Where do U.S. health care priorities lie?

The cost of health insurance and healthcare in the United States is approximately twice that of other modern, prosperous countries (those with living standards similar to the United States). At the same time, U.S. healthcare outcomes are inferior to the outcomes in those countries. This is clearly an unsatisfactory situation. This month I will dissect some aspects of why the United States has this cost problem.

Healthcare Focus

The government has not yet decided to negotiate all drug prices for all government health programs (Medicare, Medicaid, Indian Health service, CHIPS, Tricare). The government does negotiate drug prices for the Veterans Administration with significant cost savings.

What about commercial health insurance, ie what an employer or an individual buys? The health insurance companies own the Pharmacy Benefit Managers (PBMs) and extract large profits while functioning as a wholesaler. As the insurance companies benefit from high drug prices they are not interested in effectively negotiating lower drug prices.

The unplanned nature of U.S. healthcare has produced a situation in which administrative costs are exorbitant. It is the excess administrative costs which I will be further evaluating in this column.

By Mark Brakke

companies. If the insurance company rejects a charge, the hospital coding/billing department will recode and try again. One hospital administrator reported the coding and billing process is so complex that his hospital has as many employees in coding/billing as they had nurses. The insurance companies advertise aggressively to attract new customers and retain existing customers. Advertising and marketing is expensive. The for-profit insurance companies are also using premium dollars to generate profits for their shareholders.

lems are insured. ricing is uniform and the complication of multiple contracts with varying discounts is eliminated. Furthermore, one does not have insurance companies spending premium dollars on advertising and marketing. Premium dollars are not used for shareholder profits. Hospitals and clinics have much smaller business offices.

It is important to remember how unique the healthcare market is. Healthcare has changed dramatically over the last few generations. In the 1950s, most medical bills were modest and health insurance was not very expensive. Since then, modern drugs, more sophisticated surgeries, organ transplants, intensive care unit care, etc. have greatly increased the potential cost of medical care.

None of us know what our medical problems will be over a lifetime. Contrast this with another type of insurance. If we buy a boat, we can manage the insurance expenses based on the size of the boat and how it is used. We can self insure if we wish. We can sell the boat if its costs become too great. What works for insurance for discretionary items like boats is very different from what is sensible for health insurance where a serious illness can lead to hundreds of thousands of dollars in costs. As we cannot significantly control most healthcare risks we all need comprehensive health insurance.

Please read attached email

The accompanying graph shows how excessive administrative costs are in the United States.

The excess administrative costs occur for several reasons. Health insurance companies have contracts with hospitals and clinics determining what they will pay for each charged service or treatment. These contracts all need to be negotiated and managed. Each hospital has a coding and billing department which keeps track of hospital charges for each patient and bills the insurance

NAMES ALREADY ON AD THE LAND 3.417 x The Land

In 2017 there were 907 health insurance companies registered in the United States.

There are about 6,000 hospitals in the United States. Even taking into account that some of these hospitals are part of a system, imagine the complexity of all the contracts between health insurance companies, hospitals and clinics. Managing this complex set of contracts requires lots of staff and much administrative expense.

Contrast this with a country which has a planned healthcare system. The insurance in a planned system is comprehensive. All significant medical prob-

In the United States we have grown up with the current inefficient health insurance situation and consequently it seems normal to us. If health insurance was a small expense, excess administrative spending could be overlooked; but health insurance is a big expense and the consequence of this wasteful situation is very significant for each of us.

As a society we have a choice. Do we prioritize the financial and medical health of our citizens or the ability of health insurance companies, pharmaceutical companies, medical device manufacturers and hospital systems to maximize their revenues? The example of other prosperous countries shows us it is possible to have better health for our citizens at the same time as we have more reasonable prices.

Mark Brakke is a retired family practice physician. He cared for patients in Coon Rapids, Minn. for 41 years during which time he was on the boards of directors of two health insurance companies. He currently is on the board of the educational non profit Health Care for All Minnesota (HCA-MN.org).