Steven Brill’s article ‘Bitter Pill: Why Medical Bills Are Killing Us’ published in TIME Magazine woke up millions of Americans who wondered why exactly their medical bills were so high. Brill spent seven months trying to find out by examining a variety of bills from as he puts it hospitals, doctors, drug companies and every other player in the American health care ecosystem. Medicine, he points out, has become a huge business in the U.S. and healthcare spending, a big burden on the tax system. With vivid, real – life experiences, he tells the story about powerless buyers in a sellers market, the result of which is that people in the U.S. spend around 20% of the gross domestic product on health care, compared with about half that in most developed countries, while the care they receive is no better and often has worse outcomes than in these countries. Here’s a look at the main points Brill makes:
Brill found that even top non-profit hospitals and academic medical centers have questionable medical billing and collection practices. Having cancer could mean a half – million – or million – dollar tab! This is affecting people with and without health insurance. Hospitals charge exorbitantly for pills which can be bought online for just a fraction of the cost. Simple x – rays and medical tests also came with unexplainable mark – ups.
In fact, for a patient without coverage these charges were found to be much higher ($283.00) than what Medicare would pay ($20.44). Similarly, for a CBC (complete blood count, Medicare pays $11.02 in Connecticut, while Brill found that a patient not Medicare paid 157.61. Hospitals tend to defend themselves saying that Medicare’s rates are too low, but can such a big difference in price have any reasonable basis? In-hospital labs are virtually profit centers, says Brill.
Another worrying thing is that hospitals charge widely varying prices for the same treatment or procedure and have no relation at all to objective factors like cost. One hospital’s chief financial officer even said that the prices were set in cement a long time ago and just seemed to be rising automatically! Brill says there’s “no rhyme or reason” about the costs that people face in the healthcare marketplace. A patient who had chest pain and was diagnosed with indigestion ended up paying $21,000 with $995 for the ambulance ride, $3,000 for the doctors and $17,000 for the hospital.
Patients with private health insurance seem to have a better deal, similar to Medicare patients. They get discounts off the listed chargemaster figures, probably because the hospital is included in the provider’s network. The discounts are however lower than Medicare discounts, so that the non – profit hospital is assured of high profits even in this case. This is in addition to the payments such hospitals receive from millions of unemployed, uninsured patients who are charged the unreasonable chargemaster list prices.
Medical technology is advancing and adding to costs instead of lowering them. As more CT and MRI scanners enter the market, doctors are recommending more high – tech tests. And hospitals are taking advantage of high – tech tests and medical equipment to charge higher prices. Brill cites a McKinsey study which showed that a typical piece of equipment which has a life span of 7 – 10 years will pay for itself in one year with just 10 to 15 procedures conducted in a day. So every ER room scan will rake in more profits with lower maintenance costs and also earn an extra fee for the doctor who ordered the scan.
Even the medical device industry has its dubious side. Brill says that according to an informed source medical – device companies routinely compensate physicians through stock options, royalty agreements, consulting agreements, research grants and fellowships. It is very much a mutually beneficial relationship.
Another startling fact is that, contrary to what one tends to believe, outpatient services are much more lucrative than inpatient care. A McKinsey study found that about two – thirds of the $750 billion annual U.S. overspending is accounted for by payments for outpatient services. That includes work done by physicians, laboratories and clinics (including diagnostic clinics for CT scans or blood tests), same – day surgeries, ER care and other hospital treatments like cancer chemotherapy. When patients have same – day surgery and don’t have to stay over in the hospital, it’s profit all the way as an operating room has fixed costs.
Brill also talks about Obamacare. The positive points – statewide insurance exchanges to help distribute health – insurance policies, restrictions on abusive hospital – bill collecting, clarity in insurance policies, more rigorous medical billing claims appeal processes conducted by independent entities when insurance coverage is denied. But none of this can reduce the costs of health care. Insurance premiums are set to rise further due to three of the Affordable Care Act’s attractive provisions – the prohibitions on exclusions for pre – existing conditions, the restrictions on co-pays for preventive care and the end of annual or lifetime payout caps.
Lopsided pricing and exorbitant profits in a market that doesn’t work – that’s how the problem facing the U.S. can be healthcare system described. And the losers are the customers who have no choice and have to approach the hospital their plan has contracted with. With no competition, they are forced to pay whatever they are charged or go without treatment. Brill concludes by saying that Americans have to think again about the choices they made knowingly or unknowingly.