Extreme Costs of Health Care in the United States Opportunities for Improvement

By Stephen F Hightower MD FACP

“I think we do better as a country when we go step by step toward a goal,

and the goal in this case should be in reducing health care costs” Lamar Alexander

fixingushealthcare.com

Tuesday, January 21, 2025

Dear Mr. President, Honorable Members of Congress and Distinguished Staff and Fine Citizens,

The United States in 2023 had a population of approximately 330 million based on data from the Congressional Research Service.  About 7.9% or 26,070,000 of those were uninsured. Spending on health care for individuals including the uninsured, to health plans, and federal and state governments was approximately 4.2 trillion dollars for the previous calendar year 2022.  This accounted for 16.5% of the nation’s gross domestic product.  The expense breakdown for 2022 by CMS, (Center for Medicare and Medicaid Services), identified 30% going to Hospital Care, 7% to government Administration, 6% to residential and personal health care, 5% to public Health Activities, 4% to personal nursing care and the remaining 48% to various charges from clinics, private physician practices, and outpatient charges.

Unfortunately, though our country spends the most on healthcare, we as a country have the lowest life expectancy among large wealthy countries.  Explanations vary but consistent concern is placed on our emphasis on the cost of medical procedures versus efforts on health promotion. Costs themselves are often hidden from consumers and money can often be spent on tasks or treatments that suggest we are treating something but there is no identified effect.  Dr. David Cutler a Harvard University Economist noted the United States spends more on administrative costs than they do on care and treatment of heart disease or cancer.

The amount working–age Americans spent on Health Insurance through payroll deductions has increased three times faster than wages for the past 10 years.  Health bills have become the leading cause of personal bankruptcy, and those bills are more than half of all dept on consumer credit records in 2022 per data from the consumer credit records in 2022 by the Consumer, Financial Protection Bureau.

In 2023, a group of health economists identified the entire United States health care system, and not just insurers, required scrutiny for runaway medical bills.  At the same time Rice University economist Vivian Ho noted that Health Insurance companies took in $25 billion in profit, while hospitals collected $90 Billion.  The focus of her concern was mainly on the fact that so many hospitals were identifying themselves as non-profit.  

A recent review of the above data by the editors and staff of USA Today, has pointed out our current health care system as a travesty and has provided significant research to identify root causes. They have provided these seven root causes:

I

A) Lack of Price Limits:  US hospitals have more specialists over all and per capita than other nations. This 24/7 specialty care increases cost when reviewed by a health care policy professor at Harvard medical school.

B) There is a significantly higher cost for private and two-bed rooms versus the more often open wards in Europe.

C) Hospitals collected 30% of the $4.5 trillion spent on US Healthcare in 2022.  Doctors bills were second at 20%.  Prescription drugs were 9% and Medicare and Medicaid were 7% for their administrative costs.

D) Commonly, most hospitals and non-profit entities, receive federal, state and local tax breaks. They are expected to provide free or reduced care to low-income or uninsured patients. Federal law requires hospitals to assess and stabilize any patient who seeks ER care regardless of payment ability.  An evaluation by Johns Hopkins University and Texas Christian University estimated that nearly 3,000 nonprofit hospitals were spared $37.4 billion in federal, state and local taxes in 2022.   That same year Medicare identified that only $15.2 billion in charity care  was provided by the 3,000 nonprofit hospitals.  A proposal has been introduced to provide healthcare price caps in markets where large hospitals control a significant share of the local health market.

II

Hospitals and Doctors get paid for services not outcomes:  The insurer pays the doctor, hospital, or lab on negotiated in-network rates, based on the number of tests and procedures they order and not on actual outcomes, but more on expected outcomes. This encourages quantity over quality with more tests or procedures providing lucrative payments regardless of patient outcomes. In 2010 after the ACA, Affordable Care Act, was passed, the CMS (Center for Medicare and Medicaid Services) funded programs that encouraged hospitals and health providers to emphasize value over volume. Actual experience with US value-based-care, came in 50 models done by CMS over the past 10 years and only six provided health savings and two showed improvements in quality when reviewed by US Representative Lloyd Doggett, Democrat from Texas.

III

Specialists Get Paid Much More. Cardiovascular Surgeons, Cardiologists, Neurosurgeons, Intensive Care Unit doctors, Orthopedic surgeons, and others,  receive much higher payouts from Medicare and private Insurances compared to primary care doctors. Not surprisingly the Medicare payment rates set the base rate for health care prices typically used by private insurers.  The question has been raised if more lucrative payments for primary care, where the emphasis is on prevention, might lead to healthier patients and reduce costly spending on specialists.

IV

Administrative costs inflate health spending by an extra 25% per multiple experts including Dr. Cutler at Harvard who has evaluated these costs over time.  These administrative steps include requiring authorizations to perform procedures, or operations, or mandated step therapies, requiring lower cost prescriptions or other treatments to assess outcomes before pushing more costly medications or surgeries. This produces more administrative tasks requiring prior authorizations from an insurer on behalf of the patient. Dr. Cutler has noted that Medicare is much more efficient as patients bills are collected in seamless transactions without the oversight level of private insurance companies. However, unfortunately, unscrupulous providers can more easily be fraudulent with billing and are not always easily detected.

V

Health Care Pricing is a Mystery. Patients frequently have no idea how much a test or

procedure will cost before going to a clinic or hospital. Health Care prices are hidden from the public. Consumers even with health insurance must pick up a portion of their bill, so health care prices matter. For example, Dr. Cutler has noted differences for common processes such as an MRI costing $300 dollars at one institution and $3000, for the same test at a different institution.  Similarly, he has noted colonoscopies at $1,000 to $10,000 at different certified facilities.

VI

Americans pay far more for prescriptions drugs than people in other wealthy nations. In a report by the Health and Human services in 2023, United States prescription drug prices run 2.5 times higher than those in 32 comparable countries.  In a study of 224 cancer drugs approved by the FDA from 2015-2020, the median price for a patient was $196,000 per year.  Law makers scrutinized prices of the weight loss drugs Ozempic and Wegovy in September of 2023 with Bernie Sanders asking Novo Nordisk’s top executive why US residents pay $969 a month for Ozempic, and in Canada it is $155, Denmark it is $122, and in Germany $59.

VII

Private Equity:  Wall Street Investors with private equity firms have bought our hospitals and large doctor practices with the primary goal of making a profit. The Federal Trade Commission sued U.S. Anesthesia over its serial acquisitions of practices in Texas and then inflated prices for patients.

A health care opportunity for all Americans, funded by the United States, would allow for a significant improvement in health care and would reduce costs to a great nation that could then say, “Our citizens are our greatest asset, and we will care for them as our highest priority!”

Respectfully submitted,

Stephen F Hightower MD FACP

Rio Rancho, New Mexico

fixingushealthcare.com

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