The Commonwealth Fund’s 2017 International Comparison of Healthcare Systems affirms US Healthcare is by far, still the most expensive health care system in the world: over twice that of Canada, Germany, UK, and France. Is it because we have more doctors coordinating our care? No. Germany, France and the UK lead us there. Is it more hospitals per capita? No. Germany and France both have more than double ours. It must be because we have better health outcomes and are living longer. No, Germany and the UK lead there. Aha! You may be thinking it must be the cost for caring for all those uninsured people! After all, as most of us know, the U.S. is leads most successful western economies in percentage of uninsured populace. Think again.
First of all, National Academy of Medicine, Kaiser Family Foundation and other that study the issue note that although the Affordable Care Act (ACA) brought coverage to millions previously not insured, approximately 30 million of us remain uninsured. They also point out the uninsured are less likely than people with coverage to use any health services. That uninsured populace, comprised mainly of low income working families, pays a heftier price in other ways, including higher rates of morbidity and mortality. Limited access to routine preventive care leads to astronomical costs of treating catastrophic illness. The financial implications of not having any coverage lead to medical debt, exhaustion of savings and deficits that have to be absorbed into the overall cost of healthcare, often, even when they result in premature death. Why?
The uninsured tend to wait until they have no choice but to go the hospital for medical care in hospital emergency departments where immediate care is guaranteed. This safety net was created as a result of the Consolidated Omnibus Budget Reconciliation Act (COBRA) which includes a provision called the Emergency Medical Treatment and Labor Act (EMTALA) signed into law in 1986 by then President Ronald Reagan. Under EMTALA, all patients presenting to an emergency department for any potentially lethal medical condition must be stabilized and treated regardless of ability to pay. This is no way to save money, as critical illness typically costs many times more than preventive care. It reflects poorly on indices of health outcomes in our extremely expensive system and suggests callous indifference. A more intelligent health system design would include consideration of reducing negative impact from the social determinants of health: income, education, and environmental factors that drive poor health outcomes and increase the need for catastrophic care that we see daily in emergency departments across the country. I will return to this concept in future posts.
Why is U.S. healthcare so expensive?
The invisible hand is extremely expensive: business administrative costs are the highest in the world and the leading reason for the $4 trillion price tag. All of the staff not directly involved in the care of patients, including the vast variety of insurers required as intermediaries in the health provision transaction, add multiple layers of cost right to the top of the organizations. (See prior post on Emergency Department costs)
Drug costs are not negotiable by the federal government; therefore Medicare is compelled to cover the costs pharmaceutical industry sets, and with the exception of the Veteran’s Administration and Medicaid, cannot negotiate to lower those prices.
Our healthcare system is the most litigious in the world with zero tolerance for even the most exceptional rare outcome, which causes hospitals, healthcare organizations, and physicians, to practice defensive, often protocol-driven, medicine. Conveniently, this leads to over-utilization of resources, and pushes prices for care up astronomically. These costs are passed on to patients directly as well as in the form of higher insurance premiums based on insurance status.
A related effect is the overuse of specialists and sub-specialists. Higher reimbursement for specialist care and consultants and over-utilization of procedures they are trained to perform(regardless of scientific that those interventions may have no effect on outcomes) drive costs higher. In some cases, the interventions are demanded by patients based on fear or marketing and eroded trust in the physician-patient relationship hampered by the threat of litigation described above cannot reverse that inertia.
Business strategy based solely on on quarterly profit margins. rather longer term return on investment. Marketing, branding and certification, including non-clinical benchmark-based hospital rating services, all add to needless costs that health systems use to compete in the market. These costs are absorbed into the overall operational budget and lead to increased costs to patients as well. (See post on patient satisfaction)
So how do we pay for the care for the uninsured? Public hospitals are funded by tax district, city, county, and state. In some cases, these regions operate health care centers and clinics, employing healthcare providers directly. In other cases, they purchase the healthcare services from private providers, hospitals and clinics. For example, the District of Columbia (D.C.), created an entity called the DC HealthCare Alliance to pay for low income District residents not eligible for Medicaid. As a result the District has one of the lowest uninsured rates in the country. Incredibly however, mental health and substance abuse services were not included this coverage.
Hospitals and health providers bill patients regardless of insurance status, which also leads to increased cost to uninsured patients. Bills are higher than that for insured patients, as there is no carrier to negotiate collectively for lower prices. You should be aware that you have a right to negotiate for a lower cost as well. To be fair, hospitals budget in the range of about 5% expenses for uncompensated care. The American Hospital Association reported that in 2016, hospitals provided about $40 billion in uncompensated care to uninsured patients the year the ACA passed. The GOP is still threatening to eliminate provisions in the ACA that would likely double that uncompensated care, a fact that the Healthcare Leadership Council (a coalition of CEOs from all disciplines in US healthcare) has pointed out, is not a partisan issue.
To be clear, our ridiculously expensive health care system could save countless lives and an almost unfathomable amount of money by applying more sensible approaches to health care system design, but it goes far beyond accounting for the cost of care for the uninsured.