Health Care

Why the American Health Care System Falls Short

May 8, 2017  • Elisabeth Rosenthal

Key Points

  • We live in an age of medical wonders—transplants, gene therapy, lifesaving drugs and preventive strategies—but the health care system remains fantastically inefficient.
  • The American medical system has stopped focusing on health or even science. Instead it attends more or less single-mindedly to its own profits.

Elisabeth Rosenthal, author of An American Sickness: How Healthcare Became Big Business and How You Can Take It Back and editor-in-chief of Kaiser Health News, recently stopped by the Institute to discuss her new book with Joanne Kenen, health care editor at Politico, as part of the Alma and Joseph Gildenhorn Book Series. Below, check out an excerpt from the introduction to her new book.

In the past quarter century, the American medical system has stopped focusing on health or even science. Instead it attends more or less single-mindedly to its own profits.

Everyone knows the health care system is in disarray. We’ve grown numb to huge bills. We regard high prices as an inescapable American burden. We accept the drugmakers’ argument that they have to charge twice as much for prescriptions as in any other country because lawmakers in nations like Germany and France don’t pay them enough to recoup their research costs. But would anyone accept that argument if we replaced the word prescriptions with cars or films?

The current market for health care just doesn’t deliver.

The current market for health care just doesn’t deliver. It is deeply, perhaps fatally, flawed. Even market economists themselves don’t believe in it anymore. “It’s now so dysfunctional that I sometimes think the only solution is to blow the whole thing up. It’s not like any market on Earth,” says Glenn Melnick, a professor of health economics and finance at the University of Southern California.

Nearly every expert I’ve spoken with—Republican or Democrat, old or young, adherents of Milton Friedman or Karl Marx—has a theoretical explanation as to why the United States spends nearly 20 percent of its national budget on health care. But each one also has a story of personal exasperation about the last time a family member or a loved one was hospitalized or rushed to an emergency room or received an incomprehensible, outrageous bill.

Stephen Parente, Ph.D., a health economist at the University of Minnesota and an adviser to John McCain in the 2008 presidential election, believes that studies overstate the excessive health care spending in the United States compared with that of other developed countries. But when he talks about the hospitalization of his elderly mother, his dispassionate academic tone shifts to one I’ve heard thousands of times, brimming with frustration:

There were a dozen doctors all sending separate bills and I couldn’t decipher any of them. They were all large numbers and the insurance paid a tiny fraction. Imagine if a home contractor worked this way? He estimates $125,000 for your kitchen and then takes $10,000 when it’s done? Would anyone ever renovate?

Imagine if you paid for an airplane ticket and then got separate and inscrutable bills from the airline, the pilot, the copilot, and the flight attendants. That’s how the health care market works. In no other industry do prices for a product vary by a factor of ten depending on where it is purchased, as is the case for bills I’ve seen for echocardiograms, MRI scans, and blood tests to gauge thyroid function or vitamin D levels. The price of a Prius at a dealership in Princeton, New Jersey, is not five times higher than what you would pay for a Prius in Hackensack and a Prius in New Jersey is not twice as expensive as one in New Mexico. The price of that car at the very same dealer doesn’t depend on your employer, or if you’re self-employed or unemployed. Why does it matter for health care?

Faced with disease, we are all potential victims of medical extortion.

We live in an age of medical wonders—transplants, gene therapy, lifesaving drugs and preventive strategies—but the health care system remains fantastically expensive, inefficient, bewildering, and inequitable. Faced with disease, we are all potential victims of medical extortion. The alarming statistics are incontrovertible and well known: the United States spends nearly one-fifth of its gross domestic product on health care, more than $3 trillion a year, about equivalent to the entire economy of France. For that, the U.S. health system generally delivers worse health outcomes than any other developed country, all of which spend on average about half what we do per person.

Who among us hasn’t opened a medical bill or an explanation of benefits statement and stared in disbelief at terrifying numbers? Who hasn’t puzzled over an insurance policy’s rules of co-payments, deductibles, “in-network” and “out-of-network” payments—only to surrender in frustration and write a check, perhaps under threat of collection? Who hasn’t wondered over, say, a $500 bill for a basic blood test, a $5,000 bill for three stitches in an emergency room, a $50,000 bill for minor outpatient foot surgery, or a $500,000 bill for three days in the hospital after a heart attack?

Where is all that money going?

Before becoming a reporter for the New York Times, I went to Harvard Medical School and then trained and worked as a physician at what is now New York Presbyterian Medical Center, a prestigious academic hospital. To explore the American system and its ills, I’ve fallen back on the “history and physical,” an organized and disciplined form of record keeping that every doctor uses. The so-called H&P is a remarkable template for understanding complex problems, such as sorting out a patient’s complicated multitude of symptoms, in order to come to the proper diagnosis and to allow for effective treatment. The H&P has predictable components:

  • Chief complaint: What major symptoms does the patient notice?
  • History of the present illness and review of systems: How did the problem evolve? How has it affected each organ separately?
  • Diagnosis and treatment: What is the underlying cause? What can be done to resolve the patient’s illness or symptoms?

What you are reading right now is the chief complaint: hugely expensive medical care that doesn’t reliably deliver quality results. Part 1 of this book, “History of the Present Illness and Review of Systems,” charts the transformation of American medicine in the last quarter century from a caring endeavor to the most profitable industry in the United States—what many experts refer to as a medical-industrial complex. As money became the metric of good medicine, everyone wanted more and cared less about their original mission. The descent happened sector by sector: insurers, then hospitals, doctors, pharmaceutical manufacturers, and so on.

These days our treatment follows not scientific guidelines, but the logic of commerce.

First as the child of an old-fashioned doctor––my father was a hematologist—then as an MD, and finally during my years as a health care reporter for the Times, I’ve had a lifetime front-row seat to the slow-moving heist. I have spent months poring over financial statements, tax documents, patient charts, and bills trying to explain why, for example, a test that costs $1,000 at one of the nation’s leading academic hospitals costs $7,000 at some small community hospitals in New Jersey—and the equivalent of only about $100 in Germany and Japan.

These days our treatment follows not scientific guidelines, but the logic of commerce in an imperfect and unregulated market, whose big players spend more on lobbying than defense contractors. Financial incentives to order more and do more—to default to the most expensive treatment for whatever ails you—drive much of our health care. The central mantra of “innovation” in the past decade has been “patient-centered, evidence-based care.” But isn’t that the very essence of medicine? What other kind of medical care could there be?

All the harrowing tales in this book occurred despite the 2010 passage and 2014 enactment of the Patient Protection and Affordable Care Act (the ACA, also known as “Obamacare”). The ACA is not a failure, as some still assert, but the “affordable” in its name was an overreach to win over votes and public opinion. (Health care bills all have happy names affixed for the sell, including the newest mixed bag, the 21st Century Cures Act.)

After endless compromises with the medical industry to enable its passage, the ACA was mostly a bill to make sure that every American could have access to health insurance. But it didn’t directly do much, if anything, to control runaway spending or unsavory business practices. Washington being what it is I doubt we’ll ever see the “Take Back America’s Health care” bill or the “Stop Robbing Patients” bill.

We, the patients, can actually do a lot to wrest control of our health.

It is easy to feel helpless. Our sense of medical urgency combined with bureaucratic confusion is a debilitating cocktail. But we, the patients, can actually do a lot to wrest control of our health from the ledgers of the medical-industrial complex.

Part 2 of this book, ”Diagnosis and Treatment,” offers not only advice and recommendations that will make your insurers, doctors, and hospitals more affordable and responsive to you but also a range of potential, and politically viable, fixes that would tamp down the costs and the financial crimes imposed on our bodies in the name of health.

The next steps are up to us. There are self-help strategies you can implement tomorrow to reduce your medical expenses, not to mention political solutions that could revamp American health care once and for all if you understand how to effectively press for their deployment. They’re not mutually exclusive. We can start now.

Each market has certain rules that are determined by the conditions, incentives, and regulations under which it operates. Currently, we buy and sell medical encounters and accoutrements like commodities, but how do participants in the marketplace make purchasing choices? Prices are often unknowable and unpredictable; there’s little robust competition for our business; we have scant information on quality to guide our decisions; and very often we lack the power ourselves to even make the decisions.

The rules governing the delivery of health care in the United States have grown out of the market’s design. The type of health care we get these days is exactly what the market’s financial incentives demand. So we have to get wise to them, and be smarter, far more active participants in this ugly, rough–and-tumble world. More important, we have to change the rules of the game, with different incentives and new types of regulation. I’ve set out the current rules at the end of this introduction. As you read on, you’ll see how they play out, and their terrible effects on the health and finance of patients, as illustrated by real-life case studies.

The economist Adam Smith spoke of an “invisible hand” with respect to income distribution. But in American health care, there’s a different type of invisible hand at work: it’s on the till.

This excerpt is reprinted by arrangement with Penguin Press, a member of Penguin Group (USA) LLC, a Penguin Random House Company.