KEY IDEA: Today some pharma CEO’s will go to Congressional Hill to answer questions about high drug prices. Politicians are conducting this charade because they want to give voters the idea that “they care” and that they are doing something. What won’t be discussed are the real reasons American healthcare is the most expensive in the world with poor results.
What won’t be discussed today is the gouging in American healthcare. While the pharma industry has been the target of angry voters and media people the real reasons for our costly healthcare won’t be discussed because to do so would take the courage of telling the voters the truth.
Why is US healthcare so expensive?
1ne: The rising Prices of services – More than half of the total spending increases were due to price and intensity increases, which contributed $583.5 billion to the $933.5 billion total increase of health care spending in the United States that increased by about $933.5 billion between 1996 and 2013. “Intensity of care” refers to service variety and complexity. “It’s the difference between a relatively simple X-ray as a compared to more complex MRIs and other forms of diagnostic services,”
2wo: More spent on specific conditions – Diabetes was the condition with the greatest increase in spending, rising by $64.4 billion between 1996 and 2013. The single most important risk factor for type 2 diabetes is obesity, noted Dr. Patrick H. Conway of Blue Cross Blue Shield of North Carolina.
3hree: Outpatients survives and hospitals – Spending on ambulatory care, which includes ER and outpatient hospital services, also played a role in increased overall costs. Annual spending on ambulatory care swelled from $381.5 billion in 1996 to $706.4 billion in 2013. This increase, about $324 billion, was higher than any of the other five types of care analyzed. American hospitals often charge 2 to 3 times more for their services than do hospitals in other wealthy countries. American physicians bring home annual incomes their European and Canadian colleagues can only dream of achieving.
4our: Insurance/PBM companies – Premiums continue to rise faster than inflation. And while Americans struggle to find affordable plans, leading insurance company executives report staggeringly high annual incomes. Since passage of the Affordable Care Act, David Cordani, CEO of Cigna, has taken home more than $140 million of compensation. Yet he feels poor compared to Stephen Hemsley, the CEO of UnitedHealthGroup, who has made almost $300 million. Anthem, Cigna, CVS Health, Humana and UnitedHealth Group cumulatively expect to collect almost $787 billion in 2019, compared with $783 billion of projected revenue for Facebook, Amazon, Apple, Netflix
5ive: Medical Device Industry – The device industry is about half as big (dollar-wise) as the pharmaceutical industry, but it’s growing faster. According to a study in Health Affairs, it’s the enormous markup that some device manufacturers charge whenever their products are used in the US. Drug-eluting stents that cost about $500 in Germany are priced around $1,500 in the US. Bare-metal stents, priced around $200 in the UK, cost $800 in the US: And single-chamber pacemakers, less than $1,000 in Germany, cost almost $4,000 in the US.
6ix: Pharma – $44.4 billion of the total $64.4 billion increased expenditure for diabetes was spent on medications meant to treat, as well as to prevent, the disease. Part of the high price paid for pharmaceuticals “is a regulatory problem,” said Robert F. Graboyes, a senior research fellow at the Mercatus Center at George Mason University. Graboyes, who was not involved in the research, said that the FDA drug/approval process makes pharmaceuticals far more expensive than they ought to be.
7even: Chronic preventable diseases – Unhealthy behaviors such as smoking, poor eating habits, and lack of exercise are costing the United States billions of dollars in the treatment of preventable diseases. Obesity affects almost 1 in 5 children and 1 in 3 adults, putting people at risk for chronic diseases such as diabetes, heart disease, and some cancers. Over a quarter of all Americans, 17 to 24 years are too heavy to join the military. Obesity costs the US health care system $147 billion a year. Each year in the United States, more than 1.6 million people are diagnosed with cancer, and almost 600,000 die from it, making it the second leading cause of death. The cost of cancer care continues to rise and is expected to reach almost $174 billion by 2020 yet 40% of all cancers are preventable. Behaviors, such as smoking and obesity, are limiting our nation’s ability to make progress and costing billions in unnecessary, preventable healthcare costs.
So why won’t any of these be discussed? Because it would make too much sense and communicate that our healthcare system is beyond broken. It would also put the responsibility for healthcare costs back on voters and God forbid we can’t have that.