Why Health Care Costs So Much
Why Health Care Costs So Much

We know that the United States has the most expensive health care in the world. But beyond noting that dubious achievement, we seldom ask why. On my recent visit to Canada as a Fulbright scholar, I stopped by to pose that question to one of their leading health care experts, David Dodge, an economist who has served as federal deputy health minister and seven terms as governor of the Bank of Canada.

Right away he focused on the health care cost dilemma facing both our countries. “Medical technology is fascinating in that it is like consumer electronics in generating new products at a prodigious rate,” he said. “We’re on the verge of another burst of new products when we learn how to use genetic data.” It will change medicine, Dodge said, and will be a “quantum leap” into the unknown in the next quarter of a century, both medically and financially.

Nonetheless, Dodge quickly drew a distinction between medical technology and consumer electronics. While the health care industry continues to pump out new products, they cost more than the old ones, but the price of the old technology doesn’t come down as it has with consumer electronics like computers and television sets. “Why hasn’t the price of cataract surgery fallen by 90 per cent with the introduction of new laser techniques?” Dodge asked. “The price has fallen a little, but not much. You used to be in the hospital two weeks for the surgery. Now it takes 10 minutes.”

Dodge threw out a possible explanation: “Perhaps something is wrong with the economic mechanism.” The market doesn’t seem to work. Maybe health care is different from other goods and services. He brought up another example: In Canada, geriatricians are the lowest paid medical specialists and yet there is enormous demand for them, he explained. If the normal forces of supply and demand were working, high demand might raise the price for their services. That’s the explanation the oil industry gives when gas prices rise.

Our conversation that day in Ottawa didn’t produce definite answers. Dodge speculated that maybe health care markets don’t work because patients usually don’t feel the pain of paying their bills directly. In Canada, provincial governments pay them. In the United States, Medicare, Medicaid, or employer-based health insurance pay most Americans’ medical bills.

He also suggested that self-regulation of the medical professions in both countries might partly account for the lopsided supply and demand equation when it comes to physician payments. “Governments understandably don’t want to take on the self-regulatory aspects of the professions,” Dodge told me. In other words, they don’t want to interfere too much with the prices professionals charge. In Canada, as in the United States, most doctors receive fee-for-service payments. In Canada, though, the government may negotiate more forcefully with professional associations.

Patients are also somewhat to blame for the cost conundrum. Dodge noted that most people want to be treated by doctors rather than lower-cost nurse practitioners; when something is wrong they want to talk to doctors directly rather than someone else, even if that person can manage their care just as well.

And most people want the new (pricey) technology that promises the latest and greatest cures. My conversation with Dodge reminded me of the news in early December when the FDA approved a new drug for hepatitis C, a disease that’s hard to treat and plagues some 170 million people worldwide. A three-month regimen of the drug Sofosbuvir carries a price tag of $84,000. That’s $1,000 a pill.

Last week, NPR explored the high cost of that drug and questioned why it was so expensive given the huge market and likelihood that the drug maker would quickly recoup its initial investment. When NPR correspondent Richard Knox noted that experts suggested the price could be lower, a vice president for the drug company replied, “That’s very unlikely we would do that.” In other words, the drug maker simply didn’t want to lower its price.

Those high health care costs? Something besides market forces is at work.

Trudy Lieberman, a journalist for more than 40 years, is an adjunct associate professor of public health at Hunter College in New York City. She is a long-time contributor to the Columbia Journalism Review and blogs for its website, CJR.org. As a William Ziff fellow at the Center for Advancing Health, she contributes regularly to the Prepared Patient Blog. Copyright 2014 www.troymedia.com.

Views expressed in this article are the opinions of the author(s) and do not necessarily reflect the views of Epoch Times.

  • Mobyboy

    The reason is greed, greed and more greed. And sadly as long as there are people who are desperate to save their loved ones the greedy will fleece them.

    • tincho81

      Every single market is run on greed, but you don’t see incredibly crazy car prices. That’s because the market somehow controls the costs by supply and offer. But for some reason that doesn’t work with medicine, so “greed” can’t be the only reason for those crazy bills.

      • Trilby16

        Because you’re always buying blind with healthcare. If our government won’t provide single payer, they should at least create a schedule of fees that can be charged. But doctors and hospitals would find a way around that too, sadly.

      • Trilby16

        Imagine how crazy it would be if you had to agree to buy a car first and only later be told the price.

  • Trilby16

    Consumers cannot possible “shop around” for an affordable price so there’s no competition. Medical pricing is kept secret, so costs are highly unpredictable. And the other reason is greed.

    • Richard M

      The government chooses which industries will be charged with collusion and price fixing, and which other industries, that do the exact same thing, or worse. Will skate completely unmolested into wealth unimaginable.

      Care to guess how they make the choice?

    • rg9rts

      You can have as much as a $5000 difference for the same procedure depending on your location, New York vs Arkansas

      • Trilby16

        Yep. Even within a location. And you can’t even get reliable estimates. They won’t tell you. It’s just “Open your wallet and we’ll take what we want.”

        • rg9rts

          Your first born

  • OnyxE

    I’m not sure Canadians have really been asked or had much of a discussion on having other health care professionals take over some of their care. The other thing is as soon as you do that you have to pay the other professionals more too.

  • eyelashviper

    The AMA has fought any kind of regulation over their domain, and has forcefully worked to limit the number of med schools, so that docs maintain their special status. Physician’s Assistants and Nurse practitioneers can do much of the work of docs, yet there are never enough, and their pay is usually well below that of docs for the same work.
    Then add on Big Pharma, who expects exorbitant prices for meds, many of which were developed with the help of tax payer dollars, and then for profit hospitals, etc., etc.
    Whatever happened to people in medicine who want to heal others?

    • rg9rts

      That sums it up

    • Albert8184

      And ask yourself why no politicians seem to be dealing with this issue… if it’s such a big problem as you claim.

      It isn’t the problem.

    • AskandTell

      Have you noticed a fairly new tactic of Pharma….when their patent expires, suddenly new warnings of the drug come out. It is a tactic to strong arm physicians to write prescriptions for a new version of the drug that doesn’t have an inexpensive generic version.

      • eyelashviper

        That’s one of the reasons they always have a cadre of lawyers available.

  • Robin Cohen

    Could it simply be greed?

    • Albert8184

      In a free market system, greed is mitigated by competition and supply and demand. That’s why your cell phone doesn’t cost you 5000 dollars.

      These prices are due to market distortions, as the Canadian hinted.

      • Robin Cohen

        That’s why the free market system does not work for health care. The providers have a monopoly of something we must have so we are forced to pay what the demand. The same is true of the health insurance providers.

        • Albert8184

          No. Not at all. The system doesn’t even meet the definition of a monopoly, much less act like one. The system doesn’t work properly because there is too much distortion caused by market interferences.

          It is not possible for free market principles NOT to work for a market. That’s like saying the laws of aerodynamics don’t work for one particular airplane the way they do for any other.

          • Robin Cohen

            I have read news articles that disagree with you.
            Let’s agree to disagree, shall we? Health care is too important to be left to market forces.

          • Albert8184

            News articles say all sorts of things. There’s no such thing as something that’s outside market forces. Like saying there’s a planet somewhere in the universe that’s exempt from the laws of physics.

          • Robin Cohen

            My point is that quality medical care is the right of every American and that the patient should not have to be bankrupted by the cost of that care. There will never be enough good doctors and hospitals for all and that shortfall is not the patient’s fault. Therefore it is not fair for a patient to spend every cent they have to get quality care. Something has to rein in the excessive costs we now pay.

          • Albert8184

            You won’t be happy 2 years from now either. It’s like a tube of toothpaste. When you squeeze one end, it comes out the other.

          • Robin Cohen

            You may be right. Obamacare could have been better if we hadn’t catered to Big Pharma and the insurance companies. Only in America would healthcare be at the mercy of Corporate interests.

          • Albert8184

            You shouldn’t at all have been surprised that this happened. One of these days, people are going to figure out that politicians lie. It’s what they do.
            They’re telling you what you want to hear, so you’ll vote for them. They’re not telling you what you don’t want to hear because they don’t CARE and they don’t have the balls.

            The HC mess is a mess because OF the government, not because they haven’t been involved. HC is NOT a free market. It is a quasi-centrally regulated system with all sorts of distortions and barriers built into it since 1940. It’s boloxed up sixteen ways to Sunday.
            It’s already pretty much a socialist system. Just a badly run socialist system. Of course there are better examples…. in places like Hong Kong or Singapore or Japan. Where the government spends money on these things and not building a massive neo-con security state and foreign military adventures.
            Look, if you gave me global dictatorial powers for one year to fix HC any way I wanted to, I could do it. And you’d love it.

            And the solution I’d propose is nothing more than common sense. But you’ll never hear it from the politicians BECAUSE it’s not in their interests.

            This whole issue is about CONTROL Robin. Not “helping you have a better life” or realize your “right” to quality HC. It’s about control, and it’s about bigger issues like reorganizing debt.

            Sigh. Eventually, the entire West is going to get hit right between the eyes with the sad reality of life: you can’t spend money like there’s no tomorrow, thoughtlessly pursuing every agenda under the rainbow, neglecting important things, and not face the consequences.

            It’s the old Grasshopper and the Ant fable from Aesop. We’re the grasshopper.

          • Robin Cohen

            I would love to have you at the helm. As a retired Pharmacy Technician, I am well aware of the problems in our current HC system which is one reason I am delighted to say God Bless Medicare!

          • Albert8184

            I’d fix it!

            Government IS the biggest corporation of all. And they have a vested interest in making sure commercial corporations are as vibrant and profitable as possible. Regardless of whatever populist rhetoric is spouted by politicians on the campaign trail.

          • Robin Cohen

            I have no doubt that you would! :)

  • rg9rts

    How about padding the bill with useless and or redundant tests to CYA the doctor or take for example the latest cash cow the colonoscopy. It was not until recently that there was a push for this procedure. In the past it was a in office procedure with out an anesthesiologist and was usually given to those with a family history of colon problems. Now it is a cash cow for the medical community.

    • Trilby16

      You said it! I refuse to take these tests. There are so many cash cows for these guys, it’s a regular cash herd.

      • rg9rts

        Good for you like most medicine you have to do your homework and remind the doctors that you too can walk on water whenever it rains.

  • Albert8184

    “Perhaps something is wrong with the economic mechanism.” The market doesn’t seem to work.”

    Yes. Much of what’s wrong is that people don’t pay their bills and the government essentially prevents HC from collecting on bad debts aggressively. Instead, the government allows them to pass bad debt off by a variety of methods, including rolling it back over into the cost structure year after year.

    Each year, about 1/4 to 1/3 of all HC expenditures are written off as bad debt. Year after year after year. After awhile, it really adds up. Billions upon billions.

    My sneaking suspicion is that the government is going to eventually allow the IRS to garnish wages and bank accounts to pay medical bills. And I’ll bet you money that once we go to single payer, you won’t be able to discharge medical debts in a bankruptcy, just like you can’t usually discharge student loans.

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