Will American Choices on Health and Healthcare Sicken All of Us and Our Country, Too?

Americans pay too much for healthcare. How do our choices shape our health as people and patients?

An interesting study was published by Papanicolas et al. in the Journal of the American Medical Association in March. The authors sought objective data to explain why we pay so much for healthcare relative to peer countries. Countries where people are healthier, live longer, and are likelier to have ongoing access to healthcare.

Papanicolas et al. looked at three cost categories. They argued higher administrative costs, higher salaries for health professionals, and higher payments for pharmaceuticals can explain the difference in costs. The problem is that these reasons don’t fully account for either the total difference between the cost of our healthcare or even these factors’ actual impact on spending here. The authors also didn’t really account for the real and perceived price patients and their caregivers pay in any system of healthcare whether it is in limited access, impacted finances, or time spent trying to deal with “decision-makers.”

The reasons for our higher costs are many and complex. As a non-MD and non-health professional (though I have trained hundreds and worked with hundreds more), I don’t have the complete expertise needed to do more than nitpick at Papanicolas et al.’s explanations but I do know the daily lives and health outcomes of millions of patients fall directly within the gaps in their work.

I am, however, an educated patient with a master’s degree in Public Affairs and a PhD in Genetics. I also have multiple chronic conditions and so spend far too much time dealing with many aspects of our healthcare system, some of which I appreciate but many I do not.

It doesn’t take the enormous volume of data in Papanicolas et al.’s study to know that the choices we have made individually and nationally over the last three quarters of a century or more make our lives shorter than they could be and our health more expensive to maintain than we would generally like. They also make millions, like me, with health concerns (or family who have them) more economically, psychologically, and professionally vulnerable than necessary. A close look at some of these choices may help us decide to keep making them as we do now or take new ones that may lead to a longer, healthier, less expensive future for most of us.

One of the choices we have made so far is to let ourselves live with a healthcare disorganization that costs between three and five times more to administer than any other covered by Papanicolas et al. Data is available indicating their estimates of the cost of administering healthcare in the US, which they set at eight percent of GDP, may be far too low.

For example, several studies (often quoted by Senator Sanders) show that administering insurance costs companies from 12-18 percent of their total budgets. Some media sources suggest administration may be up to 30 percent of US healthcare costs.

It should be pointed out that for every administrator insurance companies need to work on payments, hospitals need parallel people to negotiate with them. The cost of these people is significant:  a study published in the Journal of the American Medical Association in February 2018 by Tseng et al. states that for every primary care physician (PCP) hired by a major US hospital system, it costs nearly $100,000 to deal with billing every year. This would be more than 40 percent of what Papanicolas et al. report is the average salary for PCPs. Tseng et al. further say that billing for many functions in healthcare an efficiently run hospital system costs well more than ten percent of revenue for physician visits or procedures. It is worth noting that Tseng et al. thought that billing would cost physicians who do not benefit from the economies of scale of a large healthcare system even more.

Patients like me have to spend many hours dealing with the cost of healthcare just as hospitals and insurers do. This ranges from interacting with insurance, hospitals, and physicians over the cost of care to tracking what we pay for our medicines and other care for tax purposes. The more problems we have, the more time we have to spend. Time we can’t use on work, social activities or simply doing necessary tasks around the house. Time people with health concerns comparable to mine (and those who care for us) have available in every other civilized country because of the far lower administrative burdens there.

I would estimate that I or those around me have to spend at least fifty hours a year on these matters. Some of that time is spent by various health center bureaucrats trying to help me in dealing with insurers who may not wish to pay for a doctor’s preferred drug because it isn’t in the formulary for my insurance plan. If we assume the 56.7 million Americans who had a disability in 2012 all had to spend comparable time dealing with insurance or other administrative issues, this would total nearly three billion hours’ time at a potential value of at least $80 billion or more each year. This excludes people who are injured once or otherwise have a short-term but profound interaction with healthcare providers and the insurers and others who they must work with in order to get and/or pay for, the care they need . According to the Commonwealth Fund, forty percent of people under 65 face credit score impacts due to healthcare bills.

Most healthcare systems studied by Papanicolas et al. either nationalize or regionalize care through boards that consider the health benefits of drugs, procedures etc. relative to their cost. They also pay health professionals salaries and manage physical plant expenditures—against clearly set budgets. This means that "administration” in those systems is far more easily defined than in the United States where we have thousands of parallel structures to do things that relatively tiny administrative sectors in other countries handle at far lower cost and with far more cumulative access, efficiency and effectiveness.

In the United States by contrast, every payer either directly or indirectly negotiates how much hundreds of drugs, procedures and tests will cost with thousands of hospitals, pharmaceutical manufacturers and physicians. Prices people who are patients and policy holders pay one way or another.

Direct negotiations include billing disputes. They can also be time working with health professionals, hospitals or insurance administrators to determine which of a variety of procedures, meds and care plans balance our need for health and ability to pay for it. Indirect negotiations cover things like health insurance premiums or decisions we have no power to change on what we will pay for the meds we need to live.

These negotiations are repeated hundreds of times on both sides of thousands of deals leading to millions of individual prices for drugs, salaries, procedures, and tests. Prices that are renegotiated every year, negotiations that all-too-often require patient involvement when they begin, move forward, and we hope, get resolved in ways that don’t leave people bankrupt, unemployed, or financially distressed.

This brings us to the cost of pharmaceuticals. According to the March JAMA study, Americans pay twice as much per capita as the average person in the eleven countries they surveyed. Take the US out of that average and it is about ten percent lower across the other countries. The article also states that costs for surgeries and other procedures including lab tests range from somewhat, to many times, higher here.

In many cases progressives’ much-hyped single-payer proposals mean that unlike here, only one organization negotiates with pharmaceutical companies (and vendors of everything from surgeries to lab tests) on the price of everything sold to patients in those systems. The problem, of course, is that in some cases, single-payer systems do not pay for some of the world’s most expensive (and often least frequently used but most desperately needed when required) treatments. Treatments that, if unavailable, leave patients either sick, suffering over the long-term, or dead.

Some opponents of single-payer systems also argue that they restrict care. This is almost certainly true. It is definitely true of American healthcare. In the US, millions live in rural areas where top quality care isn’t available. Millions more go without insurance or can’t afford it in their local area due to extremely high premiums. For both reasons people in many areas—rural and not—and the uninsured can’t access or afford care they need.

Their only recourse is often to go to the emergency room which is one of our most expensive treatment venues. Treating them there costs us far more than we would pay to help these people before whatever issue they have becomes urgent. Ultimately, whatever system one uses, it must be remembered that healthcare is a finite item for which there is more demand than there is supply.

This reality requires us to honestly answer the question: if healthcare is a limited resource for which there is more demand than supply, who will suffer and how will we work to reduce their pain?

By answering these questions for ourselves we have a better sense for what policy we will support in the range of options we have to manage, distribute, and pay for healthcare.

On one hand, we can support policies that emphasize so-called “choice” over cumulative health. These policies usually have philosophies that mean that profit from patients’ need for treatments or care should be restricted by only what the market will stand. Given that most people will pay a great deal to fix their health issues and even more to prevent an often painful death, the market will stand quite a bit.

Alternatively, we can advocate for single-payer systems that by most large-scale measures provide better cumulative health at lower cost than the disorganized mass of payers, providers and administrators we have here. They do so by providing relatively low-cost (sometimes free to the patient) access to PCPs or others who can often give the help we need. However, by supporting a single-payer model we have to accept that we put primary value on programs that risk restricting access to some medicines and procedures more than our current paradigm that makes hyper-expensive solutions to otherwise impossible problems available… if they can be paid for. Payment whose negotiation takes time, causes stress, and makes the lives of millions of patients like me even more difficult than they already are.

Ultimately, if single-payer is ever to be implemented here, we will have to either make the same choices nationalized systems make (i.e. rationing certain kinds of treatment due to its cost) or we may need to accept paying somewhat more across the board so that those extremely expensive medicines can be available on some limited basis to those who need them—possibly (though not certainly) at a lower cost than insurance plans spend for them now. Either way, we will ration treatments just as we do based on location, accessibility, and insurance agreements today.

 Conversely, if we don’t choose a single-payer model we will continue paying for medicines so those who need them can have them here—and in countries both friendly and unfriendly to us. We will also have to consciously accept that we are continuing to ration care based on cost, access, and location while adding billions in money, time, and often in the suffering of family and friends here in costs that competitor countries don’t pay. A way of doing things that lets these other (sometimes unfriendly) countries out of paying their fair share for treatments they also use.

Staying with our current system may also force us to continue living with the reality that American healthcare performs less efficiently and has poorer outcomes than health services in any other leading country except China, which is catching up fast. Because of this enormous comparative inefficiency, we give other countries a potentially decisive advantage where providing longevity and health at lower cost to nearly everyone is concerned. An advantage that extends to developing new medicines which they are creating at lower cost than we can here, sell them to us at uniquely high America-specific prices and hope to take the resulting profits home where they can use them on programs and initiatives that give them an even bigger competitive advantage over us.

Is there an intermediate position between single-payer/negotiator models and ours where the cost of medicines, treatments, and tests are concerned?

Maybe.

The Department of Health and Human Services currently wants to push introduction of so-called biosimilars and generics for many of today’s most expensive medicines. Other policies to lower the price of drugs via market mechanisms are being developed.

Will action like this help? Some, but we can’t say how much, and it seems very unlikely that we can cut our pharma expenditures by nearly 40 percent, which is what the data available from Papanicolas et al. suggests would be required just to get to the level of the country that pays second-most for its meds.

Another option others have offered is to give the government the right to negotiate med prices on behalf of the millions it insures through Medicare. Currently the VA is allowed to negotiate prices for its nine million veterans. Tricare does this on behalf of the millions of active-duty people and their families for which it is responsible. Other federally funded insurance schemes that pay for meds for millions of Americans do not have this power or are somewhat limited in using it.

Medicare, and to some degree, other federally funded programs must therefore depend on that complicated mess of profit-driven insurance companies, pharmacy benefit managers, drug retailers and pharmaceutical companies to negotiate prices with all the added cost in time and bureaucracy this entails. Giving the government the power to combine its programs into one negotiator with the power to set a formulary would offer it a great deal more power in the marketplace. So far, both Republicans and Democrats haven’t acted to implement this common-sense cost-cutting policy.

A third path would be to use Germany’s model and create national bodies that set the prices manufacturers can charge for meds, doing so depending on whether they actually improve Germans’ health relative to products already on the market. Pharmaceutical companies must then argue every year for price changes and to include any new meds approved by the European Medicines Agency (Europe’s FDA) on Germany’s formulary, except PBMs have no objective agency to decide whether a new drug is truly beneficial and there is only one final decision-maker in Germany not dozens of PBMs like there are in the US.

Data and logic suggest the singular price-setter (with some checks and balances) in Germany has far more negotiating power than our numerous payers have here. Although some argue innovation is penalized, available data shows that Germans are living longer and at lower cost where meds are concerned while having confidence they have access to truly beneficial medicines at reasonable cost.

 The third area in which America pays more than other countries is salaries for health professionals. According to the March 13 JAMA study, we pay our MDs (both specialist and primary care) two to three times what other countries do. US nurses are also second on the chart. Only Australia pays them more relative to average income earners than we do. As many types of American professionals are paid more than their peers elsewhere, health workers’ high salaries are culturally consistent and likely necessary.

All that said, we must ask ourselves whether in some cases, these salaries are artificially elevated, even given America’s cultural bias toward comparatively high salaries for many professionals and managers.

If they are, what can we do about it? After all, people will, rightly, pay health professionals quite a bit in order to be healthy, minimize illness’ effects, or avoid death. This gives healthcare employees a nearly unassailable negotiating position relative to the people—i.e. patients—who ultimately pay their salaries.

Let’s consider one example that can illustrate how salaries for health professionals in the US may be artificially higher than they have to be in a way that also reduces patients’ ability to access care.

In a recent essay on Statnews.com, Dr. Jeffrey Flier, former Dean at the Harvard Medical School, cites data showing we will soon be up to 100,000 physicians short. In his essay, Dr. Flier seems to assume the current US physician to patient ratio is an acceptable standard. Why should we stop there when Finland has 4.3 MDs per thousand people as compared to the 2.6 per thousand currently employed here? A number that may be even less where full-time physicians is concerned given that many of our doctors work at least some of the time in healthcare administration or in academic medicine where 16 percent of our MDs spend only about half of their working time with patients.

What would happen if we suddenly said: “we should have four full-time doctors per thousand Americans.” That 100,000 physician gap would become a shortage of nearly half a million doctors.

There are ways to correct physician shortages however profound they may be. Dr. Flier notes that two ways to do this are to build more medical schools and to make it easier for foreign trained physicians to practice here (even under higher supervision at first). There is resistance to actions like this. Dr. Flier says professional societies don’t want too many US doctors because this would drive salaries down.

This is an understandable attitude for groups like the American Medical Association to take. However, the 325 million of us who aren’t doctors should ask how much the AMA’s attitude adds to what we have to pay physicians for their time? We could also ask if there were more doctors would we have to wait to see PCPs and some kinds of specialists as long as we do. We could wonder if a larger inflow of doctors would cut the number of locations that are currently considered “underserved?” Would more MDs have fewer working hours on average, potentially reducing medical errors and possibly physician burn-out? Would adding physicians mean these people, whose dedication is usually amazing and whose work is some of the most stressful in our society, be better able to take care of themselves? Would reducing average physician hours make medicine more attractive to thousands who prioritize work/life balance; people who currently choose different career paths because many jobs for those with MDs don’t support it? Would more physicians also let us end the threat to patient welfare posed by the thousands of doctors who have been found guilty of misconduct or malpractice (some believed guilty of sexually abusing patients), who state medical authorities are currently leaving active because there are already not enough MDs available?

One can easily argue that if we let more doctors immigrate, the relatively high salaries here would draw in enough MDs that physicians could not charge as much as they do for services today. Similarly, building more medical schools in states that don’t have them would help them train their own healthcare workforces. Whether larger numbers of doctors would make fewer mistakes, burn out less, or stop protecting colleagues who engage in misconduct or malpractice can’t be known without years of data and experience after bringing in more of them, but as Dr. Flier says, more doctors are needed and so training or recruiting more of them should be a good thing for the vast majority of us.

I would argue opening medical schools overseas that train and test to US standards could also help reduce future physician shortages. More medical schools like this would provide a well-educated workforce that would also have the language skills needed to effectively interact with people who may not have sufficient English to function effectively in the highly stressful situation of trying to deal with either their health, or that of a loved one while in hospital or the doctor’s office. It would also reduce the need for translators who are an added (and very necessary) cost in our healthcare system.

With more medical schools comes a need for added residency slots. Growing the number of residencies or shortening them is an obvious way to increase the number of physicians in the US. One way to shorten them would be to take all aspects of research out of residency, focusing trainees on clinical tasks only. This would cut the number of years in training by up to 25 percent in many specialties.

Alternatively, as others have suggested, Medicare, Medicaid, and the Veterans Administration which fund most residency training could demand that their funds go to programs for physicians in primary care only, (training that generally lasts three or four years as opposed up to nine in some specialties) with specialty residents being trained at the expense of the hospitals where they work. Given that specialist care costs more and hospitals can charge more for it, they would likely lose little, (even though they would claim otherwise) because they could simply raise rates for the specialist care most insurance already pays for.  By funding residencies this way, we would return to the model used before World War II.

Focusing the years of training the Federal Government funds on people who can be prepared relatively quickly, would raise the number of doctors who complete their residencies each year a great deal—possibly doubling it. The government would also get more return on its investment since most of its healthcare dollars go to programs that would particularly benefit from using relatively low-cost physicians who specialize in primary care. Specialties we now know improve outcomes and reduce costs.

 Papanicolas et al. discussed in detail the number of lab procedures Americans seek relative to other countries. Generally, they found we are more comparable in terms of the number of lab tests we seek than discussions in the media etc., might lead one to expect. We do seek more MRIs and CT scans. They note that prices for all lab procedures are higher in the US than elsewhere. However, they do not fully address the fact that these elevated costs often cause significant stress and financial strain for patients who must often spend a great deal of time dealing with hospitals, insurers and service providers about money and payment schedules for tests that can vary enormously in price even in the same city.

A second cost that Papanicolas et al. didn’t fully address is in so-called voluntary care. Family and community caregivers are thought to give the equivalent of 18.5 million full time jobs in the US annually. This can be valued at between $470-$920 billion. These people miss work and other opportunities to earn money, socialize, or serve society. Better comparative figures are needed but from what I was able to find via internet searches, in the UK and Australia at least, per capita time contributions from volunteer caregivers are slightly less than in the US but their economic value is equal at a minimum.

A part of the volunteer and social care piece is home health etc. The JAMA study dealt with this but did not fully account for the fact that providers in the US are rated and often won’t take on patients who may have poor outcomes. Outcomes that will pull down performance ratings. Understandable though they may be given the fact that ratings are essential in the choices people make about providers, these policies add significantly to the practical and health challenges millions of vulnerable people like me face daily as we look for the care we need in order to be independent and hopefully productive.

The final area Papanicolas et al. did not fully account for is the cost to all of us of our lifestyle choices. They did note that our life expectancy is the lowest of any of the countries surveyed. However, they did not say (and likely couldn’t fully estimate) how much our poor health choices add to the cost of healthcare here as compared to elsewhere.

While we are second best relative to our peers in terms of our smoking rates for example, we are more obese than any other sampled country. We now know that being overweight or obese shortens life spans, adds to the risk of virtually every condition from cancer to heart disease and diabetes, and drives up our healthcare costs at the same time our outstanding rate of obesity ensures we will keep dying earlier than people living in other so-called “developed” countries.

While some of our weight and food issues are not “by choice” (i.e. label data on calories and other aspects of many foods we buy either at the grocery or in a restaurant is hard to understand), many of our issues are of our own making. We could trade TV time for that needed to pack lunches. We could also avoid office snacks. We could buy plain black coffee, rather than whatever high-calorie version with lots of caloric things we choose to add that we buy now at our favorite barista (thereby saving money for gym memberships or home exercise equipment). We could choose to walk at lunch or during coffee breaks and walk about while on the phone or watching the game at home instead of sitting in our easy chairs. We could also demand work cafeterias make healthy food easier to find than unhealthy items.

Unfortunately, because we talk a lot about these things and yet are doing less than other countries where taxes, advertising controls, improved labeling, and regulated packaging are being used on these problems, it may well be that higher costs here are virtually inevitable however we ultimately choose to pay for the staff time, tests, meds, and procedures all of us expect (and need sooner or later) from  various sources. Prices every one of us will pay whether directly as patients and caregivers or indirectly as contributors to insurance however we choose to organize and finance American healthcare.