It is very hard to answer the question posed in the title of this post. No matter how fucked up you think health care in the United States is, it is even more fucked up than that. In this regard, it's a lot like the size of the observable Universe. No matter how mindbogglingly large you think it is, the Universe is even bigger than you imagine.
The fucked-up-ness of health care in the United States is effectively infinite in extent.
If you still doubt that the United States is a joke—that hardly seems possible if you are awake—you might read Steven Brill's Bitter Pill: Why Medical Bills Are Killing Us. It is a very long article because Brill is dealing with infinity.
Brill seeks to answer a few simple questions—
Why do health care services in the United States cost so much?
Why do costs keep going up and up?
I've added a chart for your further edification.
From Doug Short's What Inflation Means to You: Inside the Consumer Price Index (February 21, 2013). The red line shows medical care inflation. If you go back to 1980, health care cost increases are about 500-600% of official CPI inflation.
What are the answers to Brill's simple questions? Well, the answers are pretty simple, too.
The price of health care services are arbitrary, and set by the provider.
Annual price increases in health care services are automatic and arbitrary.
Let's read one of Brill's examples.
One night last summer at her home near Stamford, Conn., a 64-year-old former sales clerk whom I’ll call Janice S. felt chest pains. She was taken four miles by ambulance to the emergency room at Stamford Hospital, officially a nonprofit institution. After about three hours of tests and some brief encounters with a doctor, she was told she had indigestion and sent home. That was the good news.
The bad news was the bill: $995 for the ambulance ride, $3,000 for the doctors and $17,000 for the hospital — in sum, $21,000 for a false alarm.
Out of work for a year, Janice S. had no insurance. Among the hospital’s charges were three “TROPONIN I” tests for $199.50 each. According to a National Institutes of Health website, a troponin test “measures the levels of certain proteins in the blood” whose release from the heart is a strong indicator of a heart attack. Some labs like to have the test done at intervals, so the fact that Janice S. got three of them is not necessarily an issue. The price is the problem.
Stamford Hospital spokesman Scott Orstad told me that the $199.50 figure for the troponin test was taken from what he called the hospital’s chargemaster. The chargemaster, I learned, is every hospital’s internal price list. Decades ago it was a document the size of a phone book; now it’s a massive computer file, thousands of items long, maintained by every hospital.
Stamford Hospital’s chargemaster assigns prices to everything, including Janice S.’s blood tests. It would seem to be an important document. However, I quickly found that although every hospital has a chargemaster, officials treat it as if it were an eccentric uncle living in the attic.
Whenever I asked, they deflected all conversation away from it. They even argued that it is irrelevant. I soon found that they have good reason to hope that outsiders pay no attention to the chargemaster or the process that produces it. For there seems to be no process, no rationale, behind the core document that is the basis for hundreds of billions of dollars in health care bills.
Because she was 64, not 65, Janice S. was not on Medicare. But seeing what Medicare would have paid Stamford Hospital for the troponin test if she had been a year older shines a bright light on the role the chargemaster plays in our national medical crisis — and helps us understand the illegitimacy of that $199.50 charge. That’s because Medicare collects troves of data on what every type of treatment, test and other service costs hospitals to deliver.
Medicare takes seriously the notion that nonprofit hospitals should be paid for all their costs but actually be nonprofit after their calculation. Thus, under the law, Medicare is supposed to reimburse hospitals for any given service, factoring in not only direct costs but also allocated expenses such as overhead, capital expenses, executive salaries, insurance, differences in regional costs of living and even the education of medical students.
It turns out that Medicare would have paid Stamford $13.94 for each troponin test rather than the $199.50 Janice S. was charged.
Janice S. was also charged $157.61 for a CBC — the complete blood count that those of us who are ER aficionados remember George Clooney ordering several times a night. Medicare pays $11.02 for a CBC in Connecticut. Hospital finance people argue vehemently that Medicare doesn’t pay enough and that they lose as much as 10% on an average Medicare patient.
But even if the Medicare price should be, say, 10% higher, it’s a long way from $11.02 plus 10% to $157.61. Yes, every hospital administrator grouses about Medicare’s payment rates — rates that are supervised by a Congress that is heavily lobbied by the American Hospital Association, which spent $1,859,041 on lobbyists in 2012. But an annual expense report that Stamford Hospital is required to file with the federal Department of Health and Human Services offers evidence that Medicare’s rates for the services Janice S. received are on the mark. According to the hospital’s latest filing (covering 2010), its total expenses for laboratory work (like Janice S.’s blood tests) in the 12 months covered by the report were $27.5 million. Its total charges were $293.2 million. That means it charged about 11 times its costs.
As we examine other bills, we’ll see that like Medicare patients, the large portion of hospital patients who have private health insurance also get discounts off the listed chargemaster figures, assuming the hospital and insurance company have negotiated to include the hospital in the insurer’s network of providers that its customers can use. The insurance discounts are not nearly as steep as the Medicare markdowns, which means that even the discounted insurance-company rates fuel profits at these officially nonprofit hospitals. Those profits are further boosted by payments from the tens of millions of patients who, like the unemployed Janice S., have no insurance or whose insurance does not apply because the patient has exceeded the coverage limits. These patients are asked to pay the chargemaster list prices.
If you are confused by the notion that those least able to pay are the ones singled out to pay the highest rates, welcome to the American medical marketplace.
You do not have to be rocket scientist to see the point—if health care providers can set prices and raise prices arbitrarily, they will do so, to their great benefit. They do so because they can, just like universities and colleges do. And as Brill says in the video below, if the health care "reform" bill (aka. Obamacare) had done anything to rein in costs, it probably would not have gotten through Congress.
As Brill points out over and over again, the health care industry constantly strives to deflect attention away from the question
why are costs so high?
in an always successful attempt to get people to focus on the question
who will pay those high costs?
This is not surprising, of course — there are a lot of animals feeding at the health care trough. Some of them have gotten quite fat.
In fact, the American economy would be far, far worse than it already is if the health care monster had not been permitted to grow arbitrarily large and ever more expensive. Job creation in health care runs very far ahead of any other industry.
So don't look for the health care monster to be dismantled anytime soon.
Let me spell it out for you. The United States economy is a
J. O. K. E.