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6 March 2013

How the healthcare industry bleeds America dry

Of the biggest employers in Houston, Texas, which industry would you expect to dominate the rankings? The obvious answer, one might think, is the oil industry. But in fact, five of the top ten are hospitals while only three are energy companies.

Now what about New York, New York? Surely, you’d expect Wall Street to dominate: 

  • “America’s largest city may be commonly thought of as the world’s financial-services capital, but of New York’s 18 largest private employers, eight are hospitals and four are banks.”

Those are just two eye-opening facts in a remarkable investigation into America’s healthcare system by Steven Brill for Time. Here’s some more:

  • “Taken as a whole, these powerful institutions and the bills they churn out dominate the nation’s economy and put demands on taxpayers to a degree unequaled anywhere else on earth. In the U.S., people spend almost 20% of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.
  • “According to one of a series of exhaustive studies done by the McKinsey & Co. consulting firm, we spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia.” 

How does the American healthcare system manage to suck in so much money? Well, needless to say, it’s complicated, but as Steven Brill documents (at exhaustive length) it basically comes down to mark-ups. Quite simply, whether or not Americans need to see a otorhinolaryngologist, they end up paying through the nose:

  • “Why should a trip to the emergency room for chest pains that turn out to be indigestion bring a bill that can exceed the cost of a semester of college? What makes a single dose of even the most wonderful wonder drug cost thousands of dollars? Why does simple lab work done during a few days in a hospital cost more than a car? And what is so different about the medical ecosystem that causes technology advances to drive bills up instead of down?”

All of these questions boil down to one key question (which we need to be asking in this country too, and not just in relation to healthcare):

  • “When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?”

Brill’s answer is that the American healthcare system represents the “ultimate seller’s market.” That may be so, but it isn’t the only one. 

Whether in the private sector, the public sector or, above all, in the grey areas that straddle the two, there are many seller’s markets – and whether as taxpayers or consumers, you can be sure that we’re all being routinely ripped-off. 

There was a time when leeches were widely used in western medicine. These days, however, they just send out the invoices.


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