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Why waste your health care dollars in the United States?

REUTERS/Jim Young
The big problem now looming in U.S. health care is cost.

I’m a U.S. citizen who spent most of the last year in Colombia, where I sought medical treatment for my cancer. At the time, as an uninsured and uninsurable patient, I knew that I had two choices when I was diagnosed: get treatment in the United States and face probable bankruptcy, or go somewhere else.

Debra Axness

In Colombia, I found first-class medical facilities, well-trained physicians and health professionals, and a completely transparent cost system. I paid up front for everything — from surgery and hospital stays, imaging, laboratory testing, infusions, radiation, doctor’s fees, nursing care, and facility fees. By my best estimate, I paid between one-tenth and one-fourth what I would have in the United States.

One dramatic example: I received a course of 25 radiation treatments at a modern facility that could have been located anywhere in the United States. In fact, the cancer clinic I went to is a partner institution with the famed MD Anderson Cancer Clinic in Houston, so I received the same treatment as I would have there.

The machines that delivered the radiation were new and manufactured in California. A radiation oncologist was in charge of my treatment, and I not only saw her several times, I had her email address and cell phone number in case I had questions. The radiation was guided by CT scan. The cost for all of this? About $2,400 U.S. in total. What I found is that in the States, each treatment would likely cost that much, and the oncologist’s fees would be additional.

I am now insured under the Affordable Care Act — thank you, President Obama! Insurance companies can no longer deny coverage.

The big problem now looming in U.S. health care is cost. Until we can find some way not only to control costs but also to roll them back to an affordable level, providing health care will remain one of the largest problems facing the American public. Even if you have very good employer-paid insurance, employers are paying out much more per worker than they did 10 years ago. Perhaps if they paid less, your employer could afford to give you a raise.

Why does it cost so much?

Why does the same treatment cost so much in the United States? It isn’t that the doctors are trained better, or the facilities more modern (sometimes), or the drugs and testing so much better. They aren’t.

There are two big reasons why so many health care dollars are wasted in the United States:

  • Administrative costs. The New England Journal of Medicine found in 2003 that 31 percent of all health care expenditures are administrative. This amounted to $1,093 per capita. For every person in the country, more than $1,000 annually goes not to helping people get better, but to administration. Insurers have no incentive to hold down their administrative costs — in fact, the incentive is to do the opposite, to increase their profit margin.
  • Profit motive. When health care was delivered to the public at mostly nonprofit institutions, and private doctors in small practices were the norm, costs were well under control. Employer-based “hospitalization” covered the expensive stuff, and people mostly paid out of pocket for doctor visits. With the advent of expensive testing, the explosion of prescription drugs and high-tech procedures, business took over much of health care delivery. Especially today with publicly traded companies, a hefty profit margin and return to shareholders is more important than delivery of health care. For example, Stephen Hemsley, CEO of UnitedHealth Group, was No. 9 on Forbes 2012 list of most highly compensated executives across all industries. Top-level and mid-level managers have similarly large salaries, all at the expense of the patient or the patient’s insurance company.

Administration

To rein in our administrative costs, addressing the first point, we could look to France for a way to revolutionize our medical records. Every French man, woman and child is given a green card, called a Carte Vitale, the size of a credit card with an embedded chip. This card contains all medical records — every blood test, doctor visit, imaging result, patient history, everything. It is read by a small machine that is portable so that every office, facility, pharmacy, and even a nurse or doctor visiting a patient’s home (gasp!) can read all information and add to it. There are many other examples of administrative cost saving in other countries, if we would only look to how health care is delivered elsewhere.

Profit

Some simple rules regarding profits for health care providers and Big Pharma could rein in the other big leakage in our health care dollars. Simply requiring providers to be nonprofit is not enough — there needs to be some control on shareholder profit. Why not make the American public the shareholders in their care?

On the pharmaceutical side, authorizing Health and Human Services to negotiate lower prices for Medicare Part D would be a big first step. There were three bills in Congress to address this issue; none of them went anywhere last session. Taking another leap and authorizing this negotiation (which the VA and Medicaid have done for years) for the Affordable Care Act would pass these savings along to many more people.

Unsustainable costs

The rising costs of health care in the United States are simply unsustainable. Sixty percent (!) of all personal bankruptcies in the country are due to medical costs. When a patient needs treatment the most, when they have a life-threatening illness, is often when the patient will lose his or her job, and consequently, their health care coverage. Even worse, of those bankruptcies that are due to medical costs, 75 percent of those people had insurance that was inadequate. It’s no wonder people from other countries think our health care system is simply cruel.

Americans pay twice as much per capita as the next most expensive country, Norway. For all of this spending, our health statistics are getting worse. Our life expectancy is 78 years, ranking 29th in the world. Other prime indicators, especially infant mortality, are in similarly bad shape.

For $2.6 trillion in 2011, or $8,508 every year for every man, woman, and child, we aren’t getting our money’s worth. What I did was to take my dollars overseas and avoid throwing them away on wasteful practices and administrative costs and profit-driven providers. What I got was incredibly good treatment, virtually the same as I would have at home.

Other countries, such as France, Germany, Great Britain, Canada, Australia, the Netherlands, Taiwan, Japan, New Zealand, all have health care costs far below what we pay per capita. We could benefit from learning how other nations have managed their health care costs. An interesting read along these lines is “The Healing of America,” by journalist T.R. Reid (2009).

Debra Axness is writing a narrative of her experience in Colombia. She lives in Minneapolis.

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Comments (10)

  1. Submitted by Todd Hintz on 06/18/2014 - 12:15 pm.

    Universal

    Debra, thanks for posting your story. It’s only through well reasoned articles like this that we’re going to move the health care ball forward and get a system that really works for our citizens.

  2. Submitted by Mike Holly on 06/18/2014 - 12:19 pm.

    Supply and Demand

    Health care costs have been inflating because the US is increasing demand through government programs while severely limiting the supply of doctors and hospitals. For example, continental Western Europe has similar demand but 40% more doctors and hospitals, and much lower costs.

    http://bastiat.mises.org/2013/12/how-government-regulations-made-healthcare-so-expensive/

  3. Submitted by Dimitri Drekonja on 06/18/2014 - 01:30 pm.

    Supply and demand is not the issue. My brother is an orthopedist in one of those Western European countries– a common hip prosthesis he uses costs him about 3,000 in Austria, is a bit cheaper (~2500) 20 miles north in Germany, is more expensive (~5000) to the west in Switzerland where it is made, and is a whopping 15,000 in the US. No changes in the number of doctors will change that.

    • Submitted by Mike Holly on 06/19/2014 - 08:35 am.

      supply and demand is the issue

      and you made my case.

      • Submitted by Todd Hintz on 06/19/2014 - 02:10 pm.

        Doctors

        Mike, I believe you’re confusing correlation with causation. For example, just because the ground is wet it doesn’t mean it rained out this morning as there are other causes for the wet grass. In this case prosthetics are cheaper in some countries and western Europe has more doctors per caipta than America, but it doesn’t mean one caused the other or vice versa.

        It could mean the two conditions have a common cause or it’s possible they’re not related at all.

        • Submitted by Mike Holly on 06/19/2014 - 07:55 pm.

          the laws of supply and demand

          No this is basic economics. Prices will rise when supply is not allowed to meet consumer demand for a good or service that is price inelastic (eg health care, oil, food, housing etc.). Nobel prize winning economists Milton Friedman and Paul Samuelson both said the restriction of the supply of doctors have caused prices to increase.

  4. Submitted by Neal Rovick on 06/18/2014 - 02:44 pm.

    Gosh, I wonder why it’s so expensive

    Medtronic Inc. (MDT), the world’s biggest maker of heart-rhythm devices, agreed to pay $9.9 million to settle U.S. government claims that the company paid doctors kickbacks to implant its products.

    Medtronic resolved allegations, first raised in a 2009 whistle-blower’s lawsuit, that it paid doctors to speak at marketing events, treated them to trips and lavish dinners, and provided tickets to sporting events as part of a campaign to persuade physicians to implant more of the company’s heart devices such as defibrillators and pacemakers, federal prosecutors said.

    The settlement brings to more than $400 million the amount Minneapolis, Minnesota-based Medtronic has spent since 2007 to settle lawsuits over its handling of certain defibrillators, which some patients claimed were defective and endangered their lives.

    http://www.bloomberg.com/news/2014-05-28/medtronic-settles-suit-over-heart-device-kickback-claims.html

    Medtronic continues with its fine history of kickbacks–as they have done from the very beginning.. The most highly compensated people are the sales people at Medtronic, and they have very large expense accounts.

    Now who actually ends up paying for that system?

    And multiply that with virtually every equipment, product and service company involved in health care.

    Thy’re certainly not selfless martyrs working for the common good.

    A lot of cash splahed around to get their system in the doors..

  5. Submitted by Neal Gendler on 06/18/2014 - 09:11 pm.

    Excellent — and a laugh

    Excellent piece, Debra. I’m thankful for you that the treatment in Colombia was so competent and that you didn’t have to use up your every penny. I hope you will enjoy excellent heath for decades more.

    I did have a cynical laugh, though, at your optimistic notion that if employers had to pay less for health insurance, maybe they could afford to give their workers a raise. A few benevolent outfits might, but many, I think, would just stick the savings into their executives’ pay. (Some might increase their dividends a few cents, but higher profit also tends to increase executives’ bonuses.)

    Pity Stephen Hemsley is stuck at No. 9 on the Forbes list. Perhaps the compensation committee will move him up a notch. How is a guy expected to get along on less than $40 million?

    • Submitted by Todd Hintz on 06/19/2014 - 12:37 pm.

      Executive Pay

      Here are a few ratios of pay to average worker salary.

      Japan: 11:1
      Germany, 12:1
      France: 15:1
      Italy: 20:1
      US: 475:1

      Yeah, it’s a big problem.

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