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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Ying-Yang's picture

Feds don't allow hardware stores to overcharge on plywood when hurricanes hit then why do they allow hospitals to overcharge? Hospitals should be charged with predatory pricing.

In a hospital you have no say on what you are charged and in most case what you are given. One solution is to require pricing to be disclosed. Same with drugs and testing.

My wife had to have a CT scan with contrast. Doctor said go here, $4,200, I said bullshit. I found a clinic on the other side of town that did the same test for $1,200. That's 3k bullshit!

Drugs are cheaper in Canada and more available in Mexico. Why are Americans not allowed to do like Mexico? Money plain and simple... it is a racket that we can't afford anymore.


duo's picture

When a week in the hospital ICU costs more than the average worker makes in a career, that means that every person has a negative value to society because they are at risk of running up seven-figure medical bills.

Let's face it, the US is an HMO that happens to have an army and a Navy.

emersonreturn's picture

a friend's father was told he had weeks to live...i found this unbelievable, usually they give the stats and the individual generally hears the high number and takes that as the time frame, but then i realized he has private insurance and they know that generally people believe doctors and take what they have to say as gospel, and by telling him weeks it saves the organization thousands, sheeple being so easily programed....then his doctor told him in Washington State he has the right to chose to leave the planet (which i am completely in favour of and feel it is a highly enlightened stance) and that he, the doctor, will supply the father with the handful of pills when the time comes; the father is to administer them himself, thereby freeing the doctor and organization of direct responsibility.  great.  the father is completely satisfied, as is the medical provider---it saves them all a tremendous amount.

Vashta Nerada's picture

I believe the Feds are the ones who won't let hospitals disclose pricing to the user.  They also mandate that hospitals treat people regardless of ability to pay.  They also mandate that hospitals treat illegals without charging them.

Id fight Gandhi's picture

It is a racket. Then you add insurance companies in there and it really fucks things up. Many drs have a vested interest in those testing labs. They profit from the tests.

It's a lie that USA medical care is the best in the world.

The game is, they overcharge and the insurance gets a "deal" pays a fraction of the cost. Those with poor insurance or none get stuck with the full msrp.

hidingfromhelis's picture

It's both predatory and monopolistic pricing, and there's no obligation on their part or ability on your part to get price quotes in advance.

Vendetta's picture

How many hardware stores have highly paid lobbyists in DC bribing politicians?

rhinoblitzing's picture

Exactly - A blank check to the INSURANCE INDUSTRY with no way to for consumers to compare prices, services, or past performance.

Vashta Nerada's picture

Healthcare costs so much because the person using the service isn't the one paying for it.  Look at cosmetic surgery, where insurance does not cover the service - prices have been going down for years.  I guarantee you that if people had to pay for their care on delivery, a competitive market would emerge.

harami's picture

You never know, some time in the future cosmetic surgery might be deemed necessary since ugly mother fuckers have an affair advantage in life when it comes to getting a job or having high self esteem.

Stranger things have happened.

DaveyJones's picture

That is indeed a big part, but the way things are going, the criminal collusion and the federal scale, is tiping the control over to organized crime. The anti-hippocratic oath

rayduh4life's picture

Ok, except why doesn't that apply to dentistry?  A lot of folks, even those with Health insurance, don't have dental insurance and those prices keep going up.

Vendetta's picture

My dentist made around $800/hr for some work he did (~3 hrs).  Something seriously wrong with that, I had no idea till I got my portion of the bill that my insurance didn't cover.

Vashta Nerada's picture

If I am not mistaken, the costs for dental care are going up at about two thirds the rate of medical care. Essentially, the cost increase is proportional to the percentage of care that is paid for by a third party.

Motorhead's picture

German TV the other night had a show about the hanky panky Eli Lilly pulled with prozac and how the Germans turned it down twice before eventually approving the drug.  Disgusting.  Monetary penalty, my ass.  Hang those execs (and any complicit scum at the FDA).

DaveyJones's picture

My favorite latest from criminal law land is OXY. It has exploded into the scene and is screwing up a lot of lives. The drug maker was caught red handed hiding the evidence that this stuff could do a lot of harm. The corporation paid a fine and a few minor execs got a deferred misdemeanor. Meanwhile the addicted teenager does prison.

Aint that America, somethin to see...

Panafrican Funktron Robot's picture

I work in this field, and my friends, it is a really fucking depressing field to work in.  Our sector is 1/6th of the entire US economy, and it is a fucking cancer on our society.  It bankrupts people, it causes, maintains, or worsens illness, and it is a fucking cancer on our society.  

dick cheneys ghost's picture

Our society has many cancers.......

cancer on health care

cancer on the president

cancer on the dollar

and the cancer on wall st (ass cancer)



DaveyJones's picture

cancer on cancer treatment

a lot of that shit does not work. We have thown billions (trillion?) into the last twenty five years and not really improved the success rate. We've made some people rich though

Meatballs's picture

I left. Not going back and couldn't be happier. Managed Care? Yeah, it's managed all right.

Panafrican Funktron Robot's picture

Looks like I managed to repeat myself, but, really, it probably can't be repeated enough.  When you think about the FIRE economy, a lot of minds go right to finance and real estate, and forget about the insurance part.  Providers are very much complicit in this, but in the end, the respond to money flows, and the money comes from insurance (both public and private).  I think this is where the article is actually a bit weak; it seems to focus a lot on the providers (both service and gear) and the utter fuckitude of mispricing, but again, they have and always will respond to the money flows.  We have hospitals that are nicer than fucking 5 star hotels.  We have insurance company towers that are larger than some bank towers.  That is a totally fucked situation.  Like I said, fucking... cancer.

JustObserving's picture

The mantra of American business is "fraud," whether it be Wall Street, Healthcare, or the Military Industrial Complex.

Motorhead's picture

Healthcare, AKA the "pharmaceutical-industrial complex".

combatsnoopy's picture

Medicare and Medicaid are both welfare for Big Pharma.  With an aging baby boomer market and drugs made for cheap in India, Big Pharma has LOADS of money to lobby Congress with.  THey may be as dangerous, if not more dangerous than Wall Street.   That contest will def. be a game of wits 

DaveyJones's picture

isn't it interesting that with an aging society and rising health care costs, you would think the first thing we would do is use the world market for drugs where we could find prices one tenth to one one hundredth of what we pay. And the first thing this administration did was cut a deal with pharma that that would never happen. It followed up with the promise that the boss middleman, insurance, whose last interest is health would always get their cut, their now mandatory cut.  It's not medicine, it's just crime. crime and corruption. Anyone with an ounce of medical and ethical intelligence has called this plan out for what it is.

mkhs's picture

The silence is deafening.


trillion_dollar_deficit's picture

I work in healthcare finance. From what Ive read of it so far, the article is pretty accurate in its portrayal of the industry. My opinion is that the system has become so complex that nobody truly understands it. I see examples of that almost daily.

As bad as the article protrays the not for profit organizations, the for profits are significantly worse. I estimate their charges (ie the chargemaster) are anywhere from 2 to 3 times more than the not for profits. This is important even for the insured because of the patient owed portion of the bill thats due. My suggestion is to find out which facilities in your area are HMA or HCA owned and avoid them at all cost.

Panafrican Funktron Robot's picture

The best values are often found in ex-urb county clinics.  They typically have reasonably good staff and can tackle just about anything that doesn't require an ER visit.  

john39's picture

someone certainly understands it...  just follow the money.  wealth is being stripped out of the middle class, especially the elderly, through the sick care industry and related insurance companies.  pure fascism, and now there is no way out.   Take good care of yourself, great, now open your wallet for the rest of the fat lazy americans who didn't...  because your corporate overlords want every last penny of wealth they can get.

berlinjames02's picture

What?? The healthcare and insurance industry is too complex for anyone to really understand what is going on?? I'm shocked to hear that.

Dude, you should really spend more time on Facebook. Just about everyone I know on FB 1) understands healthcare perfectly and 2) can articulate how great Obamacare is in Twitter-like character limits.

I don't know how anyone can 'think' they understand anything. There is so much (un)intentional (mis/dis)information out there that no one knows what is going on. Healthcare, Social Security, the national debt or deficit.

I love how people believe you take a complex system and make it work by increasing complexity.

Vendetta's picture

The simplest of things are often hidden by complexity ... things like greed and corruption. 

uncle reggie's picture

The rising cost of healthcare. First heard that story 25 years ago. Couldn't fix it then, can't fix it now. Too many making too much prevents a fix. That is the American way, afterall.

Umh's picture

And they keep trying to sell more problems while calling them solutions. I cringed at the side effects of the HMO model which they said would reduce costs. It may have reduced costs, but has only increased prices.

Shell Game's picture

Guess I'm Old School. I avoid the doctor's office like the Plague.  I DO NOT go unless I really have to fucking go.  What is wrong with our milk-toast society?  I have an ache......pill me.   I feel glum......Pill Me.  I have a restless leg at night......PILL ME!   I have a hard time falling asleep, not sneezing, digesting my milk, paying attention, waking up, settling down......  Is there's a pill for that!?!

It's all a fucking mess.

harami's picture

Best thing my dad ever taught me "Don't go the hospital unless you're dying, because if you're not, they'll make sure you are by the time you leave".

Michelle's picture

And might I add that doctors and hospitals can bury their mistakes.

Modern medicine is great until you and others have to pay for it.

Once the kids are "off the payroll" (age 18) it makes little difference if I'm around, none of them should have to feed my face and wipe my sorry ass. Guess I'm one of those that doesn't believe in entitlements and that I "earned" it, at some point we become burdens to our families and society.

Vendetta's picture

we bury their mistakes, they bury their paperwork and evidence.

Esso's picture

Agree. A poster on another forum once commented, "The worst thing that can happen to a person is a diagnosis."

Pretty sage.

Widowmaker's picture

Puhlease.  Widowmaker doesn't go to the doctor because doctors are SHILLS!

Last visit, a family member was diagnosed with a "super-virus" in their eye.   What the fuck is a super-virus?  A $120 office "visit," and a $7.00 trip to the pharmacy.

Where are all the doctors in the health care debate?  Paying themselves and their incorporated dick sucking racketeering syndicate known as the AMA. *slurp* *slurp*

Two biggest houses in any midwest small town- the banker and the doctor, if you can find one (insert syndicated dick-sucking above).


BigDuke6's picture

That's the sort of talk that gets you an extra big incision and a 'bad' operation in some places

reader2010's picture

Welcome to the Modernity aka Capitalism in which money (aka profit) is always ahead of human needs. And let me quote the American thinker Immanuel Wallerstein (1930 - ) here:


It is simply not true that capitalism as a historical system has represented progress over the various previous historical systems that it destroyed or transformed. Even as I write this, I feel the tremour that accompanies the sense of blasphemy. I fear the wrath of the gods, for I have been moulded in the same ideological forge as all my compeers and have worshipped at the same shrines.

riphowardkatz's picture

I can tell you are the type of person that doesnt care about words and meanings but what the heck here goes

bank bailouts, a central bank, thousands and thousands of laws, import tax, export tax, medicare, medicaid, social security, war on terror,  are NOT in any way associated with capitalism. They are socialist and fascist. 


Can you understand that jackass? answer I already know you cannot.

reader2010's picture

According to the western intellectual history,  both socialism and Fascism are just two different types of capitalism.