Bitter Pill: Why Medical Costs Are Killing Us by Steven Brill

Steven Brill has a great article in Time called Bitter Pill: Why Medical Costs are Killing Us. I found it nauseating and terrifying — and I have health insurance. It is nauseating that helpless sick people are billed huge amounts of money that bear little relation to costs. It is terrifying that our government has failed to protect us from this.

Brill’s article is about the details of health care costs in America, especially hospital costs. Markups are huge. One example is a test strip for measuring blood sugar. The patient was charged $18 for each strip. On Amazon, the strips cost $0.50 each. The patient had no choice and was not told the wildly-inflated price. Brill gives many examples of similar markups. Hospitals, including nonprofit hospitals, are large prosperous businesses with very well paid CEO’s (e.g., $1 million/year). Yet Americans pay far more for health care than people in any other country and, judged by life expectancy, get worse results than people in about 40 countries. Brill’s article begins to explain the discrepancy.

Asked to explain their prices, many hospitals refused. One of them, MD Andersen in Houston, gave a statement that Brill quotes in part:

The issues related to health care finance are complex for patients, health care providers, payers and government entities alike . . . MD Anderson’s clinical billing and collection practices are similar to those of other major hospitals and academic medical centers.

Judging from the widespread refusals to explain and answers like this (“everyone does it”), the prices are indefensible.

The term stagnation — America is in the grip of profound stagnation — may be misleading because it makes it sound like things are staying the same. People point to a lack of increase in the median income over the last 30 years as indicating “stagnation”. Beneath stagnation is problems stacking up unsolved. (When they are solved, spread of the solutions produces an increase in income.) The problems aren’t staying the same: They’re getting worse. Health care costs are a good example. Health care costs have gone up faster than inflation for a long time, with plenty of signs that the American excess (the difference between what Americans pay and what everyone else pays) is completely wasted. (Or worse, given the many bad effects of drugs, surgery, and other high-tech medicine.) The American excess isn’t trivial, so median income, adjusted for it, has been going down for a long time, over the same period of time that median income in almost every other country has gone up. Quite a comment on the quality of our government.

As Brill says, the health care debate has been about who will pay? The question are prices too high? has been ignored.  Jon Stewart said, “This should be a Silent Spring moment.”

23 Replies to “Bitter Pill: Why Medical Costs Are Killing Us by Steven Brill”

  1. A huge part of the problem is that hospitals are not subject to the market in the way most other businesses are. During WWII, the Feds set up a regime that made health insurance tax deductible if bought by the employer for the employee. Without going into why that happened, that is the regime health care has been provided under for most people ever since.

    What that means is that the market for health care bought directly for the end-user is tiny. Hospitals and health insurers don’t really cater to it, which is why individual health insurance is difficult to acquire, and hospitals don’t provide competitive retail pricing.

    The fact that this is the case is demonstrated by the competitive retail market for medical procedures that are not covered by health insurance: elective procedures like Lasik or plastic surgery. These procedures have transparent, up-front pricing, use technology to control costs, and have seen prices decline as the procedures become more efficient. If all healthcare behaved this way, we would have a much smaller crisis, if we had one at all.

    So long as the end-user is discouraged from directly purchasing the product, the market will be dysfunctional. Unfortunately with a single-payer model, things get worse, as one can see in the United Kingdom. At that point, the end-user become a cost, not the customer, which is a large part of the reason why the NHS provides such horrific “care”: participating in mass euthanasia.

    Of course the NY Times’ political bias prevents them from making this argument. It’s not a new one, it’s been made for decades. Our elected officials seems to like the concentration of power under the current system, where, effectively, they’re the end-user, not the patient. They get all the attention, and the end-user gets screwed.

    (This is not to say that using a market makes things perfect. The medical profession, like any other human enterprise, is subject to corruption, but market discipline is a much more effective check on that than is regulation.)

    Seth: “With a single-payer system, things get worse, as seen in the United Kingdom.” People in the United Kingdom live longer than Americans (80.4 vs 78.8 yrs) and pay much less for health care. There are far fewer personal bankruptcies in the UK due to health care costs than in the US. So it is far from clear that things are worse there. Do other data support your idea that a single-payer system would make things worse?

  2. Tuck, I suspect you didn’t read the article. since you refer to “the NY Times’ political bias” and the article appeared in Time magazine. You make a good point about the far more efficient and transparent pricing of procedures like plastic surgery that are paid for by patients. However the real money pits of medical care are not optional single procedures but events like cancer or strokes, where the costs are open-ended and outcomes uncertain. I can price a tummy tuck and decide yay or nay, but colon cancer doesn’t work that way.

    It’s hard to envision a free-market solution when the buyer has no choice on whether to buy. That’s not a free market.

    “Unfortunately with a single-payer model, things get worse, as one can see in the United Kingdom.” Worse based on what? Outcomes, costs? Certainly not by any data I’ve ever seen. Here, with pictures:

    “NHS provides such horrific ‘care’: participating in mass euthanasia.” Any evidence on this? We do have death panels in the US: they are run every day at hospitals’ accounting offices. Read the first page of Brill’s article so see how MD Anderson’s death panels operate.

  3. I decided long ago not to be so insolent as to advise Americans how to improve their medical system (let’s pretend that “system” is the right word) save to say “don’t copy the NHS”.

  4. It is my understanding that fees not recovered are tax deductible so a hospital can charge something outrageous, be unable to collect on a large portion of it and then write it off. I believe there a place for government in health care but Obamacare is a fiasco of the first order.

  5. I was told that part of the problem in the US is that many people do not actually pay (or are not insured) so that many hospitals have to take a loss on a fraction of the patients.

    If so, this makes overcharging a necessity.

    Disclaimer: I am Canadian.

  6. @Seth I believe its wrong to make an assumption treating life expectancy as a result of health care. Could getting more and “better” health care reduce life expectancy? Second, personal health practices probably have more to do with life expectancy than our health care system.

    Also, I would be careful about how much more we spend on health care than other developed nations. For example, doctors pay their way through medical school and then repay their student loans with higher fees in the US. In Europe, their education is paid for and they don’t have the resulting student loans. We might be moving expenses into significantly different buckets in different nations

    Seth: Yes, getting more and supposedly “better” health care could easily reduce life expectancy. Lots of common treatments have significant (and undisclosed) bad effects. The difference between what Americans and people in other countries pay for health care is so large it couldn’t be due to anything as small as the need of American doctors to repay student loans.

  7. “Do other data support your idea that a single-payer system would make things worse?”

    For starters, measuring health care outcomes by life expectancy is a bad way to judge: non-health-care-related factors like murder rates and car fatalities play a large role in the difference between coutries, and don’t reflect health care quality.

    Second, measuring health-care outcomes across country is fraught with error:

    “For example, babies who are not viable and who die quickly after birth are more likely to be classified as stillbirths in countries outside the United States, especially in Japan, Sweden, Norway, Ireland, the Netherlands, and France. This is especially likely for babies who die before their birth is legally registered.[9] In the United States, however, nonviable births are often recorded as live births, making the US infant mortality rate appear misleadingly high. In a detailed study of medical records and birth and death certificates in Philadelphia, Gibson and colleagues found that infant mortality had been overstated by 40 percent, merely as a result of these nonviable births that were recorded as live births.[10]”

    “US health care: A reality check on cross-country comparisons”

    I suspect that it’s near impossible to do, especially since there’s such a large political component to any analysis.

    Third, if you want to look at actual health-care quality outcomes, rather than potentially-misleading epidemiology, the US system starts looking pretty good compared to single-payer systems:

    “The United States spends more on cancer care than European countries. However, a study published in the newly released April issue of Health Affairs suggests that investment also generates a greater “value” for US patients, who typically live nearly two years longer than their European counterparts.”

    “Cancer survival is known to vary between the regions of the USA covered by the US National Cancer Institute’s (NCI) Surveillance, Epidemiology and End Results (SEER) Program,21 but the range of survival in Europe is much wider. Furthermore, survival from breast cancer during 1985–94 was higher in each of the nine SEER areas than in any of the 22 countries participating in the European study of cancer survival (EUROCARE).7,22”

    “Cancer survival in five continents: a worldwide population-based study (CONCORD)”

    Again, there are many confounders: for instance, cancer screening is much more aggressive in the US than in Europe, which may affect time to survival, but doesn’t speak to the poor quality of US healthcare.

    Fourth, the only other place where I’ve ever heard of horrible care like this:

    “There are around 450,000 deaths in Britain each year of people who are in hospital or under NHS care. Around 29 per cent – 130,000 – are of patients who were on the LCP [euphemism for euthanasia].

    “Professor Pullicino claimed that far too often elderly patients who could live longer are placed on the LCP and it had now become an ‘assisted death pathway rather than a care pathway’”

    “Top doctor’s chilling claim: The NHS kills off 130,000 elderly patients every year”

    “Between 400 and 1,200 patients are estimated to have died needlessly at Stafford Hospital in central England between January 2005 and March 2009 in one of the worst scandals to hit the NHS since it was founded in 1948.”

    “NHS ravaged by hospital scandal”

    “More than 100 hospitals may face tough new inspections in the wake of the report into the Mid Staffordshire scandal.

    “The Care Quality Commission has ­concerns about an alarming 20 per cent of hospitals in England and plans to carry out spot checks into their care of patients.

    “The Sunday Mirror can reveal the healthcare watchdog is drawing up a hit list of hospitals and, in many cases, experts will probe alleged neglect which mirrors the shocking breaches that led to the needless deaths of 1,200 people at Stafford Hospital between 2005 and 2009….”

    “Bosses are worried about standards at 20% of hospitals”

    …Is in the US Veterans Administration Hospitals, also a single-payer system. (You know, where *One Flew Over The Cuckoos Nest* took place?)

    “The waits in California and elsewhere are so bad that thousands of veterans are dying before their claims for physical and mental injuries are approved. In 2011-12, the VA paid $437 million in posthumous benefits to families of nearly 19,500 veterans, up from just $8 million three years earlier, the Center for Investigative Reporting says.”

    Seth: Thanks for the information. That makes clearer what the case against one instance of single-payer (England) is. As for the cross-country comparisons, I agree they can be improved. I look forward to learning what better comparisons show. I especially look forward to cross-national surveys of how people feel about their health, especially older people (when health care effects should be larger). Death is one endpoint; how you feel while alive is another. For any measure of health (let’s call it X), it can always be argued that X depends on lots of other stuff besides health care, just as you can point to flaws in any research. That’s not interesting, at least to me. What I find interesting is better comparisons. That provides a test of the idea that the “lots of other stuff” make a big difference.

  8. I’ve read the differences in life expectancy are mainly due to violent crime and obesity which are two problems the health care system can do little to change. What about the famous Rand study that finds no link between healthcare consumption and health outcomes?

    Using Seth terminology this is a gatekeeper problem. The prices and costs that we complain about are a result of that. We cannot change the prices and expect better outcomes. The main issues with Gatekeepers is they inhibit innovation.

  9. “…and obesity which are two problems the health care system can do little to change.”

    Arguably the obesity epidemic is a result of the health-care system, but that’s a whole ‘nother discussion. 🙂

  10. What’s not discussed is the enormous amounts of money the American Hospital Association and big pharma spend on lobbying congress to keep the game going. In addition, Congress tells us that Medicare is unsustainable and must be cut to make it affordable. Obviously, that’s not true. Medicare would be fine if we focused our efforts on reducing the cost of care – like allowing Medicare to negotiate prescription drug prices. The American people are being taken for fools just like when they were flushed down the drain by Wall Street.

    Seth: Brill mentions the enormous amounts of money spent on lobbying by health care advocates. It’s a small part of his piece, however, and I agree with you that it is very important.

  11. “That makes clearer what the case against one instance of single-payer (England) is.”

    As a more general point of the economic problems with a single-payer provider of any service, look at the US Postal Service. It looses a ton of money and is hugely inefficient in the one area where it has a monopoly: letter delivery. Logically, but for human nature, that should be hugely profitable.

    It’s much more efficient in package delivery, where it has to compete against two brutally-efficient competitors, UPS and FedEx.

    Of course that’s because the consumers can pick and choose. USPS knows that it either has to match UPS and FedEx or exit the business.

    It can be dreadful in letter delivery, as there’s no choice.

    Seth: US Post Office rates are set by Congress. Perhaps the rates are too low? What about the 2006 Postal Accountability Act? Maybe that was a mistake? Consider other examples. The US has a single currency now. Most people think that is better than when there were multiple currencies (and therefore more choice of currency provider). In the US, almost all libraries are government-run. Is the library system doing a bad job? What about the FAA? Airlines have no choice. Is it doing a bad job?

  12. While we are at the game of comparing health care systems, Hong Kong’s government system consumes just 3% of GDP (another 3% for private) and the HK citizens are amongst the healthiest in the world.

    I think one of the real problems with the US system (speaking as aCanadian) is tying it to employment. It means if a business wants to take on an employee, it must also, one way or another, take on their health care. This is a huge deterrent to hiring part time employees, amongst other things.

    A (well run) government system frees up people, and their employers, from worrying about that, leaving them more time and energy for innovation.

    The trick is to create any well run government system, of course…

    Seth: And HK citizens have few personal bankruptcies due to health care costs.

  13. Tuck exemplifies an individual with a fine grasp of political ideology, but little understanding of the different systems of Healthcare and their finance. This ignorance is displayed by a failure to comprehend that the NHS is a single-provider system (run in parallel with an independent private system). It is NOT a single payer as conceived in other, probably better functioning, though slightly more costly systems on the european continent. The hospitals and practitioners respectively are owned by and work for the NHS. Costs are contained by complete vertical integration (which is effective evidenced by the spend as %ofGDP), but with all its attendant political & bureaucratic failures, that often result in sub-standard care, waiting lists, rationing, and lack of convenience. That said, it is the low-cost global provider and by any measure provides the UK with an excellent value proposition. The parallel private system in part benefits from the NHS existence (many providers have both public and private practices), but is far from efficient or cost-effective.

    France represents the best model of the true single-payer, and uses it advantage. Contrary to Tucks derision, Libertarians and conservatives should take note and admire it since it combines the political goals of universal coverage, cost containment, with the best of the market ideas such as competitive independent service providers (less so in hospitals), complete freedom of consumer choice, and freedom of providers to price accordingly, bounded by the pricing discipline and transparency instilled by a single payer. By contrast, even though one pays taxes for use of the NHS, if a patient “goes private”, there is no “voucher” or contribution by the NHS to that service, and the patient must foot the entire price untethered by a single-payer. In France, like school vouchers promoted by conservatives and libertarians in the US, one visits a Doctor of choice. The single-payer reimburses a designated amount (like the Canadian usual & customary). IF that doctor is the top heart surgeon, he will likely charge a premium, and the patient is free to pay the difference or visit a more economical provider. In practice, most doctors charge the reimbursement rate because most french people cannot afford anything else. And eminent doctors often do pro-bono work where the case is clinically interesting or unusual need. The result is a pricing discipline that prevents absurdities like those cited in Brill’s Time article and this is a huge step in the right direction. The same people like Tuck who hyperventilate about such pragmatic hybrid (but ultimately market-based solutions) funnily enough are happy with regulated monopoly provision of public services in other areas like municipal water, electric and gas utilities, Police, etc. precisely because a regulated monopoly in some economic circumstance produces far better outcomes for almost everyone (save the few institutions that are gorging at the trough of the current US “system”).

    Seth: Very helpful, thanks.

  14. Seth, This is the result of highly regulated “monopolies” granted by the state.

    If you are interested I can dig a lengthy paper on the subject written back in the 90s describing many of the problems. It would be nice to have a truly free market, then we would see the prices going down, not up. Dr Mary J. Ruwart wrote a good book called “Healing Our World: In an Age of Aggression.” Which goes over how using the initiation of force (government granted monopolies, like licensing, etc) cause more harm than the good they were initially created to do.

    I’ve read “Silent Spring.” In the book the author shows how the most egregious polluter of the environment was the government itself (as it continues to be today). It was a great book. The author never advocated the outright banning of DDT. She only asked that it be used responsibly and very little of it be used, if any at all. I think she got it wrong though when she did propose more aggression to solve problems that were caused by the initiation of force to begin with.

    Peace and love is the path, not more hate and harm. I know that sounds cheesy but I think it is the truth.

  15. I am a British citizen & yes there are problems with the NHS (even more so now Cameron is tearing it apart) but let us not be fools, GDP & population is about 5x the difference so it is easy to compare, the UK spends 9.8% of GDP on healthcare but the US spends 16.8% (i imagine to provide decent coverage for all would be well beyond 20%), so the problem isn’t the NHS being rubbish, it is underfunded, even if its budget was increased by 10-25% we would still be spending 25% less than the US does but our NHS would improve so much. I also want to make it clear, many right wingers say you wouldn’t be allowed to pick your own GP, my family picked mine when I was born, and when they retired they picked a new GP, and then a few years ago I picked my own GP

  16. will you please sign my petitin tu

    Time Magazine recently ran an article ‘why medical bills are killing us’ and included the story of the Recchi’s who MD Anderson charged over 83,000 for cancer treatment MD Anderson is supposed to be a non profit but made a 26 percent profit last year and the head of MD Anderson made more than 2 million dollars last year. I think they should reimburse the Recchi’s 26% of the 83,000 and apologize to them for not giving them assistance or treating them with compassion at the time they most needed it. I do not know the Recchi’s but I was absolutely furious when I read this. this type of rip off by the medical community has got to stop.

    That’s why I created a petition to MD Anderson Cancer Treatment Center, Manager, Asm MD Anderson.

    Will you sign this petition? Click here:


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