Time’s opus to health care costs

by
Time magazine

Time waded into the U.S. health care debate with a 24,105-word cover piece called “Bitter Pill,” billed in the news release as, “the longest single piece ever published by a single writer in TIME.”

Author (it’s like a book) Steven Brill “spent seven months analyzing bills from hospitals, doctors, drug companies and every other player in the American healthcare ecosystem, following the money to find out exactly how and why we are overspending, where the money is going and how to get it back,” Time’s PR department said.

The story is shocking. In fact, frankly, I found it a bit formulaic and repetitive. Brill seems to use every record, interview and detail he unearthed. This piece screams for an editor or at least to be part of a series. After several hours of reading the at times dense copy, I felt like I’d been beaten over the head with the point that healthcare is outrageously expensive and we’ve done nothing to fix a broken system. (I couldn’t have written this in seven month, so take my opinion for the little it’s worth.)

That criticism aside, it’s an outstanding piece, full of details, examples and bumbling hospital PR people attempting to defend pricing that’s on average marked up 150% and considered a beginning point for negotiations.

Here’s the ending to the piece and the part I found the best summary of Brill’s findings:

Obamacare does some good work around the edges of the core problem. It restricts abusive hospital-bill collecting. It forces insurers to provide explanations of their policies in plain English. It requires a more rigorous appeal process conducted by independent entities when insurance coverage is denied. These are all positive changes, as is putting the insurance umbrella over tens of millions more Americans — a historic breakthrough. But none of it is a path to bending the health care cost curve. Indeed, while Obamacare’s promotion of statewide insurance exchanges may help distribute health-insurance policies to individuals now frozen out of the market, those exchanges could raise costs, not lower them. With hospitals consolidating by buying doctors’ practices and competing hospitals, their leverage over insurance companies is increasing. That’s a trend that will only be accelerated if there are more insurance companies with less market share competing in a new exchange market trying to negotiate with a dominant hospital and its doctors. Similarly, higher insurance premiums — much of them paid by taxpayers through Obamacare’s subsidies for those who can’t afford insurance but now must buy it — will certainly be the result of three of Obamacare’s best provisions: the prohibitions on exclusions for pre-existing conditions, the restrictions on co-pays for preventive care and the end of annual or lifetime payout caps.

Put simply, with Obamacare we’ve changed the rules related to who pays for what, but we haven’t done much to change the prices we pay.

When you follow the money, you see the choices we’ve made, knowingly or unknowingly.

Over the past few decades, we’ve enriched the labs, drug companies, medical device makers, hospital administrators and purveyors of CT scans, MRIs, canes and wheelchairs. Meanwhile, we’ve squeezed the doctors who don’t own their own clinics, don’t work as drug or device consultants or don’t otherwise game a system that is so gameable. And of course, we’ve squeezed everyone outside the system who gets stuck with the bills.

We’ve created a secure, prosperous island in an economy that is suffering under the weight of the riches those on the island extract.

And we’ve allowed those on the island and their lobbyists and allies to control the debate, diverting us from what Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, says is the obvious and only issue: “All the prices are too damn high.”

It’s scary. The rising cost of health care, premiums and limits to coverage are only going to become bigger issues for business journalists. Health care is a huge driver of the U.S. economy. Paying attention to the companies that make the products, how they’re sold and how insurance companies pay for care will be a big driver of coverage.

Here are just a few of the facts from Brill’s story:

According to one of a series of exhaustive studies done by the McKinsey & Co. consulting firm, we spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia. We may be shocked at the $60 billion price tag for cleaning up after Hurricane Sandy. We spent almost that much last week on health care. We spend more every year on artificial knees and hips than what Hollywood collects at the box office. We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at Walmart.

The Bureau of Labor Statistics projects that 10 of the 20 occupations that will grow the fastest in the U.S. by 2020 are related to health care. America’s largest city may be commonly thought of as the world’s financial-services capital, but of New York’s 18 largest private employers, eight are hospitals and four are banks. Employing all those people in the cause of curing the sick is, of course, not anything to be ashamed of. But the drag on our overall economy that comes with taxpayers, employers and consumers spending so much more than is spent in any other country for the same product is unsustainable. Health care is eating away at our economy and our treasury.

The health care industry seems to have the will and the means to keep it that way. According to the Center for Responsive Politics, the pharmaceutical and health-care-product industries, combined with organizations representing doctors, hospitals, nursing homes, health services and HMOs, have spent $5.36 billion since 1998 on lobbying in Washington. That dwarfs the $1.53 billion spent by the defense and aerospace industries and the $1.3 billion spent by oil and gas interests over the same period. That’s right: the health-care-industrial complex spends more than three times what the military-industrial complex spends in Washington.

When you crunch data compiled by McKinsey and other researchers, the big picture looks like this: We’re likely to spend $2.8 trillion this year on health care. That $2.8 trillion is likely to be $750 billion, or 27%, more than we would spend if we spent the same per capita as other developed countries, even after adjusting for the relatively high per capita income in the U.S. vs. those other countries. Of the total $2.8 trillion that will be spent on health care, about $800 billion will be paid by the federal government through the Medicare insurance program for the disabled and those 65 and older and the Medicaid program, which provides care for the poor. That $800 billion, which keeps rising far faster than inflation and the gross domestic product, is what’s driving the federal deficit. The other $2 trillion will be paid mostly by private health-insurance companies and individuals who have no insurance or who will pay some portion of the bills covered by their insurance. This is what’s increasingly burdening businesses that pay for their employees’ health insurance and forcing individuals to pay so much in out-of-pocket expenses.

There’s also the doctors’ perspective that needs to be covered. Many in small towns don’t have access to the care they need simply because it’s not lucrative enough to remain a small town doctor with a general practice.

This story is an interesting (and long) way to advance the conversation on health care costs. I hope for Time’s sake it gets the attention a work of this undertaking deserves. And I hope for all of us that it helps spark real reform of an obviously broken system.