American Healthcare Spending Is Fucking Mental

By Libby Watson  |  August 22, 2018 | 4:42pm
Healthcare

American healthcare is a sick joke from almost any angle: how it neglects people with disabilities, and how the people who need it most are least likely to have it. It is morally unforgivable, but it’s also bewildering that anyone thinks this works: America spends 17.9 percent of its GDP on healthcare, or $10,348 per person, far more than other countries, and yet for our money we still have tens of millions of citizens who don’t have adequate care. 10.3 percent of non-elderly people have no health insurance at all, and 28 percent of working age adults who do have health insurance are underinsured, meaning their plans are too expensive for them to use.

These are the macro-level absurdities. A story from the Wall Street Journal yesterday shows that the situation at individual hospitals and for individual treatments is absurd too. A hospital system in Wisconsin investigated the price it charged for a knee replacement surgery, $50,000, and found it had set that price “using a combination of educated guesswork and a canny assessment of market opportunity.” The actual cost was $10,500—20 percent of the original. A 376 percent markup. I don’t think drug dealers gouge you that much.

As Sam Baker at Axios wrote this morning of the Journal story, though the vast majority of patients don’t end up paying full sticker price for procedures, “our premiums and out-of-pocket costs all still flow from that top-line number.” Someone, somewhere, is paying up, though private insurance negotiates their own secret rates with individual hospitals, so we don’t actually know what it costs. Sarah Kliff at Vox has been tracking hospital emergency room bills for months, and found some truly staggering prices: In one case, a baby had fallen off a hotel bed and bumped his little noggin, and was treated by the hospital with “a nap and a bottle of formula.” The bill for this? $18,836.

Hospitals can do this because they are frequently monopolies. (In many states, so are health insurers.) And there is no requirement to make public their secret negotiations with private insurers, so we have no idea how they set these ridiculous prices. In the case of the knee replacement surgery in Wisconsin, it took an a year and a half-long internal investigation to find out what the surgery actually cost.

This is important context in the fight for Medicare for all. Opponents of single payer are going to argue (and already do) that it would devastate the medical industry by cutting payments to doctors, forcing many of them out of business, and thereby interrupting your care. But if hospitals are charging $50,000 for a $10,500 knee surgery, maybe provider payments should be cut. The category of “provider payments,” a phrase you’ll hear a lot as the fight for single payer ramps up, covers everything from payments for MRIs to the $18,000 nap that baby had.

In the weeks since the Koch-funded Mercatus Institute accidentally produced a study showing that a Bernie Sanders-style Medicare for All plan would actually save the American people $2 trillion, Mercatus and their defenders in the media have been working overtime to convince people that isn’t what they said. Among the complete falsehoods that have been repeated by credulous fact-checkers: that payments to providers would be cut by 40 percent under Medicare for all, presumably leaving doctors destitute.

But, as Ryan Cooper wrote yesterday in a masterful debunking of Mercatus’ lies, that is plain wrong, because “only about half of people are on private insurance. Medicare payments would stay the same, while Medicaid and uninsured payments would go up.” Matt Bruenig of the People’s Policy Project calculated that provider rates would actually only fall by about 11 percent. And Kevin Drum of Mother Jones—no single payer diehard—pointed out that, if the Sanders bill’s assumptions about increased use of medical services under single payer hold (because people will actually be able to afford them, because they would be free), the change in provider payments is “close to zero.”

Medicare for All would also likely save doctors billions in administration costs; Bruenig noted that American hospitals spend about 25 percent of their revenue on administration, whereas single payer systems like Canada and Scotland (which is a slightly different single-provider system, under Britain’s NHS) spend only 12 percent.

One of the biggest lies that people seem to believe is that privatized systems, and the market in general, is necessarily much more efficient than the government, because hurr hurr big government, Ronald Reagan, etc. This is patently false. It would be much more efficient to set a standard for what a procedure costs, and it is clearly extremely inefficient and illogical to have individual hospitals lying about how much procedures cost so that insurers can pass that fake cost onto consumers, let alone the inefficiency of covering people for those payments through a byzantine system of private payments, subsidies, and tax credits.

Single payer is morally far superior to our current system—which is hardly a system at all but instead a jumble of exploitations and lies—but it also just makes more sense. You will hear single payer described as an insane fantasy. Remind yourself that it is actually our current system that is completely and utterly mental.

Correction: A previous version of this article stated that the markup on knee surgery at the Wisconsin hospital was 80 percent. It is 376 percent.

 
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