Bitter Pill: The Exorbitant Prices Of Health Care

Tyler Durden's picture

Instead of asking the endless question of "who should pay for healthcare?" Time magazine's cover story this week by Steve Brill asks a much more sensible - and disturbing question - "why does healthcare cost so much?" While it will not come as a surprise to any ZeroHedge reader - as we most recently noted here - this brief clip on the outrageous pricing and egregious profits that are destroying our health care quickly summarizes just how disastrous the situation really is.  A simplified perspective here is simple, as with higher education costs and student loans: since all the expenses incurred are covered by debt/entitlements, there is no price discrimination which allows vendors to hike prices to whatever levels they want. From the $21,000 heartburn to "giving our CT scans like candy," Brill concludes "put simply, with Obamacare we’ve changed the rules related to who pays for what, but we haven’t done much to change the prices we pay."

 

Via Time,

The $21,000 Heartburn Bill

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.

"Giving out CT Scans like candy..."

The costs associated with high-tech tests are likely to accelerate. McKinsey found that the more CT and MRI scanners are out there, the more doctors use them. In 1997 there were fewer than 3,000 machines available, and they completed an average of 3,800 scans per year. By 2006 there were more than 10,000 in use, and they completed an average of 6,100 per year. According to a study in the Annals of Emergency Medicine, the use of CT scans in America’s emergency rooms “has more than quadrupled in recent decades.” As one former emergency-room doctor puts it, “Giving out CT scans like candy in the ER is the equivalent of putting a 90-year-old grandmother through a pat-down at the airport: Hey, you never know.”

 

Selling this equipment to hospitals — which has become a key profit center for industrial conglomerates like General Electric and Siemens — is one of the U.S. economy’s bright spots. I recently subscribed to an online headhunter’s listings for medical-equipment salesmen and quickly found an opening in Connecticut that would pay a salary of $85,000 and sales commissions of up to $95,000 more, plus a car allowance. The only requirement was that applicants have “at least one year of experience selling some form of capital equipment.”

When you follow the money, you see the choices we’ve made, knowingly or unknowingly.

Over the past few decades, we’ve enriched the labs, drug companies, medical device makers, hospital administrators and purveyors of CT scans, MRIs, canes and wheelchairs. Meanwhile, we’ve squeezed the doctors who don’t own their own clinics, don’t work as drug or device consultants or don’t otherwise game a system that is so gameable. And of course, we’ve squeezed everyone outside the system who gets stuck with the bills.

 

We’ve created a secure, prosperous island in an economy that is suffering under the weight of the riches those on the island extract.

 

And we’ve allowed those on the island and their lobbyists and allies to control the debate, diverting us from what Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, says is the obvious and only issue: “All the prices are too damn high.”

The health care market is not a market at all.

It’s a crapshoot. Everyone fares differently based on circumstances they can neither control nor predict. They may have no insurance. They may have insurance, but their employer chooses their insurance plan and it may have a payout limit or not cover a drug or treatment they need. They may or may not be old enough to be on Medicare or, given the different standards of the 50 states, be poor enough to be on Medicaid.

 

If they’re not protected by Medicare or protected only partially by private insurance with high co-pays, they have little visibility into pricing, let alone control of it. They have little choice of hospitals or the services they are billed for, even if they somehow knew the prices before they got billed for the services. They have no idea what their bills mean, and those who maintain the chargemasters couldn’t explain them if they wanted to.

 

How much of the bills they end up paying may depend on the generosity of the hospital or on whether they happen to get the help of a billing advocate. They have no choice of the drugs that they have to buy or the lab tests or CT scans that they have to get, and they would not know what to do if they did have a choice.

 

They are powerless buyers in a sellers’ market where the only consistent fact is the profit of the sellers.

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kaiserhoff's picture

About damn time someone asked that question, but Time won't be around much longer in any case.

Texas Ginslinger's picture

When the cost of healthcare is discussed, why is exercise and a proper diet never mentioned..??

Instead of a bunch of pill bottles, why not show a photo of a pile of veggies and someone exercising..??

Tyler, you are part of the problem not the solution.......... 

A Nanny Moose's picture

It pays to have some shrink declare your rugrats in need of some magic pill to mitigate their perceived psychotic behavior (part of which results from being forced to sit in a classroom for 6 hrs a day). It pays to rake on SSI benefits for said pills, not consume said pills, and sell them on the black market.

Umh's picture

Other than their perceived psychotic behaviour being filed away in their permanent online dossier.

TBT or not TBT's picture

Apples are a fructose bomb, and fructose ingestion directly creates the worst sort of LDL, so no thanks.     Mammals evolved eating fruit(and fructose) only in season, short seasons.

Retronomicon's picture

An easy way to slip out of being middle class, if you managed to avoid the other pitfalls to poverty.  Maybe that's the point.  Get everyone poor and hooked on goverment 'help'.  

philipat's picture

Duplicate. Fat Finger. Apologies

philipat's picture

There are other issues; Tort Reform for instance. ONE of the reasons for the over-use of CAT scans is thst if they do NOT make a CAT scan, the Physician and/or Institution could be looking at a Malpractise suit. That pushes up costs both directly in terms of the number of services employed on a "Fee-for service" Model (Which Global experience has shown to inconsistent with controlling costs anywher) AND in the cost of Malpractise insurance which can, for a surgeon for instance, run to Hundreds of Thousands of Dollars per year.

And the Doctors are not entirely blamesless in this either. According to many relaiable sources NYT etc.) about 20% of the top 1% Income earners in The US are Physicians. Whne did you last meet a poor Doctor?

meltdown's picture

Ah yes the issue that no one including the legacy media ever broaches.

Physician compensation.

Yes they spend a long time in school and training, but the amount of remuneration they expect nay demand is off the chart. pun intended.

Buckaroo Banzai's picture

Unfortunately we have a lot of doctors who care more about making money than they care about people. And those doctors that put people first, are made to suffer by forcing them to negotiate a costly bureaucracy just to do their jobs and get paid a fair wage.

It used to be that a doctor was well respected and well paid BECAUSE THEY GENUINELY CARED ABOUT HELPING PEOPLE. The community recognized that, and was happy to compensate them. Not enough to get fabulously wealthy, but certainly enough to be very well off. Those people who could afford to pay the doctor's published rates were happy to do so. Those that couldn't worked out a payment plan, or bartered with the doctor, or the doctor reduced his rates on a case by case basis for the needy in the community, because he was intimately familiar with their circumstances.

Now we have this bizarre, impersonal, irrational system that has totally disconnected the people who deliver the service from the people who use the service. THIS IS A COMPLETE AND UTTER PERVERSION OF THE VERY IDEA OF HEALTH CARE, which necessarily demands a personal connection between the care giver and the care receiver to be effective at all.

What kind of people have we become, that we can barely recognize this simple and obvious fact???

hidingfromhelis's picture

AMA acts as a very effective choke-point on the number of new physicians allowed to enter the system as well, especially in the higher paid fields.

FreeMktFisherMN's picture

yep. pure rent-seeking. It's normal in a true free market to have guilds and voluntary associations that become private means to signal competence, but to get government=force to back you up is rent-seeking. All this fear about 'anti-trust' and monopolization when the only true monopolization is when government has control and keeps out competitors by conferring special status.

It's all about the 'there's a pill for that' mentality as people don't have skin in the game. They are cost insulated and it's all about being 'covered' instead of shopping around and getting legitimate pricing based on supply/demand. Government induces this insurance mentality when it is supposed to be only for catastrophes. And for those who say but what about those with preexisting conditions? Well, insurance is for unforeseen events, so by definition it's not a 'possible risk'; the condition already exists. But people underestimate strongly how charitable people are. Firms would look to keep up good PR by insuring these people anyway and people who are relatives of the person with preexisting conditions might have leverage, too, to tell the ins. company that they only will buy from them if...

As it is now 'community ratings' are mandated and people don't get rewarded for being healthy. Incentives are perverse. The diabetes and prediabetes/heart condition with even youth already will overwhelm it all. This is a disaster. Free mkts work. Look at Lasik and cosmetic surgeries. Cheaper and way more advanced/painless technology.  Markets work. 

Umh's picture

The same is true of trying to open a new hospital. First you are going to to need the other area hospitals to say that their beds are all being used. I think I remember the term "Certificate of Need".

impermanence's picture

I am a doctor and I am fast becomming poor.

John Skookum's picture

Relative to a shit-ton of do-nothing government jobs, for one.  There are primary care docs in low paying specialties like pediatrics who are beating their brains out 60 hours a week for less than the deputy assistant coordinator of diversity coordination makes at your local college.  And the deputy assistant diversity coordinator doesn't run the risk of being skinned for everything she owns by the piratical plaintiff's bar. Nor does she carry a beeper and get her fat ass woken up at night.

Parrotile's picture

"The Tyranny of the Pager!" - especially when you're the Night Registrar covering Gen. Med. after hours, AND being the "on take" Consultant's Reg! Add in carrying the Resus Team pager too and that's a lot of responsibility. Unfortunately it's also a lot of "learning on your feet" and this is how medicine works - preclinical Med School only gives you the bare bones basics - you only start to "learn to be a Doctor" once you get out there and have to make the hard decisions yourself, and God help you if you disturb the Consultants beauty sleep for anything other than a VERY good (read life-or-death) reason!

Being issued with your first pager seems to be one of those "memorable events" in the training process - along the lines of buying your first Littman stethoscope (which you never give away!), and possibly your first Keeler or Welch-Allyn diagnostic set (again, something that you'll never part with!!)

impermanence's picture

Remember, health care has been turned into a pyramid scheme by the insurance companies/Big Pharma/etc., so you get paid IF you make money for them, i.e., testing and prescribing.  If you don't wish to participate in this massive fraud, then you settle for what they pay for your time, which is very little.

There isn't much profit to be made in this system in most areas of health care if you are ethical/honest.  Individual health care practice is like any other small business that has been regulated and financialized to near death.

philipat's picture

@ I am a doctor and I am fast becomming poor.

To be fair, I have quoted one of the LOWER estimates for Physicians in the top 1% of US Income earners. Other sources vary between 16-20%:

https://en.wikipedia.org/wiki/File:Percentage_of_the_top_1%25_wage_earne...

It is true that thinga are changing as the US becomes a Fascist State, dominated by The Government/Corporate Complex BUT As of NOW, Physicians comprise 16-20% of the Top 1 % of US Income earners.

You can have your own opinions but NOT your own facts. Suggestion: drop Pediatrics and take up surgery, OB/GYN or oncology. If you don't like working nights, Dermatology is also  quire profitable.

Did you walk around the Physicians carpark of a major Medical Centre recently? You might be surprised just how many Ferraris and Lambhorginis's there are around.

impermanence's picture

If you are one of the elite in medicine, or if your aim is to make a lot of money, then obviously, the opportunity exists.  I am not so very concerned about them, but instead about the middle 50% who arne't doing so very well and more, and losing ground every day.

I would think that if you are willing to make this type of committment (time and capital), that you should a least live without fear of, "making it."  Otherwise, who would take on such a task?

Obviously, this system is severely broken, but just because there are some still doing well, does not reflect on those who have not sold-out and are trying to keep their patients are the center of their practice philosophy.

Umh's picture

On the silly side; walk around the carpark of a office building when most people there are part of the cleaning crew. It's no wonder they are in debt.

rbg81's picture

I really like my doctor--he is a great guy.  But his office seems to have about 2X the staff that is warranted by the size of his practice.  They are basically tripping over each other in there.  I'm am sure he would luv to pay fewer people, but the paperwork must be such that he needs those he have.  They certainly always seem busy.

Professor Fate's picture

I had a few beers with a radiologist friend just last night and we were talking about what a disaster "O"care is and the hospital ripoff.  He told me his radiology group, contracted with the hospitals, receives about $3.75 per read of an MRI / x-ray whatever.  You and I (those that have insurance) will pay $250-$750 on the hospital bill for that read.  Those that have no insurance will pay nothing. And the blood-sucking parasitic lawyers take great delight in seeing it stays that way.  I'm for private medical care facilities / groups that you belong to and pay a monthly "membership" to.  You sign away your rights to sue and they do the best job possible.  No membership card...no service.  Best of all, no parasites.  Want to buy a supplimental major medical policy for cancer, heart transplant, whatever?  Go right ahead.  Get treated at Duke.  But for more common ailments, give me a private program.  The free market sets the rates as the medical facilities compete against each other for your membership business. 

johnconnor's picture

¿Poor like you don't take home a quarter million dollars a year? please define what is poor for you. In other countries Doctors have a good quality of living, but they don't make nearly half of the amount that you guys take home

Hypnos's picture

Cost of medical degree, malpractice ins,office expenses,hours per week.most doctors are paid accordingly.almost every physician is not extremely wealthy throughout his/ her time in practice. Taking a snapshot in time not fair assessment.

Zer0head's picture

Jeopardy:

$16 trillion please

 

They are powerless buyers in a sellers’ market where the only consistent fact is the profit of the sellers.

 

 

 What is Capitalism?

 

Supernova Born's picture

Spend some time in a California emergency room.

You can't have affordable health care for a working "minority" when the non-working majority gets it all free.

And more uninsured (obviously) illegal immigrants are coming via promised amnesty and guaranteed anchor babies every day! Every birth costs THOUSANDS, even the routine ones!

Medical insurance is going to get insanely expensive for those who buy it and medical care will only remain "first world quality" for those who can afford to pay cash.

Old and insured? Hospice is always covered 100%.

Supernova Born's picture

That AARP doesn't oppose illegal immigration demonstrates how utterly owned they are by the socialists and how deluded they have become in this baseless fiat economy.

Texas Ginslinger's picture

Am curious.  How many folks here work at staying healthy, thereby denying the healthcare industry their obsene profits.

How about a quick poll..??

Up arrow me if you eat a good diet and get regular exercise.

Give me a down arrow if you eat a meat based, junk food, process food diet and are sedintary.

Thanks in advance...

Kidrobot's picture

Newsflash...you can get sick and need medical attention without an unhealthy lifestyle.  

Everyone gets sick and old eventually.  At least today we're given pain pills to cope till we die.  Not like people in the past had much a choice and they managed. 

MisterMousePotato's picture

Joel Fuhrman. Eat To Live.

By the way, poster above is correct about minority working and majority non working takers in California: The ratio is 139 .gov/welfare to 100 private sector. (There are actually a couple of states even worse off.)

Id fight Gandhi's picture

I get your point, be active and fit. But you're fucked if you blow out your knee and need scans, surgery, drugs and rehab. Anything can happen.

All people at some point will need care no matter how well they take care of themselves.

TBT or not TBT's picture

A longer "health span" as opposed to mere "life span" could improve things a lot, for the country and indviduals/families.

Eating too much meat is not the cause of shorter health span so much as eating wheat based blood sugar bombs and cheap vegetable oils.   We are designed to eat meat, big time, and the vilification of saturated fats is something that came from Congress, big agro, and the packaged foods industry.    

Eat lots of whole grain, whole wheat bread?   You are hammering your whole body, every last cell, with big insulin spikes.

sschu's picture

People get sick and hurt for a variety of reasons, some of them are outside of their control.

The way it is going however, getting sick or hurt can easily lead to financial ruin.

So it is up to the individual to make every effort to minimize the chances of getting sick or injured.  Last year we went on a "get healthy" program.  Given the cost of our medical premiums (we are small business owners) we have no choice.  Smoking, eating better, exercise, lose some of those pounds, refrain from gluttony, it is not all that bad.  The downside risk to unhealthy lifestyle is pretty grim.

Roll the dice if you want.  Put your well-being in the hands of a Washington bureaucrat if you feel lucky.

sschu   

 

TBT or not TBT's picture

There are already very strong, obvious incentives at the individual level....for being a healthy individual, but yeah, individual responsibility ought to be emphasized.

Evil Bugeyes's picture

Eating a good diet and getting regular exercise may allow you to live longer, but I'm not sure whether it decreases your lifetime healthcare costs. In fact, it might even increase them.

Whose healthcare expenses are larger:

1. An overweight meat-eating, chain-smoking, heavy drinker who keels over from a fatal heart attack at age 60?

or

2. A fit and trim guy who lives to be 101 and requires managed care/assisted living for the last 10 years of his life and then suffers a fatal heart attack?

Edelweiss's picture

 Interesting question.  The reality is (at the hospital I work at), people who are obese, chain-smoking, and generally unhealthy, many times are admitted repeatedly over a period of years before they die.  Frequently, they are on disability, or uninsured. It's not uncommon for them to incur huge expenses for care given.  A couple of years ago, a 19yr old local drug dealer was shot, and spent 7 months in the hospital, with multiple surgeries/procedures.  The bill would have to be in the hundreds of thousands. Be assured, he won't be paying a bit of it, taxpayers will. Is some profiteering involved? Most likely.  Some chemotherapy regimens cost as much as a new luxury car.  How could it possibly cost that much, even with a good measure of profit? People like myself, who are employed, and insured bear the brunt of costs.  Meanwhile, I frequently see individuals who do nothing to take care of themselves admitted monthly.  They understand that they will not be responsible for paying the tab.  Now, as of 2013 as a part of "O"-care, reimbursment from the govt. is partly based on perception of care rendered, not actual outcomes.  So basically you can receive top notch, safe, effective care, and negatively effect reimbursement because you didn't like some aspect of your stay.  Dumb idea.  I recently saw a situation where a patient who had a stroke failed a swallow evaluation, meaning if they eat, they may aspirate it into the lungs.  Because the family complained, the decision was made to feed the patient.  Safe or smart? No, but that's the way it works now.   From my perspective, it's likely the quality of care you can expect to get will decline via defunding, and the masses of unhealthy Americans flooding a hospital near you.  I hope I'm wrong. 

fonzannoon's picture

texas my wife, daughter and I are healthy and work at it. we pay $1,300/mo for health insurance. how are we denying insurance companies obscene benefits? 

philipat's picture

As a general note, why not consider Healthcare Insurance which EXCLUDES The US? I don't know about S. America, but I do know that in Asia (With the increasing exception of Singapore which is getting up to US price levels) there is VERY good healthcare available at a fraction of US costs. And also very good Insurance policies available IF you exclude The US. Thailand and Malaysia are to be recommended. It's a long way but that is why God gave us nice big Airbus-380's. And your savings will allow Business Class travel plus a nice holiday thrown in, essentially for free.

 

Just sayin'.

TBT or not TBT's picture

There ought to be an offshoring of lots of health care, that's for sure.    One of the former secret banking paradises ought to get into that, bigtime.   Plenty of high end professionals might like to ply their trades in a lower tax, sane regulation, reduced bureaucracy, reduced tort environment.    That's why Texas saw such a big influx of specialists and R&D activity from the rest of the USA in the last decade or so.    That dumbass Rick Perry and the low paid, seldom working legislators in Austin get the right things done in their short sessions, which are limited to every other year.

Tompooz's picture

The Philippines is also an excellent destination for medical and dental tourism. Good english spoken and the bills are about a tenth of the cost in the US. Insurance excluding the US is an excellent suggestion, but you can also insure yourself and just pay cash overseas. 

SilverTech's picture

Am curious. Where do you derive your ideas of what a healthy diet is?

Fact is, the nutritional guidelines that the FDA promulgates are practically guaranteed to make you sick.

Wheat is the biggest offender because it's franken-wheat, chock full of new, toxic forms of gluten (see "Wheat Belly"). Most corn is GMO=slow poison.  Most soy is GMO and, even if not, unfermented soy is NOT good for you. No soy is good for males because soy contains plant estrogens (unless you like man tits). Many vegetable oils, like canola (rapeseed) and corn oil are at least somewhat toxic. The list goes on...

Of course, you're right, processed foods and fast foods are the absolute worst. They're fast poison.

http://www.amazon.com/Wheat-Belly-Lose-Weight-Health/dp/1609611543/ref=s...

rayduh4life's picture

Urrgghhhh!  wrong,  ding, "what is fascism"  Correct.  May I have Healthcare for 17Billion please Alex:   

The asshats that first authored  "O'bamacare"?  Answer Who are fascist wing nuts called Heritage foundation.  Correct.

Buckaroo Banzai's picture

Well, actually, it's probably more communist than fascist, but we can both agree that it's Socialism.

FYI, the Heritage Foundation is controlled opposition.

mkhs's picture

Well, let's see.  Pay (according to means) and receive (according to needs).   Nope.   Communism.

Panafrican Funktron Robot's picture

"When the cost of healthcare is discussed, why is exercise and a proper diet never mentioned..??"

What established crony entity would benefit from preventative care and a generally healthy population?

Consider, what chronic disease patient is going to leave their incredibly shitty job and risk the loss of insurance?

Consider, what unemployed chronic disease patient is going to obtain a job and risk losing their insurance?

Diabetes is a control mechanism.  

 

Texas Ginslinger's picture

Thanks for describing the root cause of the problem.

The healthcare industry makes $$ off the unhealthy.

The fit spend their $$ on good food and exercise gear.

Regular exercise and a proper diet (in the long run) denies the healtcare industry more profit.

Yet nobody talks about it.

Not even Tyler.

Go figure....

 

Henry Hub's picture

When you're in you twenties and thirties proper diet and exercise are great. You probably won't have any serious illness. Enjoy your healthy life because when you hit your fifties and sixties diet and exercise help but your going to start to have serious medical problems. Count on it.

Texas Ginslinger's picture

Henry,

I'm almost 60 years old, eat a plant based diet, get regular vigorous exercise and in near pefect health.

You are clueless and part of the problem.

Open your mind.......