where the U.S. ends up falling short in the end. The bureaucratic maze to get to an intended result is convoluted and treacherous. The lobbying arms of the pharmaceutical makers, medical community and unfortunately, the trial lawyers would do their damndest to maintain the status quo.

The cost of medical care and insurance is completely impractical and delivers a less than stellar product and there are powerful voices that would prefer to see it remain that way. Profit is a great motivator.

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What are your thoughts on your own countries' medical system?

Do you feel you are getting fair value from your medical services?

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Image source: 1, 2, 3, 4, 5

http://www.zerohedge.com/news/2017-07-18/how-solve-healthcare-conundrum-make-them-pay

http://www.zerohedge.com/news/2017-07-17/new-study-finds-us-healthcare-system-ranks-dead-last-compared-other-developed-nation

http://www.investopedia.com/articles/personal-finance/080615/6-reasons-healthcare-so-expensive-us.asp

http://knowledge.wharton.upenn.edu/article/medical-waste-american-health-care-expensive/

http://www.commonwealthfund.org/interactives/2017/july/mirror-mirror/