To solve a problem, some say, look to who makes money from its existence. So, who benefits from the high cost of healthcare in the U.S.? At a minimum, looking at the beneficiaries will help us identify those who will impose barriers to changing the status quo. (In the next blog, I’ll look at root causes of the cost problem and worthy solutions.)
U.S. healthcare costs exceed those of other developed countries according to several key metrics: as a percent of our GDP, cost per family, and cost of procedures and hospital stays, among others. Self-insured employers reported to MedCity News that the average per-person cost of healthcare would be $17,201 in 2023, a $1,339 increase (or 7.8%) from 2022. By way of comparison, median annual income was $69,021 in 2021. No wonder a significant lifetime achievement is securing a job with healthcare benefits with an employer who partially covers these costs. (See chart on the right.)
Our excess national spending on healthcare might be worth it if we secured better health overall, or at least for most demographic groups. But we don’t. Here are some depressingly sad statistics by way of Nicholas Kristof writing for The New York Times. (As an aside, if you are wealthy, white, insured, and live in an urban area, you have the best healthcare in the world. But you are paying way more for it than is necessary and avoidable, persistent medical errors may hurt you.)
- Life expectancy in all states except Hawaii is less than that of Japan, Australia, South Korea, Spain, Italy, Canada, France, UK, Germany, and Taiwan. Mississippi has the lowest life expectancy, below Bangladesh’s, with West Virginia, Alabama, Louisiana, Kentucky, Arkansas, and Tennessee close to it.
- Twenty-eight million people lack health insurance, and 77 million lack dental insurance.
- 94% of the population with substance abuse disorder have no care for it.
- The poorest men in the US have life expectancies like men in Sudan and Pakistan.
- Newborns are 70% more likely to die than in other wealthy countries, and for the first time in our nation’s history, the odds that a child will live past 20 has fallen.
- While we’ve made massive progress on reducing teenage pregnancies and smoking, we have not made progress on weight, which is a leading driver of health risks. According to Harvard’s School of Public Health, 69% of US adults are overweight or obese, with 36% obese. That makes us the 12th most obese nation in the world. Only the Pacific Islands and Kuwait are heavier.
- We are the world leader in amputations of toes, feet, or legs as we are the world leader in unmanaged diabetes care and obesity. And now Type 2 diabetes is becoming more common among youth.
We’re in a vicious cycle. We generally get little support for staying healthy, so we get sicker. And needed care is delayed, which makes caring for our health more expensive and less effective.
Who benefits from this $4 trillion expensive mess, as measured in 2020? (GDP that year was $21 trillion.) By my count, at least seven different groups:
- Insurance companies with fee-for-service product offerings make more money the more medical spending there is — ditto healthcare providers with a high reliance on fee-for-service patients. (Fee-for-service is payment per procedure, not a set rate over time. The more care that is needed, the higher the revenue.)
- Pharmacy benefit managers (PBMs) like Express Scripps and CVS earn money as a mark-up on the cost of drugs. They also receive rebates from drug company alongside payers’ service fees. Bottom line, PBMs make more money with higher drug spending.
- Healthcare benefit advisors get incentive payments from the PBMs and hefty payments from providers, insurers, or payers for their advice and recommendations.
- US physicians—and particularly specialists—earn more than in other nations. Primary care/internists/family medicine doctors are the real value-add in the system overall yet are paid far less in the US than specialists (though still more than comparable jobs in other countries).
- Benefit managers who work for employers only have jobs because our healthcare system is so fragmented.
- Healthcare provider administrators are paid highly to manage the healthcare mess. With a more straightforward system and better population health, their jobs’ complexity and pay would be lower.
- US drug companies charge US residents significantly more for prescription drugs than prices set in other nations. The same is true for other medical products.
There is an eighth group that benefits—the entrepreneurs trying to fix the system. We should be thankful for them! But, absent new national leadership, I am not hopeful in the near term that they will succeed.