Why is American healthcare so expensive?

[livi]

I recently read that the budget for American health care per citizen is twice as high as that of other top ranked countries in Europe. How is that possible? Is it twice as good too or does a lot of money end up elsewhere?

BTW, this is not a political thread in my mind, but please move if thats the case, moderators.

[Heel n Toe]

As always... Google is your friend:

http://www.google.com/search?hl=en&q=Why+is+American+healthcare+so+expensive%3F+&btnG=Google+Search

[livi]

Thanks, John. I have read the news, I would just like the comments of real life Americans.

[911pcars]

Doctors and health care have gone for corporate profits, and Medicare and Medicaid are prime areas of abuse by the medical and health industries.

The best medical care facility in the country, the Mayo Clinic, has a per person health care cost that's less than half of what is routinely charged by many regional medical health care facilities. That's due to an institutional philosophy of patients first as opposed to profit first.

As for the rest of the health care industry, the status quo is what's going to break us unless we do something about it.

http://www.newyorker.com/online/2009/06/01/090601on_audio_gawande
and
http://www.dartmouthatlas.org/interactive_map.shtm

Sherwood

[livi]

Do you mean that industry profits are responsible? But we all use the medical industry products. Often the same products and services too, from the same companies, in many countries. Are the companies able to draw a larger profit in America?

[Dantilla]

There are many pieces to this puzzle.

One of them is "defensive" medicine. In ouy way-too-litigious society, doctors order tests that may not be necessary just in case something unfortunate goes wrong, and he/she ends up getting sued.

Bad form to sit on the witness stand and tell an attorney "No, I didn't order that test, as I thought it wasn't needed". "Your honor, this doctor is clearly guilty of malpractice!"

Malpractice insurance is one of the big expenses of opening up a medical practice here.

[jyl]

I am not a doctor. I have discussed this topic with doctor friends. And part of my job is investing in the healthcare sector. So based on that:

1. Healthcare is a for profit industry in the US, so our national healthcare spending must include that profit margin. Healthcare is actually one of the most profitable industry sectors.
2. Doctors earn substantially more in the US than in, say, most European countries. Other persons involved in health care may earn more as well, but I think the disparity is greatest for doctors.
3. Doctors and other health care providers are usually paid by the procedure, rather than by the patient or by the disease. This creates an incentive to perform more procedures; at the least, there is no incentive to perform fewer procedures. Litigation and the resultant "defensive medicine" is also an incentive to perform more tests in the US.
4. Insurance claims processing and all the associated administrative costs and insurer profits eat up a substantial portion of healthcare spending. One estimate I have heard is 25%.
5. Expensive branded drugs, where there is no generic substitute, cost much more in the US than in Europe. Often 1/3 more. This is even though it is the identical drug sold by the same company (often a US company). I do not know if Americans also pay more for medical devices, equipment, etc.
6. Americans tend to receive more expensive, high technology tests and procedures. Interestingly, some of my doctor friends state that much of this expensive care does not actually improve patient outcomes.

I don't know if the above are in any logical order.

[Dueller]

Originally Posted by Dantilla

There are many pieces to this puzzle.

One of them is "defensive" medicine. In ouy way-too-litigious society, doctors order tests that may not be necessary just in case something unfortunate goes wrong, and he/she ends up getting sued.

Bad form to sit on the witness stand and tell an attorney "No, I didn't order that test, as I thought it wasn't needed". "Your honor, this doctor is clearly guilty of malpractice!"

Malpractice insurance is one of the big expenses of opening up a medical practice here.

Not as big an expense as you would think. Malpractice premiums and settlements/awards amount to less than 1/2 of 1% of total health care costs in this country. FWIW I feel doctors are getting sgrewed by their carriers. Tort reform was enacted in my state limiting non-pecuniary damages to $250K. Insurance industry lobbied hard for it citing a likely decrease in premiums. Guess what...premiums actually went up.

[Rick V]

Greed.
Next question

[s_wilwerding]

I don't think you can discount American's sense of entitlement. As everyone here knows, most people have no trouble spending other people's money, and that's essentially how insurance here works (private and public/Medicare/Medicaid). Most people who have either private or public health coverage have absolutely no incentive to save money - if they stub their toe, they go the ER, if they have a health problem, they want every test under the sun.

I'll give an example - I work for Fortune 200 company, who's benefits have always been good. When I first started 10 years ago, you could get the gold-plated family healthcare plan for $300 a month - no deductible, co-pay, etc. The people who bought into the plan would rack up ludicrous bills because they figured they'd paid their money and they ought to get the most out of it. A few years ago, the company switched to Health Savings Accounts and actually gives us money in them each year, and they have come out far ahead because the employees now see the money in those accounts as their money, and they tend to spend it much more wisely. It also helps that the money rolls over, so that money I save on healthcare this year can be used in the future.

If we could only figure out something like that on the national level, we'd really have a plan...

[Laneco]

Though I realize this is an offensive comment, I believe that it is completely true.

Americans are unhealthy. We eat the wrong foods, we are fat and we do not exercise... We have ready access to drugs, alcohol and risky injury prone adventures. We are likely to do damage to ourselves while "playing." We look for a magic pill or a newfangled procedure to "fix" what we spent years screwing up with our bad habits.

That said, I guess I better get my fat American butt outside and go for a run...

(go ahead and flame me - I'm READY!)

angela

[Dixie]

Roughly half of the cost per patient occurs in the final six months of the patient's life. (Yes, I'm to lazy to google the actual statistic.) Americans expect no expense will be spared to give Grandma another day on this earth.

I wonder if European health care expense over a patient's life is similar. Livi, do you know?

[Tobra]

Angela, insightful and a badass fiberglass car that is ridiculously overpowered, wotta dame!

Originally Posted by Dueller

Not as big an expense as you would think. Malpractice premiums and settlements/awards amount to less than 1/2 of 1% of total health care costs in this country. FWIW I feel doctors are getting sgrewed by their carriers. Tort reform was enacted in my state limiting non-pecuniary damages to $250K. Insurance industry lobbied hard for it citing a likely decrease in premiums. Guess what...premiums actually went up.

Lot of truth to this, assuming you are talking about health insurance premiums. Malpractice prices did indeed go down, mine did anyway. Providers are being hosed by third party payors, premiums up, reimbursement down. Can't say as I blame them. If I saw my golden goose was ill, I would want to get as much out of her before she died as I could.

Lot of reasons, fraud and unnecessary procedures are a tiny percentage. The biggest thing, IMHO, is that for decades, Americans have not paid the true cost for healthcare. This leads to the spare no expense mentality. The need to practice defensive medicine is a giant part, lot of cat scans, MRIs. Doctor pay is a relatively small percentage, particularly when you consider the expense of an education. I was a quarter million dollars in debt when I finished my education, not to mention the 10 years I spent not earning much money, opportunity cost matters.

Read an interesting article in the July Bulletin of the American College of Surgeons by R Wenger MD, FACS.

We have high cancer survival rates, better access to care, and a system that attracts patients and doctors from around the world for care and training.

Did you know that American and American based groups have won more Nobel prizes for Medicine and Physiology than the rest of the world combined? This is astounding to me. 8 of the last 10 major medical advances also by Americans or American based groups. He also made strongly supported arguments that life expectancy is not a good indicator of efficiency of system, with the same true of infant mortality rates, this last due to vagaries in the way countries like Canada, England and France report this metric.

In short Markus, there is no simple answer to "why"

here, read the Wenger article yourself, kind of long, but made me question the wisdom of the single payor system even more
http://www.facs.org/fellows_info/bulletin/2009/wenger0709.pdf

[Neilk]

Originally Posted by jyl

4. Insurance claims processing and all the associated administrative costs and insurer profits eat up a substantial portion of healthcare spending. One estimate I have heard is 25%.

You have a single payer system where the billing is pretty clear cut. Here in the US, my employer has 600+ employees who work on contract management and claims software to help hospitals deal with the complexity of billing a multitude of payers. A single payer system would work wonders in reducing cost, but would cause millions of lost jobs.

[livi]

Thank you all for your insights! I think I have a somewhat better perspective now, although reading the article from Tobra made it clear that it is a very complex issue indeed.

[cstreit]

You get what you pay for then?

[lukeh]

I won a $1,400 watch at recent golf outing that was raising money for our local medical foundation. The watch was an anonymous donation from a doctor. He was given the watch by a drug company rep. He new he couldn't accept it so he donated it as a raffle prize. How about we lower the cost of my prescription and the drug companies stop giving out $1,400 watches to guys making hundreds of thousands a year?

[Bowling]

The patient (customer) doesn't pay the bill, for the most part. The employer does or the government. If you don't pay for something do you care what it costs? I also believe the quality of our health care is exceptional. Many other reasons as well, for instance regulation adds cost to the system.

[Moses]

All very good points.

I will add that the level of service is different than one can expect elsewhere.
On Monday one of my patients was reported to have a suspicious mammogram. Later that afternoon she got a stereotactic breast biopsy. On Wednesday the report indicated that she had breast cancer. We arranged an appointment with a breast surgeon the same day. She met with an oncologist the following day.

The surgeon told her her could arrange for her to have surgery before the end of the week or delay it if she wanted time to talk with her family or seek a second opinion.

Really remarkable service. It's pretty much the standard around here.

[widgeon13]

As an EMT, I sometimes marvel at what people will request an ambulance for transport. As someone above mentioned, when you don't pay some of the bill, you don't give any thought to the cost.

We are a volunteer organization so I'm not complaining but in the city, if you call for an ambulance, it ain't cheap.