The Cost of Healthcare

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The Cost of Healthcare

When discussing government regulations, debates gravitate toward large corporations and banks. Healthcare is often overlooked despite the fact that it makes up nearly twenty percent of the GDP. The medical-industrial complex—as the phenomenon is referred to—has stemmed from a lack of a competitive market and pressure from lobbyists to keep prices high. The end result is a market where drugs and procedures are provided at as much as a 1000 percent mark-up (Brill 3). A commonly held belief is that the issue is not the quality or availability of medical care in the United States but the cost (Comparing the US and Canadian Healthcare Systems). However, the three are all interconnected, as is the case with any free market. Although solutions have been provided, they have proved to be highly controversial because of the complexity of the issue and the number of factors to consider.

Many people do not realize just how expensive healthcare has become until they see a hospital bill. This was the case when Sean Recchi was diagnosed with non-Hodgkin’s Lymphoma. Sean had recently started a small business and was unable to afford an insurance plan with comprehensive coverage. Instead he was spending a third of his income on a plan the only coveredabout 2000 dollars a day. He sought treatment at MD Anderson, a non-profit cancer center in Houston. After a few days of treatment, he had already accumulated over 100,000 dollars in medical bills. Sean’s experience helps to explain whysixty-two percent of bankruptcies stem from the inability to pay medical bills (Brill 4). Although many diseases are no longer the death sentences they once were, the cost of healthcare in the US still leaves many of the affected families devastated. With all things considered, the healthcare situation in American has adverse effects on citizens, the business community, economy, and politics; and, to improve the landscape perhaps more can be done to create a more competitive market, make insurance costs more transparent to the consumer, and implement innovative technologies.

One issue that needs to be addressed is the availability of private health insurance. The employer-based insurance system has created a host of issues for all parties involved. Currently, employers are not required to provide insurance to provide insurance if they employ less than fifty people. Those that do provide insurance are forced to give employees a limited number of options. A majority of the population receives coverage in this way and many feel they are bound to their employer at the risk of losing their insurance (Garson 2016). Small business owners face an even bigger dilemma. Those who are not provided with employer-sponsored insurance must seek coverage from the individual market (Chua 3). This is how Recchi was forced to pay for coverage. He was only able to afford a plan that provided minimal coverage and was not prepared when he was diagnosed with non-Hodgkin’s Lymphoma (Brill 1). The US healthcare system has continued to be effective for many citizens. However, stories like Recchi’s remind us that there are many flaws that need to be addressed.

The price that providers put on medicationand procedures is not the only issue. Medical bills also lack transparency, which disguises the cost and causes many to overpay. Sean Recchi and his wife Stephanie were paying twenty percent of their income for an insurance plan with minimal coverage. When they arrived at MD Anderson Cancer Center, they were told that their insurance is not accepted. They were forced to find other means to pay for the bill. This became less and less feasible as the stay progressed. The first six days were to be paid for in advance. It would cost 48,900 dollars to devise a treatment plan (Brill 1). The first dose of chemotherapy would cost 83,900 dollars (Brill 3). The bill also included aggressive prices on supplies like alcohol prep pads. Sean was charged seven dollars per pad when a box of two hundred costs less than two dollars. This and other hidden costs could be found in 344 lines of nearly indecipherable codes on a bill that was provided after the services had already been provided (Brill 3). Sean was forced to return home to Ohio after this initial treatment because he was unable to pay. Once back home, he was told that the company that produces the drug he needs is charitably donating it and that he is qualified to receive a donation. MD Anderson failed to mention this. He is now being treated and is doing well (Brill 36). Other service-based industries disclose the cost—or at least an estimate of the cost—before services are performed. Why should healthcare be any different?

At nearly twenty percent of the GDP, there is no denying that healthcare plays a critical role in the United States economy. Because they all play a role in its function, healthcare affects the government, businesses, and households. An increase in healthcare spending for each translates to less spending in others areas. Businesses reduce employment because of the inability to provide coverage. The government has less money to spend on other important sectors such as education and infrastructure. Households have less income to spend on goods and services (The Effect of Health Care Cost Growth on the U.S. Economy7). Although steady GDP growth is received as favorable, it is evident that growth in one sector can restrict the growth of others.

Healthcare also plays a major role in politics. Lobbyists for pharmaceutical companies influence legislation and keep prices high. The biotechnology company, Amgen, and its 74 lobbyists recently convinced congress to insert a paragraph into its Fiscal Cliff Bill. Section 632 now states that Amgen can continue to sell its drug for dialysis patients, Sensipar, without government regulation for an additional two years. This is projected to cost Medicare 500 million dollars. Meanwhile, the bill also calls for cutting 4.9 billion dollars over 10 years by reducing Medicare payments for dialysis patients.Amgen’s charitable contributions to minority groups and Political Action Committees have created strong ties with the congressmen who oversee Medicare (Lipton and Sack). It is impossible to remove politics from medical care. However, it is the government’s responsibility to ensure fair competition and reasonable prices.

One explanation for the high cost of healthcare is the lack of a competitive market. Ordinarily, competition in the private sector leads to gradual improvements in technology and incentive to provide goods or services at the lowest cost. Competition in healthcare has become zero-sum in that competitors actually reduce the value of the services provided. There are several underlying practices that contribute to this effect. This includes the lack of options and limited information provided when seeking medical services.When competitors know that their consumers are forced to pick services from their plan there is no incentive to reduce prices. In fact, providers often make more money by refusing to provide a particular service rather than competing to provide services at the best cost. Limiting consumer choice is often justified by arguing that the healthcare system is too complex to be run like an ordinary service industry (Porter andTeisberg). Giving consumers the option to choose a plan, which could then be subsidized by their employer, would bring about this competitive market.

Another important component of an affordable healthcare system is transparency. Twenty-nine states currently hold an “F” rating in transparency legislation as reported by the Catalyst for Payment Reform and the Health Care Incentives Improvement Institute(Metrics For Transformation Transparency). By making information available, consumers would be better able to choose a healthcare plan appropriate for their needs. Additionally, they would be able to find medical care at the lowest cost within their plan. Simplifying the billing process would also reduce the number of lawsuits spawned from a patient’s inability to pay, along with the related expenses. Healthcare is complex but other industries have proven that it is not impossible to provide estimates on customized services (Porter and Teisberg). This information would also bring competition to the level of treating a particular disease and provide incentive for hospitals to specialize in specific treatment services. Specialization has proven to significantly reduce costs:

The renowned Texas Heart Institute (THI), for example, prides itself on having surgical costs that are one-third to one-half lower than those of other academic medical centers despite taking on the most difficult cases and using the newest technologies. Because of its specialization, THI attracts the most complex and demanding patients, whose needs produce even more rapid learning.(Porter and Teisberg)

The flaws in the United States healthcare system have been dismissed for a long time. Perhaps it is time to bring healthcare up to the standards of other industries.

Finally, the delay in the implementation of new medical technologies must be addressed. Another component of a completive market is the effort to provide consumers with the best products and services:

There are wide and inexplicable differences in costs and quality among providers and across geographic areas. Moreover, the differences in quality of care last for long periods because the diffusion of best practices is extraordinarily slow. It takes, on average, 17 years for the results of clinical trials to become standard clinical practice. Important constituencies in health care view innovation as a problem rather than a crucial driver of success. Taken together, these outcomes are inconceivable in a well-functioning market. They are intolerable in health care, with life and quality of life at stake. (Porter and Teisberg)

Implementing new technologies and practices would reduce costs and improve patient care. It would also provide companies with the incentive to invest in further research, which also reduces the time needed to conduct the research.

With all things considered, the healthcare situation in American has adverse effects on citizens, the business community, economy, and politics; and, to improve the landscape perhaps more can be done to create a more competitive market, make insurance costs more transparent to the consumer, and implement innovative technologies. It is clear that there are many inadequacies with the American healthcare system. Many of the problems the country faces can be attributed to the faulty outlook that consumers, employers, and providers are all guilty of sharing. Healthcare can function similarly to any other service industry. Implementation of any changes would be slow and gradual; but until they are made, people like Sean Recchi and those less fortunate will continue to face financial dilemmas that complicate their already present medical condition. Doesn’t America aim to assist citizens like these?

Works Cited

Brill, Seven. "Bitter Pill." Time 12 Mar. 2013: N.p., n.d. Web. 15 Apr. 2013.

Chua, Kao-Ping."Overview of the U.S. Healthcare System."American Medical Student Association.N.p., 10 Feb. 2006. Web. 16 Apr. 2013.

"Comparing the U.S. and Canadian Health Care Systems." The National Bureau of Economic Research.N.p., n.d. Web. 16 Apr. 2013.

"The Effect of Health Care Cost Growth on the U.S. Economy." US Department of Health and Human Services. N.p., n.d. Web. 17 Apr. 2013.

Garson, Arthur, Jr. "The US Healthcare System 2010." The US Healthcare System 2010.N.p., n.d. Web. 16 Apr. 2013.

Lipton, Eric, and Kevin Sack. "Fiscal Footnote: Big Senate Gift To Drug Maker." The New York Times. The New York Times, 20 Jan. 2013. Web. 18 Apr. 2013.

"Metrics for Transformation- Transparency." Healthcare Incentives Improvement Institute. N.p., n.d. Web. 18 Apr. 2013.

Porter, Michael E., and Elizabeth O. Teisberg. "Redefining Competition in Healthcare - Sponsored by GE - Harvard Business Review."Harvard Business Review. N.p., n.d. Web. 16 Apr. 2013.