Greed in US Healthcare

Financial self-interest is the primary motivation in US healthcare, motivating drug companies, insurers, hospitals, physician practices and investors.

Pharmaceutical companies use monopoly ownership of medications to raise prices. Allowed by flaws in US patent laws, these companies gain enormous profits even though much of the basic biological research funding has come from governmental sources.

Medicare Advantage (MA) hoped to give Medicare beneficiaries a choice of access to care at a lower cost. MA now covers 50% of all Medicare beneficiaries. It cost far more per beneficiary than traditional Medicare. MA plans are the most profitable branches of large insurance companies.

Hospitals claim large operating losses, especially in the COVID pandemic period, but large systems sit on balance sheets with tens of billions of dollars in the bank or invested. Hospital pricing games are widespread with prices for drugs and services several times cost.

A RAND Corporation study found that employer-sponsored plans pay hospitals 241 percent of Medicare levels on average for inpatient and outpatient care. Private insurance accounts for one-third of hospital costs. They are the source of most hospitals’ profit. Hospitals serving wealthy populations take federal money intended to reduce drug costs for people with low income.

Physician practices are purchased by for-profit firms. Oak Street Health, a primary care company that employs physicians had a $15 billion initial public offering in 2022, equivalent to $196 000 per patient. Of the 10 highest paid corporate executives in the US in 2020, 3 were from Oak Street Health. [Oak Street health agreed to be purchased by CVS on February 8, 2023].

A total of 41% of US adults, 100 million people, bear medical debts. One of every 8 individuals owes more than $10 000.

Healthcare market economics are broken. The healthcare consumer cannot freely make decisions on healthcare products or services. Providers charge prices without free-market demand forces, and they increase prices and profits. Healthcare companies use the profits to buy-out competition and create monopolies.

Employers have the potential to restore market balance. Amazon, Berkshire Hathaway and JPMorgan Chase announced a health care partnership called Haven to disrupt health care in the U.S. in 2017. They shut down in February of 2021. They failed because they tried to work through the current industry structure and use their scale forcing change from the top down.

We need to restructure healthcare. We need a competitive free market. One bottom-up alternative is activating the more than 7 million individual US employers to pursue best pricing and best service. The USA is paying a steep price for a rigged market.

REFERENCE:

JAMA Dr. Berwick Jan 30, 2023

https://jamanetwork.com/journals/jama/fullarticle/2801097?guestAccessKey=32e3bbd7-aba7-4ba1-b062-3d20d90d850c&utm_source=silverchair&utm_medium=email&utm_campaign=article_alert-jama&utm_content=olf&utm_term=013023

https://www.americanprogress.org/article/high-price-hospital-care/