Prescription Price Index: Generic versus Brand Names

Source: Express Scripts

 

 

 

US Health Care is 2X as expensive as the rest of the world.

Why?

Discuss.

Category: Consumer Spending, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

75 Responses to “Open Thread: Why Is US HealthCare So Expensive”

  1. VennData says:

    The drug and device companies lobbied all the cost controls out of Obamacare.

    “…While campaigning for the presidency, Obama often spoke about taking on drug companies and allowing Medicare to have bargaining power over prices. He also supported the re-importation of cheaper prescription drugs from Canada as a way to lower health care costs. But in order to get Pharma support for the Affordable Care Act, these two measures were taken off the table and left out of the legislation…”

    http://www.healthbeatblog.com/2011/04/using-medicares-clout-to-negotiate-drug-pricesdid-obama-put-that-back-on-the-table/

  2. VennData says:

    GOP rejects UN disabilities Treaty

    http://www.nytimes.com/2012/12/05/us/despite-doles-wish-gop-rejects-disabilities-treaty.html

    Oh you GOP voters must be proud.

  3. eddurkee says:

    Healthcare is not a true market in several ways:
    1. Classic example of third party payment. Consumer doesn’t pay bill so wants every test, right now, paid by somebody else.
    2. Third party payer (government and insurance companies) pays for wrong stuff. That is, procedures vs. outcomes.
    3. No published or even standard prices. Anyone who has ever tried to read a bill will attest.

    I’m sure people working in health care have many other examples.

  4. Iamthe50percent says:

    Generics are made in India with dubious quality control. That’s why the price hasn’t risen with (US) inflation.

    Like a little ground glass in your Lipitor.

    Many patented drugs are also made in India. I know Abbott’s are.

    Everything has been outsourced except retail trade (with the internet – just wait), banking and war.

  5. Lee Adler says:

    Doctors, hospitals, clinics and labs are paid nearly 2x in the US compared to the rest of the world. What’s the difference?

    In the US, the medical industry is a private, for profit business, that has been allowed to run amok for the last 75 years. In the rest of the world health care is either a government service, or treated as a tightly regulated public utility. The kind of disgusting, disgraceful medical profiteering that goes on all the time in the US simply IS NOT LEGAL anywhere else.

    From the doctors to the hospitals and insurers, all are operating a massive scam and ripoff, and it’s all legal, thanks to the government being in the pockets of the industry. As a result, Americans pay an 80% penalty relative to the rest of the world to support the scam. The US medical scam industry exacts a private tax of 18-19% of GDP, while in the rest of the civilized world, medical care costs only 10-11% of GDP.

    It just doesn’t get any simpler than that. But the American people have been brainwashed by the massive industry propaganda machine, and corrupted by the massive bribery of a slight majority of people who get coverage without having to pay out of pocket. If they never see the cost, the can’t understand the cost. Meanwhile, 15% of us go without, too rich or too young to qualify for government insurance, and either not healthy enough or not rich enough to pay for private insurance.

    Obamacare does not address the true nature of the problem of excessive cost.

  6. Apinak says:

    Here is a related question- What service do private health insurance companies provide that justifies their cost?

  7. hieronymus says:

    It’s pretty basic: the U.S. is the first market where U.S. FDA approved drugs(significant majority of new drugs released) are initially released so we bear the highest initial costs. Once those drugs get enough production scale and initial costs are recouped, prices naturally drop and scale expands. Generics don’t have the high initial costs as the developers so can price much lower, but also many years after the inital release. the U.S. market is essentially subsidizing the world’s lower eventual price by paying for the development costs now. For that high initial cost we get the best new treatments right away.

  8. blackvegetable says:

    “Here is a related question- What service do private health insurance companies provide that justifies their cost?”

    CURSE YOU, POOPDOG! CURSE YOU!

  9. Tim says:

    The full picture:

    1) U.S. Pharma manufacturers routinely reformulate and re-patent existing drugs, as much as they can, to extend full price chargeability.

    2) Pharma chains routinely over price for prescriptions, e.g.: Duane Reade

    3) Doctors are “bribed” to write prescriptions for dubiously required drugs, and for brand vs. generic.

    4) More than 20%+ of physicians bill for unecessary or non-performed procedures, especially for gastro and cardio diagnostics.

    5) Insurance companies deny payments for as much as 25%+ of legitimately billed tests and procedures, while retaining premiums and ancillary fees.

    6) Hospitals, health systems and freestanding facilities routinely both over bill and over collect for tests, procedures, and other patient treatments and care.

    7) The government regulatory agencies charged with oversight are grossly incompetent.

    Fraud, incompetence, and kickbacks are the rule of the day. God bless America!

    Tim McInerney, Healthcare Capital LLC

  10. lisarose says:

    It seems that in the States the very worst thing that could happen to anyone would be to find that their tax dollars had been used to give a poorer American food or medicine.

    The very worst.

    Total meltdown.

    They will give huge amounts to rich banks ( this is not “welfare” as the people getting the money already have money).
    They will allow rich investors to pay tax on only half their earnings ( this is not “welfare” as the people getting the money already have money).
    Etc. Etc.

    So afraid are they of having to give a poorer person medical attention ( this IS “welfare” as the people getting the money actually need money ) that they have allowed an entire insurance industry to grow up and require financial support in order to have a third party BETWEEN patient and doctor so they can tell themselves that their tax dollars are not being spent on a poorer American.

    The least expensive way to deliver medicine is to socialize delivery, giving direct necessary care to everyone and covering the bill through taxes.

    It flat out costs less than essentially doing this while paying for insurance agents to interfere with every aspect of doing this.

    BUT IT INVOLVES GIVING DIRECT SUPPORT TO POOR AMERICANS.

    What are you a Nation of again?

  11. spudvol says:

    The purpose of socialized health is to provide health care, the purpose of capitalist health care is to provide profits.

  12. Matt says:

    I’m not sure the data above matches the question. It is true that prescription drug list prices are increasing faster than inflation. But back end discounts to private & public payers are also increasing, and this would not be transparent to Express Scripts. So list prices increase to keep up with the discounts. Also over time oral medications are going off patent while new medications are increasingly large molecules…which clearly will be more expensive. Generic drugs are essentially a totally different business, with totally different drivers, and should not be compared to Rx drugs.

    If your question is why US drug prices are so much higher, that’s essentially because other countries institute more rigorous price controls compared to the US. The US could copy these policies, and pay slightly less for health care, but potentially have fewer drugs. To answer more broadly around health care costs as a whole is much more complex.

  13. RW says:

    There are multiple reasons I’m sure but two biggies are:

    Patent Monopolies Lead to Enormous Economic Waste

    and

    The American model of fee-for-service medicine cannot create a viable market: It must lead inevitably to market failure after market failure because the price of the good — health — has no reliable price signal, the ability to clearly associate the good with its cost. The invisible hand cannot operate without price signals. Full stop.

    Escape Fire: The Fight to Rescue American Healthcare.
    IMO a much better effort than Michael Moore’s Sicko: Not because Sicko got a lot of facts wrong because it didn’t, but because Escape Fire doesn’t indulge in political polemics, it just comes straight at you with the problem, in detail, and offers an alternative.

  14. crutcher says:

    AMA.

  15. Maggie says:

    Just off the top of my head:
    1. Prescription drug and medical equipment manufacturers are for profit businesses. I imagine it’s massively profitable even for drugs that have been available for decades. Although I’m sure there are many highly regarded and highly paid executives that would argue that it isn’t.
    2. No malpractice limits which doesn’t mean we should tolerate negligence.
    3. Too many outsourcing-industry-type fingers in the healthcare pie. There’s a reason for everything right?
    4. Highly profitable healthcare insurance companies – Lotsa wealth created there.
    5. Is Sherif Abdelhak living well? He claims he isn’t but I’m sure he made a few extra bucks while raiding restricted funds from AHERF.
    6. I’m from Philly. Remember that guy who murdered his wife for an exotic dancer? He made a good living selling medical supplies before he went off the deep end.
    7. Did I mention fraud? So many kinds of fraud. It actually may become easier to pull-off when the business of a system is so complex.

    All the reasons are out there and there are some great business and medical journal sources but it’s like banking; do the powers that be really want to change the system when it comes down to it.

    It all contributes to making the economy go round and no one wants to work for free. It’s that “finding a balance” and “what is ethical” stuff again not to mention providing safe, sanitary conditions. I could go on and on but I won’t say that direct-care healthcare providers and scientists are paid too much even if they are just standing around, prepping or drilling while waiting for an emergency.

  16. TheInterest says:

    “Why is US Health Care is 2X as expensive as the rest of the world?”

    Because it is at least twice as good as the rest of the world.

  17. wally says:

    Many excellent reasons listed above in earlier posts; I could add a couple… but I won’t.

    Because: the bigger question is, given that all these things are known, what is it about our country or our system or our government that refuses to address these issues and change them? There is no will whatsoever to end these problems, only to bitch endlessly about the consequences of them.

  18. CSF says:

    What percentage of drugs prescriptions must be purchased as brand name? I suspect it’s a low figure. My family’s drug costs continue to decline as brand names become available in generic form. This is money well spent – two family members with seizure disorders who for a couple hundred dollars per month (for our insurance company) can live normal lives.

    In c0ntrast, a recent car accident / ambulance ride to the ER with bumps and bruises will cost our insurance company 6-months of my wife’s annual salary.

  19. Bob A says:

    All you need to do is look at the German, Canadian, Japanese systems and note what’s different between their systems and ours.

    It’s not brain surgery. We have an insane, corrupt, system that rewards overuse and corruption and those who perpetuate these problems.

  20. uzer says:

    Why Is US HealthCare So Expensive? Because the banksters are money skimmers, or if you believe their propaganda (yes, you, TheInterest), it’s because quality is so much better.

  21. call me ahab says:

    because the U.S. has patent laws on drugs that the rest of the world will not enforce causing all the costs to fall on U.S. citizens …

    other countries ( including our close friend Canada) threaten to allow generics and will not enforce patents . . .so the drug companies drop their prices for the outside world and make it up on Americans. .

    basically the United States is subsidizing the drugs used by the rest of the world

  22. AndrewBW says:

    The purpose of insurance is to provide coverage for losses suffered as a result of a contingent liability, i.e., a liability that may or may not be incurred. I may get in a car crash – or I may not. My house may burn down – or it may not. A visitor may trip and fall in my house and break his arm – or he may not.

    Ill health is not a contingent liability, it is a guaranteed liability. Everyone will suffer from ill health sooner or later. Some people may be luckier, and not suffer from it until later in life. Others may be unluckier and suffer from it starting at a very early age. But everyone will suffer from it, and therefore it cannot be insured against. Every person a so-called health insurer covers will, sooner or later, begin filing claims. Consequently there are only two ways that insurers can guarantee a profit: increase premiums and reduce claims payouts.

    There is no reason for there even to be such a thing as health insurance. All it does is insert an unnecessary third party in into the transaction, a party that contributes nothing to anyone’s well being.

  23. A says:

    In what is becoming an ethics-free culture, we must always remember that Power & Profit take Precedence over People.

    Plus, you can watch last Sunday’s episode of 60 Minutes.

  24. subscriptionblocker says:

    1. High barriers to competitive entry. AMA, Big Pharma, for profit hospitals…
    2. Oligopolistic institutions like insurance companies
    3. Third party payers
    4. Rejection of automation (not their ipads – *real* drive down cost automation)
    5. Bankruptcy laws which prevent default (bleed em longer).
    6. Little federal research into infectious diseases (the big one).
    7. No state licensing of medics (99% of our problems probably could be handled).
    8. Status quo is so obscenely profitable – therefore no change.

  25. farmera1 says:

    1) Doctors are paid by the “piece” in the US. The more operations they perform, the more they get paid.

    2) The government is banned from negotiating with the drug companies for cost of pills in the US.

    3) The hospitals are the absolute worst places to be from a health standpoint. Literally hundred of thousands of people die each year due to hospital screw ups (screwed/mixed up medications, preventable infections, drug interactions and the list goes on)

    For item one above I have personal experiences. Local Doctors tried to get me to have back surgery, I went to Mayo (Mayo doctors get paid a salary not by the piece) , no back surgery, just exercise and no pain. Another doctor told me I needed a new toe joint. Didn’t have the surgery and am very glad I didn’t. In very round numbers these two procedures would have cost roughly $200,000 of wasted money. But most people do what the doctors tell them to, with out questioning.

    For item two above, that is the reason you can go to Canada and get drugs manufactured in the US at much lower cost than you can buy them in the US.

    The CDC has interesting information on how hospitals are literally killing people.

  26. call me ahab says:

    and keep in mind that creation of drugs are high risk- may not get approved by the FDA- massive research and tests

    so with risk – comes high rewards

    but in today’s world they are money gouging douche bags

  27. pc says:

    I think most people who work in the industry know what the problems are but are not willing to talk publicly about it.

    (1) DRGs – that’s how hospitals are reimbursed/paid. The more DRGs they can assign to a patient the more the hospital will get paid. There is no disincentive not to find more DRGs. It’s like Wall Street telling everyone they can police themselves. Not much difference with the health care industry.

    (2) Too many unnecessary tests and/or repeat tests. A patient can show up at one hospital one week and another hospital another week and the same tests will be run. No sharing of information between hospitals and or providers.

    (3) Health care is the only industry that I am aware of where the service provider gets to charge twice or even three times if they make a mistake and have to repeat the procedure over. I am not aware of any other industry where if a provider screws up he/she can bill again.

    (4) Hospital acquired illnesses – again the only industry where the provider gets to charge patient to fix something that the provider gave to the patient while at the hospital.

    (5) Patients are also to blame – I can’t believe how many patients I’ve come across that think hospitals are 4 star hotels and want to be treated like they were staying in the Ritz. They know exactly how many days they are entitled to stay under Medicare rules and will not leave until then. It’s very difficult for a hospital to kick a patient out who wants to stay the max number of days allowed.

    (6) Doctors caving in to requests for different drugs by patients

    (7) The general public not taking responsibility for their own health. They think there is a magic pill or it’s the doctor’s responsibility.

    PC RN, MBA, MSEE

  28. pc says:

    one more…

    (8) End of life care – I read that most people say that they would prefer to spend their last remaining days at home with family and friends but in reality most people spend last remaining days in ICU with tubes shoved up your nose and multiple IV lines. Not the most comfortable way to spend ones last few days – in my opinion. Costs for a night in ICU is probably the most expensive in the hospital.

  29. call me ahab says:

    “Everyone will suffer from ill health sooner or later”

    wrong

    people die all day long due to accidents- with or without ever experiencing ill health

    your proclamation is a fallacy

  30. juneau says:

    I work in healthcare. I get annoyed by people who compare salaries to those of other countries because I never see the same comparison for other fields. Generics by law can be made with 20 percent less of the real medication than the brand, as long as the blood levels in test subjects show bioequivalence. Look it up. It is legal. With all due respect Tim, this can make a difference in the patient’s response to cardiac and psychiatric medications. they are not the same and it is perfectly legal. Regarding relevance to clinical outcomes, it depends, YMMV.

    There are too many managers and middle men and support workers-my mother’s orthopedist needs 3 full time staff just to make insurance calls to get prior approvals, etc…. This is not patient care, is it?

    My fees are fixed and getting LOWER. I wish I could say the same for the administrators at these various facilities. Too much middle management. No consistent fee seeing across the board for all items and procedures. Cost shifting to the US to develop new R and D. Your 20 dollar viagra pays for Canada’s 10 cent lipitor (fake numbers but you get the point).

  31. CB says:

    This article lays it out:
    http://www.nytimes.com/2012/12/02/opinion/sunday/a-health-insurance-detective-story.html?partner=rss&emc=rss&_r=0

    The entire system of insurance, pharma, and health providers is a giant con designed to extract maximum profits through opaque pricing.
    So a year supply of Revlimid may cost
    $132k or $17k or only $240.00 depending upon the choices you make from inaccurate quotes and unknown guesses? They come right out and say you won’t know what it costs until you get a bill? WTF? How do they arrive at the bill then? 
    It’s ridiculous beyond belief. The black market is more honest, transparent and efficient.

    @spudvol’s comment is exactly right – the incentive is profit – not health

  32. call me ahab says:

    Ritholtz-

    sadly- regarding this post-

    its private companies that make the equipment and drugs that allow the people whining to stay alive long enough to continue whining

    guess all these life extending creations are a mixed blessing

  33. Event_horizon says:

    Regarding the ridiculous costs of often-unnecessary end-of-life care: Providing an advanced directive should be mandatory for obtaining a license/ID card, as it is with organ donation.

  34. doctored5 says:

    Two things come to mind:
    asymmetric information and a perverse business model.
    You can’t predict how much health care you’ll need. Your demand can be highly inelastic. You need very little or you need a lot, depending on factors that are mostly out of your control. So you can’t really negotiate or purchase it efficiently. And providers can assume that you could “game the system”, so they will price insurance accordingly.
    And the providers are paid for their services, not results. There really should be a central person/organization with responsibility for managing your care, tracking tests and treatment. The Veteran’s Administration is an example of a well-functioning delivery model. I see that the ACA will move the market in this way.

  35. louis says:

    Because Americans will do anything to avoid pain and university medical centers like to buy shit from Wall street.

  36. Bridget says:

    1. Other People’s Money
    2. Fat, sedentary population

    Neither of which will Obamacare rectify.

  37. 4whatitsworth says:

    Why is health care so expensive.. great question!

    I would say mostly because it can be. Costs are like goldfish they will grow to the size of the bowl. The consumer of healthcare rarely spends their own money so there is no stop there. The insurance companies don’t care because they just raise their rates. Business don’t care because the fear of being without insurance keeps people in line.

    Other than that some of the structural issues are..

    #1 The cost at the end of life and beginning of a failed life.
    25% of medicare is spent on the last year of a patients life http://content.healthaffairs.org/content/20/4/188.full

    #2 The effect of excessive medical malpractice litigation on the health care procedures, costs, and insurance.

    #3 The cost of drugs related to what I call the white drug culture the drug companies have lobbyist, sales people on every corner and great marketing trying to get us hooked.

    Will Obama care fix it..? In my view not likely it does not address any of the core issues and it actually may cause harm because most doctors hate it. Someone forgot to tell the committees that the #1 variable in a service is the quality the person rendering the service and the good doctors are not likely to go along with this.

    ~~~

    BR: Your #1 hits it — End of life care is 50% of spending in many instances — thats a huge cost center (remember death panels?)

    Malpractice is a red herring, with the data overwhelmingly showing it to be a tiny cost — a few billion out of trillions.

  38. constantnormal says:

    Lee Adler hits the bulk of the problem perfectly. His description also applies to Big Pharma, which sells the exact same drugs here for much more than they are allowed to in other countries. So why do they sell them to those other countries at all? Because they make profits there also, only not at the levels of unbridled greed that they are permitted to here.

    Like every other industry in Bananamerica, Big Pharma (along with Big Health Care and the AMA) have learned that capitalism is nicer when you can bribe the people who make the rules in our best-government-money-has-bought “democracy” of dollars.

    Until we institute effective regulation, and return most of our health care industry to the nonprofit business that it used to be, we will see no progress in controlling the explosion in health care costs.

    And until we get the money out of politics, we will see no effective regulation of anything.

  39. Dude says:

    1. Medicine is labor intensive and so increased productivity hasn’t decreased costs
    2. US Medicine reimburses based upon work done–this increases utilization
    3. Low cost shares born by patients doesn’t decrease utilization

    IBM’s Dr. Watson will solve much of this because it will be much more productive, it won’t have an incentive to produce more work to earn more. Patient utilization would likely increase, but that may or may not be a good think.

  40. river says:

    1) Medicine is overused in this country. Why is that? 1) Defensive medicine = lots of tests. 2)Profit motive, as Doctors are paid by the procedure (more procedures = more money for the doctor). Basis for this opinion: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande. This is simply huge, and effects everything, but includes the medical industry infrastructure (hospitals and medical centers, etc). As an engineer, over the last four years, it seems the one consistent thing getting built was medical hospitals . . . and these were all super fancy facilities.

    2) Medical profession is hugely overpaid. This bubble has been blown, and the sticky prices will prevent the payment that they receive from coming down very fast. (Luckily, I believe they have reached the point where they can’t keep extracting more and more money, since the population can no longer pay. The hospital my sister works “lost” twenty million dollars last year, and so all the part time nurses with full time benefits are being turned into fewer full time nurses with full time benefits. Hours are also being cut for others. Anecdotal, I know, but I would expect to hear lots and lots of grumbling in the future as this reality sets in).

    3) High admin costs for a hugely complicated health care system. Health insurance industry is out of control. I am a reasonably smart engineer, and I can’t make heads or tails out of how my health insurance works.

    4) Prescription drug companies extract as much money as they can . . . rolling patents over by barely changing the drug. Having competing drugs by different companies that do essentially the same thing (Viagra versus Cialis, anyone?).

    5) The fact that one drug is $200/month in this country and $20/month in other countries would point to the “US market” bankrolling/subsidizing the development of medicines for the world. Maybe this

    6) Medical spending is subsidized by the government, by allowing hospitals to operate as not for profits, and allowing a tax deduction and cafeteria plan.

    7) Hugely expensive end of life care, and no financial disincentives to prevent these expenses. I don’t ever expect this issue to be fixed, since any attempt to do so will be met with calls about death panels.

    8) Uninsured people not using the medical system properly, opting for emergency room visits when prior non-emergency room visits would have prevented problems at much lower expense. Not sure how big of effect this is, suspect it is somewhat minor.

    And not really a reason, but more a facilitator of the high expense of the medical profession, is the opaque way costs are shifted through the system . . . charging high amounts of money to uninsured people, who will never be able to pay, which I have heard recently allows the hospitals to have huge paper writeoffs and claim to be non-profitable, even while paying most of their employees six figure salaries. And if medicare costs/payments are limited by the government, and most medical expenses are accrued in the last six months of life (and presumably mostly by elderly people on medicare), wouldn’t that fact point to the idea that private insurance payments are subsidizing care that elderly people receive?

  41. Event_horizon says:

    river,

    your #8 is not minor… it is a very large expense for hospitals (do you think they ever recoup much of that cost from the uninsured?).

    I work in the medical field, and see first hand many cases where patients WITH insurance went to the ER for a simple problem when they could have called their physician or gone to an urgent care center at a fraction of the cost. Who bears the burden of those expenses? You and I, in the form of premium increases. Insured patients need to be disincentivized to use the ER except for serious emergencies.

  42. ConscienceofaConservative says:

    Drug prices always come up and the example of Canada comes up. I think this is wrong. Canada gets a free ride off the higher prices we pay in the U.S. which helps fund R&D. If the United States further capped big pharma we would see far less innovation and new drugs.
    One small way we could help control costs would be to tort reform which would reduce outrageous insurance costs doctors pay which get passed along.
    But the big reason costs go up is because those who seek treatment are not those paying for the treatment. Until and unless we figure out a way to empower those seeking treatment to be incentived to do so at reasonable cost we are not solving the problem. I fear that current government efforts while increasing the pool of those eligible for insurance will limit the care available to the rest of us and see reductions in the rate of new medical advances.

  43. denim says:

    This generic versus Brand name is a red herring. My and my wife’s parents and now our doctors always prescribe a generic, if available. What these whiners are really asking is for pharma companies to develop drugs for free and license them for free. That is not a sustainable business model without…pay attention…government taxpayer subsidies.
    Note that many pharmas will provide their brand name drug at almost no charge to those who have no means to pay, like no job, no insurance coverage. They have a heart and deep pockets, but not for freeloaders.

  44. JerseyCynic says:

    YES LEE ADLER

    It’s sick care not healthcare. Most doctors in the US of PC make their salaries off of disease management — lots of Rx’s and lots of office visits.

    The insurance companies “pay ” the doctor’s salaries. Gee, I wonder why so many MD’s are silent in this ongoing so called healthcare debate — I think they are split 50/50 on single payer

    It’s by design. This affordable care act is the same as the bank bailout. “$447 billion in subsidies for insurance interests alone—for the pharmaceutical and insurance industries.” http://www.truthdig.com/report/item/the_real_health_care_debate_20120409/

  45. ami_in_deutschland says:

    As someone who grew up in the US with direct relatives in medicine (mother a former RN in a private practice, stepfather a general practitioner) and who has lived many years in Germany, here are my (purely subjective) observations:

    1) Non-profit insurance providers – The vast majority of Germans (87%) are covered under the public health system, which on the the insurance side is made up of over 100 non-profits from which everyone is free to choose. (It used to be that many of these providers exclusively covered only certain occupations or regions, but such restrictions were lifted a few years ago.) Each of these is required to cover all treatments at the same reimbursement levels agreed to in negotiations with medical providers at the national level, but are free to offer additional coverage of non-mainstream treatments to differentiate themselves.

    2) Lower administrative costs – Regardless of the insurance provider used, they all utilize the same forms and procedures. Each patient has a standardized smartcard which contains all information needed for processing. This makes it possible to keep staff sizes of practices and hospitals very low.

    3) Lower doctors’ incomes – Although doctors still belong to the better-paid professions in Germany, my impression is that very few attain the kind of wealth which many in the US do. However, this is offset by generally more regular hours (no hospital rounds/on-call duty for doctors in private practice) as well as little to no educational debt (medical school is free).

  46. rd says:

    1. The US healthcare system is an accidental Frankenstein monster that is overly complex. As a result, excess administration and overhead costs consume a igh percentage of doallars. I have seen estimates of 25% of the healthcare cost is administration related. Dropping that to say 5% would proably cut half the difference from the other parallel countries (Canada, Europe etc.). If you go to a doctor’s office or hospital in Canada, the first thing that will hit you is the absence of people who are not doctors, nurses, or lab technicians. Thee are lots of reasons for this, but intense industry lobbying to keep the adminstration ballooned is a major one.

    2. Incredibly bad use of data and information, largely because of the system fragmentation. This is a highly technical field with lots of complex interactions and unintended consequences. Small changes in care can make huge differences in outcomes (think handwashing between patients which is often not done). Much better collection and evaluation of data, particularly as to how to improve outcomes with low cost steps, would probably drop the costs significantly.

  47. Julia Chestnut says:

    Lee Adler nailed it: the system is run for profit at every tiny microlevel. Third-party payor alone wouldn’t do it; in fact, you will notice that the third-party payor doesn’t result in rampant, run away gouging in countries with a single-payor system. It isn’t the consumer demanding every possible test now, that’s ridiculous. I extremely infrequently see the patient demanding anything in our system, and often see the patient suffer in silence to her detriment.

    In other cultures, it is a taboo to gouge people in health care. Are we profit centers for a machine, or are we people? Doctors are pretty pissed about the current system, too, because it puts them in a painful ethical bind, essentially, and turns them into insurance middlemen instead of professionals.

  48. jleste01 says:

    BR

    I know you say that malpractice is a red herring and i have read many articles to support that. But as an MRI tech for 18 years i know first hand that many tests are performed that are either unnecessary or equivilant cheaper ones are available to answer the same questions for diagnosis. As to weather these tests are ordered because of fear of malpractice or from pressure from the patients or lack of training/ communication between doctors to order the correct test is an unanswered question in my opinion.Other cost drivers besides drugs,insurance companies etc. arein my opinion

    1. way to many support personel/ managers to deal with the over regulations, multiple billing practices of various
    insurance companies.( if you dont believe me go to any hospital cafeteria break area etc. and notice how many people wear lab coats/ scrubs vs. suits casual attire.

    2. Lack of standard pricing models. i had to update our charges once and i had never done this so i asked the hospital president and he said to just pick a number that is higher than what we can collect from medicare and inline as best i could find with what other hospitals charge.

    3. The above comments about for profit hospital , lack of price transparency/discovery, insurance monopoly etc and others also drive price increases. I could go on and on but this is enough.

  49. rjbcg says:

    Follow the money…..

    Check Kaiser Family Foundation data –
    5% of the population spend ~50% of the total ~$2.8 trillion.
    50% of the population spend ~3% of the total ~$2.8 trillion.

    SOURCE: http://facts.kff.org/chart.aspx?ch=1344

  50. Why?

    the ‘Disease Management’-Industry has the same addiction as Wall St., W.D.C., and the, infamous, ‘Welfare Queen(s)’..(among others..)

    OPM.

    maybe, HSAs are the Answer, to begin with..

    http://www.hsafinder.com/

  51. theexpertisin says:

    1. Fear of lawsuits
    2. Third party reimbursements (before mega insurance plans and government intrusion, house calls in the early 1960s were ten bucks, or less).
    3. Bid Education. The waste and featherbedding is profound.
    4. Costly medical procedures that only marginally prolong life. How much is a month worth to a 90 year old in pain, disabled and in many cases wishing for death?

  52. DeDude says:

    In one word: Profit
    In two words: Market forces

    When your health care system is “for profit” it quickly becomes more about the profit than about the health and the care. And this gets worse, not better, when you start applying market forces on the system; because then even those who want to concentrate on the care, are forced to think more about the profit.

    There is no such thing as an informed costumer at a doctor’s office or emergency room. You have to have a medical degree to have a decent chance of evaluating the quality of the advice and you are no better off even if you get a second opinion (who is right if they disagree?). At the same time most people are willing to spend unlimited amounts if their health or life is in danger. Talk about a juicy set up for predators.

    It is not that many doctors are outright predators, but Wall Street and hospital are running a lot more of health care these days and they are predatory sociopaths.

    Just look at the latest Wall (K) Street initiated reform where Medicare reduced the reimbursement when a procedure is conducted in a doctor’s office but retained higher rates when the same thing was conducted in a hospital. As a result doctors are moving into hospitals in droves and the excess fees shared by docs and hospitals. Talk about brilliant stupidity among those who approved that change – or were they bribed.

  53. number2son says:

    I work in healthcare IT, and this is an entirely separate area of gross inefficiency contributing to the high cost of healthcare. Most patients only experience this to the extent they must fill out a new set of forms at each doctor’s office they visit, including basic information and consents to acquire their clinical data from other facilities. The latter represents a serious risk when it comes to continuity of care. One of the few good things about a system like Kaiser is that it is integrated and your health records are available system-wide.

    So how does information about you and your health move around the healthcare ecosystem? Using a messaging protocol called HL7, which is loosely typed, open to interpretation by the implementer, and thus variable from one system to another (that is, when they even bother to talk to each other). We also have a veritable goulash of code terminologies to wade through and normalize. It’s one of the most complex IT domains ever devised.

    Healthcare IT systems cost money. Lots of it in most cases. And guess what? Most of them don’t know how to talk to each other. Even though we have that flawed but useful little fellow HL7 to help make that happen, IT system vendors have built their walled gardens. And they very little incentive to change this. Health systems and hospital are captive customers. Administrators and patients are burden with unnecessary and redundant and error-prone information gathering processes. And ultimately, the quality of care suffers.

    IMHO, the people who actually provide care are doing heroic work negotiating the intentional and non-intentional hurdles these system throw in their way toward giving patients the care they need. But it shouldn’t be this hard.

    If you want to know what the government is doing to motivate people to make positive change, google “meaningful use”. Whether or not it is helping is another debate unto itself.

    Within the insurance claims realm, there are people who work as “coders” – their job is to find the best code for a given diagnosis. “Best” meaning the one that pays out the most while most closely resembling the test or procedure actually performed by the clinician. You may occasionally run across stories where someone goes in for a minor procedure at their doc’s office, and their insurance statement arrives a few weeks later in the mail showing a sky-high payout for something not even remotely related to that minor procedure – that is most likely the result of an overzealous “coder”.

    And, oh yeah, the health insurance system in the U.S. is foobar. It was a measure of Obama’s lack of spine that he didn’t push for a serious debate on the single-payer option (and yes, it didn’t help that Max Baucus was and remains deeply in the pockets of the industry).

  54. rd says:

    I have seen a lot of discussion about incentivize patients to seek cheaper care. This has one fundamental flaw in it that differentiates healthcare from most other services and products that we purchase. Much of the cost in the healthcare system occurs when patients are least well-positioned to be informed, rational decision-making machines.

    It is a very technical field and there isn’t a good Consumer Reports guide like there is for buying a car. When you need expensive healthcare, the patient is often unconscious, drugged, in pain, or otherwise incapacitated. These are not good opportunities to research the situation and potential approaches, discuss these options, and then negotiatate the price. What are people expecting – patients will issue an RFP and solicit multiple bids for their cardiac arrest care?

    It is one of the areas where we rely the most on expert help for much of the decision-making. Other countries have figured out how to get similar outcomes as the US at a fraction of the cost. We need to have empowered healthcare consumers with the ability and opportunity to make informed decisions, but this by itself is probably more focused on better quality healthcare tailored to individuals than a cost-cutting tool.

    Also, there are always anecdotes about other countries have waiting lists for joint replacements etc. because of “rationing”. Please bear in mind that these electorates are quite well informed about their health care systems and could choose to increase the per capita costs (often paid for through some form of tax) to eliminate that rationing if they wanted to. Instead, as a population, they have elected to maintain their costs to a fraction of the US’s cost.

    Another thought on this. There have been numerous studies on how bad the average person is at investing. Personal investing is easy compared to healthcare. In the end, a person can simply dollar-cost average into a low-cost indexed balanced fund and make out just fine in the long-run, not far away from the results of the pros. There really isn’t an equivalent to this in healthcare. Why would we expect the average consumer to be so much better at selecting the most cost-effective healthcare approaches than they are at picking stocks and mutual funds?

  55. Iamthe50percent says:

    Many good comments here. That generics are not exactly the same as brand name drugs is a scandal that Congress has allowed, and for what purpose? BriberyCampaign contributions come to mind.

    But right here, we can see, with conservative obsession on tort reformremoval, and obsession with “free loaders”, the real problem. The real problem is that the US healthcare system is screwed up because Republicans like it that way.

  56. AndrewBW says:

    @CallMeAhab – The fact that someone is killed instantly in an automobile accident doesn’t mean they never had ill health prior to that. About the only way to go through life without some kind of ill health is to die very suddenly at a very young age.

  57. maddog2020 says:

    Ahab –
    Accidents and suicides make up around 15% on the top 10 list of CDC causes of death. Are you saying that those individuals aren’t consumers of healthcare resources at any time in their lives before they die?

    Many of the rest of the 85% are often long-term, expensive chronic conditions. I think AndrewBW’s point is that 85% of our houses don’t typically burn down (knock on wood) or else they would be uninsurable.

  58. the ‘Informational Asymmetries’, alluded to, here..”…You have to have a medical degree to have a decent chance of evaluating the quality of the advice and you are no better off even if you get a second opinion (who is right if they disagree?)…”

    Are, being ‘overcome’..

    through.. http://search.yippy.com/search?query=iPhone+Apps+allow+patients+to+diagnose+illnesses&tb=sitesearch-all&v%3Aproject=clusty

    One can begin to see that that ‘Technology’ is being utilized on ‘both sides’ (“Dr.” & ‘Patient’)

    note, please don’t forget http://www.webmd.com/ , and that ilk..

    and, there are + Trends.. http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus-ns-aaf&v%3Aproject=clusty&query=more+People+understand+that+Exercise+and+Nutrition+play+key+roles+in+Health

    though, really, those that want to ‘Gainsay’ “People’s” ability to be their Own best ‘Health Care’-Advocate..

    GFR.

    it’s akin to mocking the Hostage, held in the Dark Cave, for being ‘Blinded by the Sunlight’..

  59. rd,

    no offense, but, really (??)

    “…Why would we expect the average consumer…”

    Simply, Why should We waste our Time expecting the Existence of an ‘average consumer’, in the First Place?

    nothing like ‘the Tyranny of Low-Expectations’, is there?

    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus-ns-aaf&v%3Aproject=clusty&query=the+Tyranny+of+Low+Expectations

    Why not do yourself a Favor? Take your ‘Stocks for the Long-Run’-Conventional Wizdom, and re-evaluate:?

  60. JerseyCynic says:

    A free market will help fix health care, Jeff Jacoby:

    http://bostonglobe.com/opinion/2012/11/28/jacoby/gv2yS9Wtm8WGRB1xbpMVHN/story.html

    “…Medicare is dysfunctional not because it lacks wise overseers, but because it is severed from normal market forces. Patients don’t spend their own money. Providers are paid by the government. Doctors and hospitals have little incentive to compete on price, or to ensure that patients get the most value for their money. So health care inflation goes through the roof, regulators try to impose stronger controls, and Medicare patients have trouble finding doctors willing to treat them.

    What Medicare really needs is the flexibility and competition of a consumer-driven free market. What works for food, shelter, energy, clothing, and other essential needs could work for health care too — if only the government would relax its grip. But suggest such a thing and the rejoinder is immediate: When it comes to health care, markets don’t work…..

    Is it really so obvious that health care “can’t be marketed like bread or TVs”? In the niches of the health care industry that have escaped government domination, providers avidly seek out ways to provide better care at lower cost. A classic illustration is Lasik corrective eye surgery. “Technology is constantly advancing, price competition is fierce, and the consumer is king,” writes Sally C. Pipes of the Pacific Research Institute. “In the past decade, more than three million Lasik procedures have been performed. During that time, the average price of Lasik eye surgery has dropped nearly 40 percent, from $2,200 to $1,350 per eye.”

  61. 4whatitsworth says:

    Regarding the legal costs in healthcare.. I know that most reports claim that the legal cost is only 2-3%. Frankly this is a very low numberand just does not pass the sniff test. In addition trial lawyers are a very strong lobbying group just like wall street lobby and I suspect keep this number down.

    Now why doesn’t this number pass the sniff test?

    #1 talk to your friends that are doctors, I don’t know a single doctor that has not been sued.

    #2 Look at the legal industry here is an article that is referenced below that discusses the business side of lawyers and claims that “the “tort tax” on doctors and hospitals, whose costs constitute the majority of health expenses—has grown much faster than health-care inflation.[4] Indeed, medical-malpractice liability alone constitutes over 10 percent of the entire U.S. tort tax.”

    This article goes on to illustrate the legal cost of drugs to be 10% of the drug cost in a few studies. I know that this is not complete data however we know the power of sampling.

    http://www.triallawyersinc.com/healthcare/hc01.html

    ~~~

    BR: Sorry you don’t care for the data — Better put your cognitive dissonance to work on that right away. Speaking of the “sniff test” — Manhattan Institute? No thanks

  62. wally says:

    Well, I’ll repeat: lots of people here seem to be able to identify the problems, but those things are NOT the problem. Everybody already knows all this stuff.
    The problem is that in spite of all the bitching, there is no serious attempt to do anything about it. THAT’s The problem.

  63. techy says:

    I wonder if anybody write about how much it costs and how long it takes to become a doctor? thats the biggest scam.

    And a doctor making a million a year, really??

  64. WFTA says:

    Because collectively we are too f*&^ing exceptional and too f*&^ing stupid to indulge in a little European socialism.

  65. JerseyCynic says:

    wally — just coming to the end of our first year with a HSA. WOW — a great start to controlling the problem. Until that deductible was met, for the first time EVER, I took an active role in what these “health care providers” were actually providing. Eye opening. I think of all the unnecessary visits we made to doctors over the years — most appointments we made were because why not — “insurance covers it!” and so so many of those tests ordered by the medical profession are only ordered because why not…

    Hell, you can diagnose many symptoms yourself — online. I went to a rheumatologist the other day and told him what was wrong with me and how I wanted to “treat” myself. He’s willing to work with me! (he listened quite intently)

  66. rd says:

    Techy:

    Medical class training is usually 5-6 years, including the required science undergrad courses. In Europe and other places, it is possible to go to medical school out of high school and complete the basic medical training 6 years. In the US and Canada, the standard is a 4 year undergrade degree and 4 years of medical school, so an extra 2 years of schooling. Residencies etc. are beyond these minimum requirements, but at that point the doctors are working doctors receiving a salary.

    Most of the European countries and Canada have public schools for universities and medical school, so the costs to the student are like going to an in-state state unitversity in the US. As a result, graduating doctors in most developed countreis are not carrying student loan debt at anything close to US graduate levels. This eliminates the claim that doctors need to be highly paid in order to cover their education costs.

  67. DeDude says:

    Sorry Andrew; in the real world there are lots of people who basically never go to a doctor in the first 3-4 decades of their life. But then there are also a few who got the shit-ticket in the health lottery and have over a million in health cost before the end of their teenage years. That is why you need mandatory insurance and bans on cherry-picking.

    JerseyCynic; we already have market forces pushing at consumers choices and it doesn’t work for obvious reasons. People have co-pays in % of the bill or as set dollar numbers per prescription or per visit. But they still follow the advice of their doctor even if they are forced to eat dog food to be able to afford it. They simply don’t have the knowledge or information to second guess that doctor and their life and health is always top priority. Have you ever meet anybody taking a specific pill for a specific condition who could give you the scientific rationale for why they are taking that pill instead of some alternative pill for the same condition? Unless they have a doctoral degree they have no clue what the treatment options for their condition are and what scientific evidence is supporting each of them.

  68. swp78 says:

    All great points.

    But at the foundation, i must agree with a few of those folks who pointed to market forces (the profit motive) as the underlying concern.

    But you also first must answer the question: is healthcare a right or a privilege. If it is a privilege, then healthcare availability and costs should be at the mercy of the market forces (no matter how twisted those forces become), where PROFIT is the top priority. But if it’s a right, then you must put it fully in the hands of the govt, where protection of citizens is the top priority, and profits take a back seat. Speak to any number of the stakeholders… docs, hospitals, service providers, med devices, payers, pharma, biotech firms… what is the ultimate goal? Profits.

    Going to a universal system, in itself, doesn’t eliminate the profit motive, but certainly minimizes the number of profit-maximizing points on an incredibly convoluted healthcare flow chart (basically by simplying that chart) and limits options where currently “private” insurance can often pay multiples of the govt (medicare) rates, all negotiated in a way to maximize profits for all players involved (the vendor, the payer and the provider). When you look at profit margins of some of these guys (one example, look at some large Biotechs that boast 40-50% operating margins on therapies that cost upwards of $200k annually), it’s rather ridiculous.

    And then everything else applies on top of that… a complete revamp of the payment model (away from quantity) helped by implementing the tech that allows you to communicate, report and track data across decision makers (and it has to talk w/ everyone), helped by pricing transparency, helped by malpractice reform (to deter defensive medicine), helped by proper management of end-of-life or palliative care, etc…

    Our outsized costs have NOTHING to do with our superior outcomes (they are not). And it has NOTHING to do with our population health status (we are in-line with the rest of the world, sure… we have higher rates of diabetes, but it’s offset by our doing well on a lot of other health metrics.) We’re middle of the run on both counts.

    It’s almost entirely on the system: the complexity of the layers and disparate silos of decisions and profits (fits entirely w/ our national history of freedom of choice and right to chase prosperity) and grossly misfitting incentives.

    The ACA/Obamacare (in combination w/ the ARRA Stimulus) tries to look at the incentive portion, and seeks to find a more appropriate payment model that uses outcomes/quality via usage of tech/reporting. Still years away from something meaningful. But a start, nonetheless. It seems the top priority of reform was access… healthcare as a right available to everyone, moreso than the cost equation (rightly or wrongly)

    The other components? lots of work ahead… will take some time and some serious political will

  69. DeDude says:

    I don’t get the idea that if something is not a right then it must be subjected to market forces – even if they are going to produce the most costly and wasteful product.

    For me the question is going to be whether market forces can produce an outcome that overall is more desirable for society than what any of the alternatives to market forces will produce. Right or privilege is irrelevant to that. That is why Fannie and Freddie should be a government owned entity, and mortgages never be handed over to the profit sector.

  70. sellstop says:

    A hurricane blows away the gasoline refiners. How does the general public feel about the “price gougers” who will sell gasoline for exhorbitant prices during the shortage. They don’t like them a bit. But they need the gasloline, so they pay.

    How do people do without health care? They really can’t. When it comes down to it healthcare is a necessity. And when your life is on the line you will mortgage the house and sell the kids to stay alive.

    When a good or a service is able to be taken or left, in other words when you can buy the service or not, the price is subject to normal market forces. A high price will contain demand.

    In contract law, as I understand it, there is a principle of “freedom from duress”. ie, both parties to a contract must make their decisions free of threat. Yet, how can anyone enter into a contract for the provision of a life-threatening medical procedure and not feel under threat of death without the medicine/procedure. And this goes for the motivation to secure insurance to provide for that life-saving treatment in the future. What is to contain the price?

    What contains the price of electricity? We all need to use it everyday. Without it our modern world would cease to exist. Answer: Regulaltion of the utility companies.
    gh

    gh

  71. sellstop says:

    By the way. In researching for the above post I got out my book of medical ethics, “Intervention and Reflection”.
    As I glanced through the table of contents my eye caught the title of a case presentation in Chapter 8 entitled, “Massachusetts takes the Lead”.

    Chuckle,
    gh

  72. JerseyCynic says:

    DeDude – They simply don’t have the knowledge or information to second guess that doctor …

    (I just happened to watch that movie The Rain Maker) I think about this dilemma all the time. I also think about the difficulties and similarities with our education system here in the US of PC. Too bad the insurance companies didn’t act more like health care advocates for those that do not have the knowledge or information….. Too bad all those suits in the central offices of our public schools couldn’t be education advocates for those that do not have the knowledge or information…..

    it sure does seem like it’s by design

    another viewpoint – http://www.tnr.com/article/economy/magazine/88631/american-medicine-health-care-costs#

    “We have arrived at a moment, in short, where we are making little headway in defeating various kinds of diseases. Instead, our main achievements today consist of devising ways to marginally extend the lives of the very sick.”

  73. AndrewBW says:

    @DeDude – I absolutely agree with you that IF you are going to have health insurance you have to have mandatory insurance and bans on cherry-picking in order to make it work. My quarrel is with that IF. There are alternatives.

  74. Willy2 says:

    I see 2 reasons:
    1. It’s illegal to import prescription drug from abroad (e.g. Canada, Mexico). And there’s a database that contains all the prescriptions in the entire US. This database helps the border patrol/police/customs to track down down offenders.
    2. Health care companies want to make a profit.
    http://jugglingdynamite.com/2012/12/03/60-minutes-examines-us-hospitals-the-costs-of-admission/

    3. Watch this video:
    http://market-ticker.org/akcs-www?post=211323

  75. Robert M says:

    Per the Interest

    Healthcare here is operated as a repair shop as opposed to a maintenance operation. There is a study in Camden NJ where a budget director looked at who the money was spent on. A ridiculous amount was spent on a a very small number of people who did not take their maintenance meds or other procedures and as a result always ended up in the ER the most expensive medicine option.
    One of the things in the ACA for the elderly is the preventive care section. It says every year an elderly person can receive have tests for prostate/mammogram/cervical and vaginal cancer, colorectal cancer, diabetes, bone density, flu/pneumonia/hep b vaccines and others. If everyone in America had the same option, ignoring the demand meeting the supply of providers match, of appropriate age based testing very little would be spent on repairs because you would catch it earlier. As to all of us whom have done the dumb thing that sent us to the ER at any age……