Extortion of the Sick: How For-Profit Health Care Has Destroyed US Medical Care

by Nomad

In the past, an armed mugger would offer his victims a stark choice: "Your money or your life!"

That bleak option, in our times, has literally become the business model for the US health care system.

An Inescapable American Burden

Physician-turned-journalist Elisabeth Rosenthal, opens her new book, An American Sickness: How Healthcare Became Big Business and How You Can Take It Back, with these lines:

In the past quarter century, the American medical system has stopped focusing on health or even science. Instead, it attends more or less single-mindedly to its own profits.
Everyone knows the healthcare system is in disarray. We’ve grown numb to huge bills. We regard high prices as an inescapable American burden.

We accept the drugmakers’ argument that they have to charge twice as much for prescriptions as in any other country because lawmakers in nations like Germany and France don’t pay them enough to recoup their research costs. But would anyone accept that argument if we replaced the word prescriptions with cars or films?

The current market for healthcare just doesn’t deliver. It is deeply, perhaps fatally, flawed. Even market economists themselves don’t believe in it anymore.

What the Health Care Debate is Ignoring

In the politicization of the health care debate, there's one point that everybody seems to overlook.
No matter which system triumphs, Affordable Care Act or American Health Care Act, the underlying problem remains: healthcare costs, at present levels, are simply unsustainable.
So why hasn't somebody done something about it?

Simply put, nearly every politician has a vested interest in not addressing the root cause of this problem.
Libertarians, like Rand Paul (who recently compared universal healthcare to a Gulag), might talk about political freedom and emphasize freedom of choice, and individual judgment and what-not but this Ayn Rand philosophy means nothing to the sick and dying.
Laissez-faire capitalism simply will not deliver the kind of health care that people need and deserve. It certainly won't provide medical care that patients can afford.

We live in an age of medical wonders—transplants, gene therapy, lifesaving drugs, and preventive strategies—but the healthcare system remains fantastically expensive, inefficient, bewildering, and inequitable. Faced with disease, we are all potential victims of medical extortion. The alarming statistics are incontrovertible and well known: the United States spends nearly one-fifth of its gross domestic product on healthcare, more than $3 trillion a year, about equivalent to the entire economy of France.

For that, the U.S. health system generally delivers worse health outcomes than any other developed country, all of which spend on average about half what we do per person.

Actually, when it comes to making profits, the American system of health care is working just fine. When it comes to delivering medical care to the majority of Americans, not so much.

Free-Market Principles and Health Care

That's just an outline of the problem. But what are the specific causes? To answer that question, Rosenthal has composed a list of business model approaches which have no place in humane and affordable medical care.

    

Economıc Rules Of The Dysfunctıonal Medical Market

• More treatment is always better. Default to the most expensive option.
• A lifetime of treatment is preferable to a cure.
• Amenities and marketing matter more than good care.
• As technologies age, prices can rise rather than fall.
• There is no free choice. Patients are stuck. And they’re stuck buying American.
• More competitors vying for business doesn’t mean better prices; it can drive prices up, not down.
• Economies of scale don’t translate to lower prices. With their market power, big providers can simply demand more.
• There is no such thing as a fixed price for a procedure or test. And the uninsured pay the highest prices of all.
• There are no standards for billing. There’s money to be made in billing for anything and everything.
• Prices will rise to whatever the market will bear.

The cycle starts with insurance companies. Rosenthal points out that the concept behind health insurance is relatively new and yet, its mission has changed dramatically in recent decades.

The very idea of health insurance is in some ways the original sin that catalyzed the evolution of today’s medical-industrial complex.

Since the mid-1990s, all insurers, she writes, have been spending less on care and more on activities like "marketing, lobbying, administration, and the paying out of dividends."

Once acceptance of health insurance was widespread, a domino effect ensued: hospitals adapted to its financial incentives, which changed how doctors practiced medicine, which revolutionized the types of drugs and devices that manufacturers made and marketed. The money chase was on: no one was protecting the patients.

Profit Making Run Amok

In a review of the book in the New York Times noted, it is a bit too easy to put all the blame on the insurance companies. We need to look closer at why other nations with comparable levels of healthcare can do it at far less cost.

The main difference between the United States and other countries, claims Rosenthal, is how the government regulates the healthcare industry.

More specifically, it’s the way in which those who benefit from America’s dysfunctional market have mobilized to use government to protect their earnings and profits.

In those countries where citizens have access to advanced medical care, there is a potential for price-gouging and runaway costs.

However, unlike the US, the governments of these nations not only provide affordable health care for all, but also provide a strong means to regulate those who seek to use "their inherent market power to raise prices or deliver lucrative but unnecessary typically in the form of hard limits on how much health care providers can charge." 

Generally, these regulations are in the form of strict limits on how much can be charged for hospitalization, diagnostic tests, etc. and in the form of pricing caps on pharmaceutical costs. 

Unless and until these regulations are in place, it is pointless to talk about affordable health care in the US. And with powerful lobbyists from the health care industries and pharma pulling strings and helping to write legislation, that is going to take a different kind of leadership in Washington.

Here's an in-depth PBS interview with Rosenthal.

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