Steven Brill's article in Time Magazine about the cost of private health care is likely to make most of his readers very angry. Angry about the prices we pay, about the lives that are devastated, and about the fact that we're one of the few developed countries without adequate health care for its citizens.
Economists have told us that the profit motive of privatization comes with an "invisible hand" that automatically corrects inequities in the market. It hasn't worked that way for health care. The personal stories recounted below, and some additional facts to complement them, make it clear that an essential human need has been turned into a product that benefits a few people at the expense of many others.
$15,000 for Blood Tests
Brill's article begins with the story of a 42-year-old Ohio man named Sean Recchi, who traveled to MD Anderson Cancer Center in Houston for treatment of non-Hodgkin's lymphoma. He and his wife Stephanie had paid $469 a month, or about 20% of their income, for insurance that covered $2,000 per day of hospital costs. His financial troubles started when MD Anderson told him, "We don't take that kind of discount insurance."
But he had to go to the hospital. His wife recalled that he was "sweating and shaking with chills and pains. He had a large mass in his chest that was..growing. He was panicked."
Stephanie asked her mother to write a check for $48,900.
Sean waited for 90 minutes while the hospital confirmed that the check had cleared. He was also required to advance MD Anderson $7,500 from his credit card. The total cost for the initial treatment and chemotherapy was $83,900, including a $15,000 charge for lab tests for which a Medicare patient would have paid a few hundred dollars, $283 for an x-ray that Medicare categorizes as a $20 charge, and $1.50 for a generic version of a Tylenol pill.
Hospital Boss $1,845,000 -- Medicare Boss $170,000
MD Anderson provided this statement in its defense: "The issues related to health care finance are complex...[our] billing and collection practices are similar to those of other major hospitals and academic medical centers." The company made $531 million in profits in 2010, on total revenues of about $2 billion. That 26 percent profit margin was, in the author's words, "an astounding result for such a service-intensive enterprise."
It's true. A PayUpNow.org analysis of Medical Services providers showed that from 2008 to 2010, Humana had a profit margin of about 5 percent, United Health Group just under 7 percent, and WellPoint about 8 percent.
Last year's salary for Ronald DePinho, the president of MD Anderson, was $1,845,000. That's over twice the compensation paid to the president of the University of Texas medical complex that includes MD Anderson. It's about ten times the compensation of the federal Medicare Administrator in 2010.
Privatization Has Failed Us: The Deadly Facts
Our private health care system has indeed failed us. We have by far the most expensive system in the developed world. The cost of common surgeries is anywhere from three to ten times higher in the U.S. than in Great Britain, Canada, France, or Germany.
Everyone has their hand in the money pot: insurance companies, pharmaceutical firms, physicians, hospitals, equipment suppliers, the AMA. Steven Brill notes that the medical industry has spent $5.36 billion on lobbying in the past 15 years, compared to $1.53 billion spent by the defense/aerospace industry and $1.3 billion spent by oil and gas interests.
As reported by the Census Department, 50 million Americans can't afford the price of health insurance. According to a study by the American Journal of Public Health, nearly 45,000 annual deaths are associated with lack of health insurance. A 2001 survey revealed that, because of cost, forty-two percent of sick Americans skipped doctor's visits and/or medication purchases. Even careseekers with insurance can end up uncovered, as in California, where a survey found that one out of four claims were denied by private insurers, even when treatment was recommended by the patient's physician. The after-effects can be disastrous. A 2007 study at the Harvard Medical School found that 62 percent of US bankruptcies were a result of medical expenses.
Meanwhile, the evidence for incompetence in the private sector is overwhelming. Data from the Congressional Budget Office (CBO) and the Center for Medicare and Medicaid Services (CMS) shows that since 1997 private insurance costs have risen much faster than Medicare costs. According to the Council for Affordable Health Insurance, medical administrative costs as a percentage of claims are about three times higher for private insurance than for Medicare. A study by researchers at Harvard Medical School and Public Citizen found that health care bureaucracy last year cost the United States $399.4 billion. The U.S. Institute of Medicine reports that the for-profit system wastes $750 billion a year on waste, fraud, and inefficiency. As a percent of GDP, we spend almost twice the OECD average.
Private Health Care Has Shortened Our Lives
When we look beyond industry malfeasance to the effects on human life, we find that Americans are paying the ultimate price. We now have a shorter life expectancy than almost all other developed countries. A National Research Council study placed the United States LAST among 17 high-income countries.
It wasn't always this way. Since 1960 there has been a close parallel between worsening life expectancy and increased health care costs as a percentage of GDP. Most disturbing is our growing infant mortality rate relative to other countries. A UNICEF study places the U.S. 22nd out of 24 OECD countries in "children's health and well-being."
In startling contrast, Americans covered by Medicare INCREASED their life expectancy by 3.5 years from the 1960s to the turn of the century.
Another Horror Story
Janice S., a 64-year-old woman in Connecticut, was rushed to the hospital in what turned out to be heartburn. She was charged $995 for the ambulance ride, $3,000 for the doctors, and $17,000 for the hospital - $21,000 for a three-hour precautionary checkup.
Part of the hospital bill was a special stress test, employing radioactive dye and a CT scan, which cost $7,997.54, about six times more than the hospital's regular stress test. Medicare would have paid the hospital $554 for the special test.
For many of the lab tests, Janice was charged about ten to fifteen times more than the Congress-supervised Medicare rate. The hospital's own filings to the Department of Health and Human Services showed that lab tests in 2010 brought in $293 million from patients, while costing the hospital just $28 million.
When confronted with the details, a hospital spokesperson said, "Those are not our real rates.. It's a list we use internally in certain cases, but most people never pay those prices."
Emilia Gilbert was 62 when she fell at home and bloodied her face, spent six hours (most of it waiting) at the at the Bridgeport, CT Hospital emergency room, and received a bill for over $9,000. She even got charged for bandages and tubing, which are supposed to be part of the $900 emergency room charge. The hospital sued her for the money.
Steve H. went to Mercy Hospital in Oklahoma City for back treatment. He had $45,181 remaining on the $60,000 annual payout limit from his union's health insurance plan. For basic medical and surgical supplies he was billed about $8,000, including charges for a surgical gown, a blanket warmer and a marking pen. The most significant cost was the Medtronic stimulator that was implanted in his back, which cost the hospital $19,000, but cost Steve almost $50,000. His total bill at the institution run by the Sisters of Mercy ended up at nearly $87,000.
Steven D. (a pseudonym) was diagnosed with lung cancer in January 2011. When he died eleven months later, his wife Alice was left with a bill for over $900,000.
Many of the patients, or their family members, interviewed by Mr. Brill took advantage of a growing industry called medical billing advocacy, by which outlandish bill totals can be negotiated downward. The initial hospital bill is apparently an attempt by the hospital to get all they can from a patient. Steven D's $900,000 bill for cancer treatment was dramatically reduced, to about $170,000, but Alice was forced to literally sell the family farm to pay off most of her debt.
Human Need as a Product For Sale
An underlying theme through the Brill article was the vulnerability of patient's spouses or other relatives, who were not in the appropriate state of mind to challenge, or even consider, the excessive costs of treatment. As the wife of a terminally ill patient stated, "Are you kidding? I'm dealing with a husband who had just been told he has Stage IV cancer. That's all I can focus on...You think I looked at the items on the bills? I just looked at the total."
By treating the essential human need of health care as a product, the hospitals and doctors and drug companies and insurance companies and equipment suppliers are lured toward a pot of money, with little regard for the effects of their profit-making on average Americans.
The solution, of course, is Medicare for all. If, that is, the invisible hand of the market ever reaches out to average Americans.