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Key insights from
The Price We Pay: What Broke American
Health Care―And How to Fix It
By
Marty Makary
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What you’ll learn
The American healthcare
system has seen better days. Costs of even routine medical procedures are
astronomical and continue to skyrocket, which raises insurance premiums.
One in five Americans has an outstanding medical debt. Many of them are
hounded by debt collectors and face financial insolvency. Ordinary citizens
are caught up in (and weighed down by) a game that forces them to pay out
large sums to hospitals, insurance companies, or both. The burden is
becoming increasingly unmanageable, and politicians get mired in debates
that only scratch the topsoil.
After interviewing CEOs of
hospitals, insurance company executives, politicians, doctors, nurses, and
lots of patients in 22 US cities, Johns Hopkins University surgeon and
professor Marty Makary sheds light on the imbroglio and proposes solutions.
He argues that while the medical system has its share of crooks and
opportunists, most professionals are good people who wish to do good but
struggle against a dysfunctional system. Makary also draws our attention to
a burgeoning social movement that aims to return patients to the forefront
of care.
Read
on for key insights from The Price We Pay: What Broke American Health Care―And
How to Fix It.
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1. Passively
letting experts continue to mismanage the health care system will work
about as well as trusting banks in 2007.
In the years leading up to
the 2008 financial crash, bankers and financiers offered explanations about
the financial system that were more obscurantist than enlightening. “It’s
all very complicated. Leave the thinking to us.” They hid behind convoluted
graphs and jargon, but the simple unvarnished truth was that banks were
buying up subprime assets with money they did not have.
There might be a bubble
with the medical industry, and, yet again, those with vested interests in
the business of medicine tell us, “It’s all very complex, so let us experts
worry about it.” Hopefully we have learned to expect better answers so as
to avoid another bust. But we clearly have a problem with the health care
system, and those within the medical profession need to make concerted
strides toward care that is patient-centered and affordable. Heaps of
reliable data and interviews with not just relevant experts but with
everyday people reveal that many citizens are groaning under the weight of
exorbitant costs and are becoming increasingly skeptical that medical
professionals have their patients’ best interests at heart.
There was a time when
physicians not only recited the Hippocratic Oath as a vow to care for the
patient, but did so. There is something disingenuous about inviting people
into hospitals to care for them, only to drop a massive bill in their laps
and let creditors harass them until they pay up. The business of medicine
has become full of incentives and constraints that prevent even well
intentioned medical professionals from keeping care for the patient front
and center. The industry has become unnecessarily complicated and is
overdue for an overhaul.
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2. One of the
major problems with American health care is not just lack, but waste.
Stenting is a medical
procedure in which a doctor inserts expandable mesh wire tubes into the
patient's arteries to remove blockages and promote better blood flow. For a
long time, cardiologists would insert stents in the vessels around the
heart, but the procedure has been shown largely ineffective, with the
exception of treating someone experiencing cardiac arrest. To enhance
general circulation, there are far more helpful treatments than stents, and
the medical literature is becoming increasingly clear about this.
Despite the growing
consensus, some doctors have continued to recommend the largely useless
procedure. Mark Medei was a cardiologist in Baltimore who came under fire
for approving stents in hundreds of patients. It was lucrative for Medei
while it lasted because he received a portion of every stent he signed
people up for, but the bad press caught up with him and sent a message to
his colleagues who were also ordering extraneous stents for their patients.
Unnecessary stenting has
never gone away, entirely. Instead of stenting the heart, some doctors
began stenting the vessels in patients’ legs, even though stenting or
blasting innocuous plaque buildup in the legs is just as useless.
Stenting is declining
across the United States, but there are still plenty of doctors taking advantage
of patient ignorance. Most people do not come in asking about their legs’
circulation, but some doctors will go to churches holding community health
fairs and tell people the bad news—not about their sin but about their
circulation. A group at Johns Hopkins did a survey to find out how
prevalent screenings for bogus stents are in the United States. They found
that more than 1,000 health fairs hosted by mosques, synagogues, and
churches across the country were offering vascular screenings that medical
professionals know to be ineffective at detecting disease.
This was a problem in the
Washington, D.C. area, according to a local cardiologist Dr. Sridhar
Chatrathi. It might look like medical specialists are just trying to serve
underprivileged minority communities, but many were looking to make a
killing. They were selling medical care that was unnecessary at best, and
financially crippling and dangerous for patients at worst. Pastors were
floored when Makary and his team informed them what was happening.
Maybe some technicians at
these fairs are just parroting what they have been taught. In any case,
these kinds of unnecessary tests add to the expensive morass of health
care. An elderly woman who gets a bogus screening will pay a little for a
battery of tests she did not need, but the public will foot the rest of the
bill through Medicare.
Every profession has its
“nudge words”: those phrases that move a patient in a predictable
direction. For the gynecologist, it is a phrase like “It will be safer for
the baby.” For cardiologists, the nudge words are, “You’ve got a widow
maker” (a blocked vessel that implies a deadly heart attack looms). For
orthopedic surgeons, the phrase “bone on bone” makes patients very
suggestible. People wince thinking of their bones grinding each other down
without any cushion. They hate the thought of leaving their spouse a widow.
They would not dream of compromising the baby’s health. Most people respond
with a willingness to do whatever it takes for whatever it costs. And doctors
know this. Oftentimes the procedures are imperative, and doctors are right
to recommend them, but some doctors give in to the temptation to use nudge
words to manipulate people into shelling out more money than is necessary.
We often think of the
American health care issues as a problem of limited resources, but in some
cases, the problem is wasted resources: Based on anonymous responses from
more than 2,000 doctors across the US, a research team at Johns Hopkins
concluded that more than a fifth (21 percent) of what happens in medical
care (including tests, operations, and prescriptions) is completely
unnecessary. That comes out to billions upon billions of dollars in wasted
care.
Even doctors who dislike
the systematic waste of time, procedures, and money feel pressured into
silence by colleagues who are benefitting from the waste. The culture of
silence makes someone like cardiologist Dr. Chatrathi’s refusal of
anonymity remarkable, even if it might harm some colleague’s
business-as-usual practices in the D.C. area where he practices.
"That’s the problem,” Chatrathi told the author. “We have all been
silent about all the waste in medicine, even as everyday people pay higher
and higher health care costs. Use my name."
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3. Pricing for
major surgeries varies widely and is often arbitrary, even if the quality
of care is exactly the same.
Henri was beginning his
Master’s at George Mason University in D.C., when his father had a heart
attack while visiting from France. Not knowing anything about the American
medical system, the family went to the hospital and learned that he would
need a bypass surgery, and that it would cost $150,000. Henri’s father
called a surgeon in France and learned that the exact same operation would cost
$15,000 back home. It was no contest, and he informed the hospital
representative that he would be returning to France for the surgery. To the
shock of the patient and his family, the representative made a counteroffer
of $50,000. The family declined again, and then a third time on their way
out the door when another offer was made of $25,000.
The bargaining made the
family feel like they were dealing with a used car salesman or haggling in
a bazaar, where vendors base prices on how much they think they can get
from you. A clueless tourist in Cairo or Istanbul is a much more promising
prospect than a knowledgeable local. But here, at an American hospital of
solid reputation, there was the same dynamic, and not over a trivial
souvenir, but over someone’s health. A family clueless about the American
system was getting price gouged. Although their vulnerability was being
taken advantage of, they were gracious enough to conclude that they loved
their American doctors, but the business of medicine left a bad taste in
their mouths.
The University of Iowa
conducted a survey of 101 hospitals across the US, asking what they quoted
for bypass surgery like the one intended for Henri’s father. Only half the
hospitals were willing to disclose what they quoted, but of those that did,
the mean price was $151,000. But the range in prices was astounding:
between $44,000 and $448,000. Does this mean the places charging a 10th of
the price deliver questionable surgeries or that the most expensive are
demonstrably higher quality? No. Surgery results are a matter of public
record and those records reveal no correlation between cost and success
rates.
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4. Markups on
medical bills continue to escalate because of a secretive, elaborate game
between hospitals and health insurance companies.
A team of Johns Hopkins
researchers investigating markup patterns for medical services found that
markups for operations across the nation were 23 times higher than what
people paid under Medicare for the same procedure. When higher-ups in
hospitals were asked about their hospitals’ markups and how they measured
up against other hospitals, most did not know. The stock explanation for
markups was the hospitals need to compensate for treating uninsured
patients, but no leaders interviewed had any evidence of this beyond
hearsay or intuition. The data, however, revealed a different story.
A team based out of Johns
Hopkins did an in-depth study of factors causing markups for medical bills
and they found that exorbitant prices had nothing to do with serving
low-income groups or the amount of free medical services. One of the major
findings was that emergency room bills were always significantly higher
than bills issued by internal medicine—even when the procedure is exactly
the same.
But why were these emergency
room bills so expensive? What was behind the markup process? One medical
student leading research out of Johns Hopkins (and a certifiable genius),
could find no discernible pattern to billing markups in emergency rooms. If
one of the brightest mathematicians at Johns Hopkins could not discern the
pattern, then of course the layman could not be expected to figure it out.
As one insurance leader put
it at a closed-door meeting involving powerful leaders looking to reform
the health care industry, “It’s a stupid game. We can do better.” The game
is one of markups and discounts: Health insurance companies aggressively
haggle for bigger discounts with hospitals, and hospitals mark up their
prices because insurance companies only pay part of many medical bills. But
the game forces the prices up, and people pay for it one way or another.
Some of the leaders at the reform meeting offered rationales and defense of
their roles in the markup-discount dynamic, but it became clear that it was
all still part of the game.
Whatever discounts
insurance companies receive, hospitals and insurance companies protect that
information jealously, but the discounts can range from 4 percent to 90
percent. Depending on the particular discount that a hospital has with an
insurance company, the price that falls to the patient can vary
dramatically, making it difficult for patients to know what they can expect
to pay. Even if the hospital, the procedure, and equipment involved are all
the same, the costs span quite a range. One Vox journalist ran a story about how the
cost of a hospital bed for a night during a standard childbirth can vary
from $1,000 to $12,000—at the same hospital.
Shopping around for quotes
can be a complicated task, even for standard medical procedures. It should
be straight forward, but a cash cow is hiding behind the obfuscating cloud
of “I’m not sure, but please hold while I transfer you to another
representative who will be equally evasive.”
A common defense that
hospital CEOs and other medical professionals offer to justify their rates
is that patients never pay the sticker price in full, however exorbitant it
is. But unfortunately that is not always the case. The Amish community in
Pennsylvania, for example, always pays their bills in toto. They forgo
health insurance, but the Amish community becomes the safety net. When one
member needs treatment, the community pools money and walks into ICUs with
bags containing thousands in cash. But sometimes the bills are
bewilderingly high. One child from the Amish community had unexpected
health issues at birth, and the Amish community was scrambling to pay a $1
million bill. Thankfully, they had connections to Johns Hopkins faculty who
helped the community whittle the bottom-line down to a mere $200,000.
To avoid these markups,
many Amish have begun sending their sick on a six-day journey to Mexico,
where the care is comparable, the costs are reasonable, and the pricing is
transparent. At one Amtrak station in Pennsylvania, the Amish account for
up to half of the passengers. Mexican hospitals have noticed the trend and
begun advertising in Amtrak’s magazines.
But lest we come down too
hard on hospitals, it is important to remember that the price might be
truly difficult to distinguish, especially at large facilities. Because of
the mushrooming medical bureaucracy at many hospitals, it is easier for
many facilities to rely on software to generate markups. Say a hospital
needs to mark up everything by five percent in anticipation of four percent
increases in costs. The software may or may not tell billing exactly where
those increases will show up.
Patients are angered and
dismayed and sometimes doctors and hospital CEOs are embarrassed to learn
what their hospital is charging patients. Some of the stories reveal that
plenty of leaders in medicine are not greedy or malicious, just
disconnected from what is going on or how their infrastructure impacts
patients.
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5. A growing army
of bureaucratic middlemen stands in the way of doctors caring for patients
well and patients understanding what is happening.
Take the story of Heather
as another example. She got a bill for $10,000 for localized anesthesia.
That’s a crippling sum for a husband and wife raising six kids on less than
$60,000 per year. She asked the author to go to bat for her. After a
months-long complicated ordeal involving calls and faxes and mail just to
see an itemized bill that could explain the exorbitant costs, Makary had a
heated conversation with the billing clerk. The clerk’s response was, “The
law allows us to charge whatever we want. If we want to charge a million
dollars, she has to pay it.” Makary was ready to take matters to her
supervisor and the hospital’s CEO, but never pushed things further, because
Heather paid the bill in full to save her credit and get onerous debt
collectors off her back.
The colossal game that is
the medical business is more expensive than ever because of all the costs
involved in staying in the game: Contractors and subcontractors, entire
teams of business people whose job it is to negotiate better discounts for
their insurance firm—they all have to be paid.
There is a thick layer of
middlemen between patient and doctor who annoy the latter and create
burdensome bills for the former. For every 10 doctors at a hospital, there
are seven nonclinical full time staff on the business administration side
of hospitals. Health care is a booming industry, but what exactly is the
product to show for all the growth? Is it meaningfully growing our economy
and helping sick people, or is the elaborate game of medical business just
creating another bubble that will burst and harm ordinary people?
Maintaining the hefty layer
of middlemen who reprice medical services is an expense in itself. The
mushrooming medical bureaucracy contributes heavily to inflated US
healthcare costs. But how vital are they to the process of health care?
After all, they are not removing tumors, suturing open wounds, or replacing
IV drips.
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6. A lack of price
transparency removes competition and allows hospitals to charge exorbitant
prices.
The absence of real prices
prevents real competition between hospitals and opens the door for
predatory pricing and surprise bills. Transparency is key to closing that
door.
Posting real prices
benefits patients because when hospitals have to compete with one another,
prices stay low. In medical niches where pricing is clear (e.g., cosmetic
surgery and LASIK), the prices are more reasonable and the best physicians
are recognized as such.
The federal government
requires full disclosure of out-of-pocket expenses for people in
emotionally turbulent times in life, but health care is an exception. The
Funeral Law, effective since 1984, requires funeral homes to be upfront
about all costs that bereaved families will have to fork over. There is
something twisted about the fact that the federal government protects
against extortion once people die but not while they are still alive.
Critics of price
transparency worry that most people who use price shopping are not looking
for the cheapest options, and some will choose the most expensive options,
knowing that insurance will foot the bill. But these are not the shoppers
who will be driving the market.
Think about a grocery
store: Even if most people choose their grocery stores based on convenience
rather than pricing, there is always that minority of determined comparison
shoppers who want to find the places that deliver the most affordable
goods, and it is this group that forces grocery stores to keep their prices
competitive. By keeping their prices low, grocery stores hang on to bargain
hunters, which benefits not only the bargain hunters, but all other
shoppers, too.
Debates over what
proportion of shoppers will be these proxy shoppers is a smokescreen that
keeps us from understanding the issue. It is the kind of argument that
lobbyists and special interest groups resort to in order to dodge the real
issues. But the most crucial question is not how many people will be proxy shoppers
but whether or not the governing bodies will give proxy shoppers the
opportunity to evaluate health care options. The clarity of options will
drive down prices for the rest of the public by reintroducing competition.
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7. Some hospitals
are beginning to prioritize the patient again, and they reap the rewards in
increased patient volume, patient trust, and revenue.
The phrase “health care
reform” sends most American’s minds to Capitol Hill and the current policy
debates surrounding health insurance. But there is a growing movement
of concerned social entrepreneurs in the medical field who are tired of
seeing patients pushed to the periphery of an industry that should be
prioritizing them, and want to do something about it.
One reformer is Dr. Keith
Smith, an anesthesiologist based in Oklahoma City. He has built his
medical center based on transparency. His slogan is simple, but
revolutionary in the United States: "You can and should know the
price." Smith believes that the surgery center’s transparency about
pricing has restored people’s trust in medicine and their doctors. He has
patients fly in from Mexico, Canada, and even Japan, and the reason is not
difficult to discern: They are receiving American medical care with pricing
that is reasonable and transparent.
Smith is even able to save
money that would otherwise go into playing the game and funding an army of
middlemen to keep it running. As a result, the hospital even sets revenue
aside to provide free or heavily subsidized care for poorer members of the
community.
Smith’s surgery center
draws plenty of critics. There are a number of nearby hospitals that worry
his transparency could spread and kill their cash cows. Insurance companies
love their discounts and they expect hospitals to keep their discounts
private. Posting prices and insurance discounts ruins the secrecy in which
price gouging thrives. Some insurance companies will threaten hospitals
that choose to disclose that information. In California, hospital price transparency
caused rancorous rifts between insurance companies and hospitals so severe
that the state government passed laws prohibiting insurance companies from
resorting to vengeful tactics to spite hospitals that chose to post real
prices.
Price transparency is not
just a pleasant-but-theoretical dream. The hospitals that have chosen
transparency win as well as their patients. In medical centers that have
decided to part with the old ways of secrecy and middlemen and adopted a
policy of complete transparency, patient volume was up by 50 percent and
hospital revenue increased by 30 percent.
These kinds of models,
which return to prioritizing the patient and model caring relationships for
the patient, are shaking free from the old ways of doing things and have
the potential to revitalize American health care.
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