Three Problems Contributing To Americans’ Sky High Medical Bills — And Three Ways To Fix Them

This week’s issue of Time Magazine takes a deep dive into Americans’ medical bills and the roots of the U.S. health care industry’s rampant inflation — costs that force one in four American seniors into bankruptcy and over one in three Americans to forgo care.

The investigative piece highlights the exorbitant costs of the most commonplace procedures and medications, and how insurance coverage often falls through for Americans who encounter unaffordable out-of-pocket costs due to the rising price of health care technology and services. Furthermore, it is often impossible for patients to ascertain why they are being charged what they are for care — a pricing opacity that is truly unique to the service-centered health care industry. Here are the three biggest takeaways from the Time exposé on the unsustainable foundations of American health care costs — and some ideas for shifting the U.S. medical landscape towards a more equitable system:

The indefensible costs of medical testing, technology, and drugs. Much of the report focuses on the costs of receiving basic care and testing, such as diabetes tests, drawing blood samples, or even taking plain old Tylenol — which one hospital in the report marked up to $1.50 per pill, approximately 100 times its general market price, for a cancer patient. Hospitals are largely able to get away with this because they are, as the article puts it, “sellers in what is the ultimate seller’s market,” so device manufacturers, pharmaceutical companies, and hospital chains — even technically “nonprofit” ones — are free to run up the tabs on Americans’ care. Use market competition and price negotiations to lower costs. In its Senior Protection Plan, the Center for American Progress (CAP) advocates tying relatively low Medicare drug rebates to more generous Medicaid drug rebates, and enforcing competitive bidding for all health care products in both the public and private sectors, as well as intrastate price negotiations in the private medical sector that constrains annual spending to a predesignated cap. All told, such reforms would reduce American health care spending by at least $180 billion.
People usually don’t know why they get charged what they do for care. It’s a common mantra among health care reform advocates — America doesn’t have a health care system, it has a sick care system. Services are charged after the fact, often in the form a hefty, inscrutable bill that tells patients very little about why they are being asked to pay tens of thousands of dollars in order to receive care that can mean the difference between life and death. This opacity allows providers to get away with jacking up the price of services even as medical technology makes huge strides — which should theoretically lower costs. One GAO report states that “the lack of price transparency and the substantial variation in amounts hospitals pay for some IMD [implantable medical devices] raise questions about whether hospitals are achieving the best prices possible.” Make hospitals issue easily understandable receipts for all health care services.This is a relatively simple fix that would help facilitate further cost reductions by rooting price negotiations in easily-available, verifiable, and uniform data. As the CAP health policy team’s Topher Spiro states in an email to ThinkProgress, “We propose full price transparency—so it wouldn’t take a seven month investigation by a reporter to find out what prices are being charged.” The best possible outcome would be for hospitals and insurers to provide a comprehensive list of services to all patients and beneficiaries that let Americans know exactly how much a particular disease treatment or procedure will cost them.
Americans get care at expensive hospital chains that don’t necessarily provide the best service. As Time’s article points out, national and multi-national hospital chains rule the American medical industry — but that doesn’t mean they provide the cheapest, highest quality, or most efficient care. For instance, at the Texas giant MD Anderson, hospital administrators charged Sean Recchi over ten times as much for a chest x-ray as they would have been reimbursed by Medicare, which is required by law to approximate the price of services rendered. Why? Because Sean Recchi had subpar private insurance, and MD Anderson could get away with it. Encourage patients to visit high-performing hospitals with insurance incentives. Americans might believe that such hospitals are their only recourse — but that doesn’t have to be true. One approach to encouraging providers to provide more efficient, quality, and affordable care would be the creation of tiered insurance plans that reward patients — through lower premiums and deductibles — who use low-cost, high-quality hospitals for their care instead of the highest-cost brand name hospitals.