Should this be the Model for India? – Health Bills are Killing Americans
Sixty per cent of bankruptcies in the US are related to medical bills. Physicians are bribed into prescribing expensive medicines and diagnostic tests by giving them stock options or royalty by pharmaceuticals.
Strong lobbies of doctors, hospital administrators, pharmaceuticals and insurance companies are making the Americans cough up a huge price for seeking treatment, no matter whether this leads to sound health or economic ruin. The Americans spend almost 20% of the gross domestic product on health care. According to McKinsey, consulting firm, the US spends more on healthcare than the next 10 biggest spenders combined: Japan, Germany, France, China, the UK, Italy, Canada, Brazil, Spain and Australia. Sixty per cent of the personal bankruptcy filings each year across the country are related to medical bills.
Medicine is a Huge Business
Americans spend more on artificial knees and hips than what Hollywood collects at the box office. According to Bureau of Labour Statistics projections, 10 of the 20 occupations that will grow faster in the US by 2020 are related to health care. America’s largest city, New York, may commonly be thought of as the world’s financial-services capital, but of the city’s 18 largest private employers, eight are hospitals and four are banks. Medicine is a huge business. Of the Houston’s top 10 businesses, five are hospitals, including MD Anderson Cancer Center which has 19,000 employees, three led by EXXON Mobil with 14,000 employees, are energy companies. MD Anderson’s operating profit for the year 2010 were $531 million, i.e., profit margin of 26% on revenue of $2.05 billion, an astounding result for such a service-intensive enterprise which is officially registered as a nonprofit unit of the University of Texas. MD Anderson’s president is Ronald DePinho who drew pay and perks totaling up to $18,45,000 in 2010, which does not count outside earning derived from a much publicized waiver he received from the University that, according to the Houston Chronicle, allows him to maintain unspecified “financial ties with his three principal pharmaceutical companies. DePinho’s salary is triple the $674,350 paid to William Powers Jr., the President of the entire University of Texas system, of which MD Anderson is a part.
Health care is eating away at US economy and treasury. And it is time to question: Should India follow the model set by the Americans?
Some of the ills of the American health system are linked to the pattern of democracy the US follows, i.e., expensive lobbying by hired agencies who themselves seek their own pound of flesh. The pharmaceutical and health care product industries, combined with organizations representing doctors, hospitals, nursing homes, health services and HMOs, spent $5.36 billion since 1998 on lobbying in Washington. In the same period, the defense and aerospace industry spent $1.53 billion and oil and gas interest spent $1.3 billion. (Source: Center for Responsive Politics)
Incentive on Over Testing
Another McKinsey report found that healthcare providers in the US conduct far more CT tests per capita than those in any other country—71% more than in Germany, for example, where the government run health care system offers none of those incentives for over testing.
Take the case of Catherine, a 64-year old sales clerk (name changed) who felt chest pain. She was taken four miles by ambulance to the emergency room at Stamford Hospital, officially a nonprofit institution. After about three hours of test and some brief encounters with a doctor, she was told she had indigestion and sent home. That was the good news.
The bad news was the bill: $99 for the ambulance ride, $3,000 for the doctors and $17,000 for the hospital—in sum, $21,000 for a false alarm. She was charged $199.50 for simple Troponin Test which measures protein level in the blood. She was tested thrice during the stay. Catherine had no Medicare cover as she was one year younger to qualify for it. Had she been 65 or more the Medicare would have paid $13 for the Troponin test.
According to the Stamford Hospital’s filings (for 2010), its total expenses for lab work (like Catherine’s Troponin test) were $27.5 million. Its total charges were $293.2 million. That means it charged about 11 times its costs.
Catherine’s bill records $7,997 dollars for an “NM MYO REST/SPEC EJCT MOT MUL”. That is a stress test using a radioactive dye that is tracked by an X-ray computed tomography, or CT, scan, Medicare would have paid Stamford $554 for that test.
Albert (name changed) who had a bleeding nose due to a fall and was taken to Bridgeport Hospital (Yale Medical School’s teaching hospital) was served a bill for $9418 for spending six hours at the hospital, most of it in waiting. He is still making weekly payment for the fall in June 2008.
Sales of CT Scans has been rising in the US. In 1997, there were fewer than 3,000 machines available and they completed an average 3,800 scans per year. By 2006 there were more than 10,000 in use and they completed an average of 6,100 per year.
Profit is the Prime Motive
All this is done to hike profits, albeit there may be some justification in the claim that some doctors prescribe more diagnostic tests merely to avoid being sued by the patients. Medical journals now carry advertisements that offer incentives for selling more capital equipments to hospitals.
Every hospital has a chargemaster which assigns prices to everything. There seems to be no process, no rationale, behind the core document that is the basis for hundreds of billion of dollars in health care bills.
McKinsey report says that 2,900 non-profit hospitals across the US which are exempted for income tax, actually end up averaging higher operating profit margins than the 1,000 for profit hospitals after the for-profits income tax obligation are deducted. In health care, being non-profit produces more profit.
Bribing by Proxy
Physicians regularly receive substantial compensation from medical-device companies through stock options, royalty agreements, consulting agreements, research grants and fellowships. Between 2002 and 2006, four manufacturers which controlled almost 75% of their hip- and knee- replacement market, paid physician consultants over $800 million under the terms of roughly 6,500 consulting agreements. This is according to a statement made in the Senate by an assistant inspector general under the Dept of Health and Human services.
Hospitals charge outrageously for things like Oxygen and saline solution which are supposed to be part of the hospital’s room and services charge. Simple saline solution for intravenous use was charged at $84 to $134. It can be purchased online for $5.16. In one case MD Anderson charged $7 for “Alcohol Prep Pad”, a little square of cotton used to apply alcohol to an injection. A box of 200 can be bought online for $1.91.
60% Lab tests are Unnecessary
Prescription drug prices in US are 50% higher for comparable products than in other developed countries. MD Anderson marked up a patient’s Rituxan to $13,702. Rituxan, the wonder drug for cancer, is produced by Biogen Idec. Biogen Idec’s cost of sales was only 10%. The dose that an individual was given should have cost only $300. But he was charged $13,702. Lab tests become daily cash generators. 60% of the lab tests are totally unnecessary.
(This report is based on extracts from special report titled “Bitter Pill” published inTime magazine issue March 4, 2013. The special report was contributed by Steven Brill)