Absurd costs of health care system


Reporter Elisabeth Sullivan looks at how echocardiogram testing has become a lucrative source of money for medical practices in the US and is done even when there is no reason to do it but just because the machine is there. As Dr. Eric J. Topol, a cardiologist at Scripps Health in San Diego who studies echocardiography says, “At many hospitals, the threshold for ordering an echocardiogram is the presence of a heart.”

And the charges for these tests are enormously variable. The one thing in common is that they are all much higher than what other countries charge.

Testing has become to the United States’ medical system what liquor is to the hospitality industry: a profit center with large and often arbitrary markups. From a medical perspective, blood work, tests and scans are tools to help physicians diagnose and monitor disease. But from a business perspective, they are opportunities to bring in revenue — especially because the equipment to perform them has generally become far cheaper, smaller and more highly mechanized in the past two decades.

With pricing uncoupled from the actual cost of business, large disparities have evolved. The five hospitals within a 15-mile radius of Mr. Charlap’s home here charge an average of about $5,200 for an echocardiogram, according to an analysis of Medicare’s database. The seven teaching hospitals in Boston, affiliated with Harvard, Tufts and Boston University, charge an average of about $1,300 for the same test. There are even wide variations within cities: In Philadelphia, prices range from $700 to $12,000.

In other countries, regulators set what are deemed fair charges, which include built-in profit. In Belgium, the allowable charge for an echocardiogram is $80, and in Germany, it is $115. In Japan, the price ranges from $50 for an older version to $88 for the newest, Dr. Ikegami said.

Because Mr. Charlap, 76, is on Medicare, which is aggressive in setting rates, he paid only about $80 toward the approximately $500 fee Medicare allows. But many private insurers continue to reimburse generously for echocardiograms billed at thousands of dollars, said Dr. Seth I. Stein, a New York physician who researches data on radiology. Hospitals pursue patients who are uninsured or underinsured for those payments, he added.

In Britain’s National Health Service, all echocardiograms are done in hospitals without charge. There are about 250 echocardiogram centers in the country, said Dr. John Chambers, a cardiologist at St. Thomas’ Hospital in London who studies echocardiography.

By contrast, in the United States, buying an echocardiogram machine is a good investment for an entrepreneurial practice. The number of echocardiograms ordered by cardiologists in the United States rose 90 percent from 1999 to 2008, according to a 2012 study. There are far more places to get one in New Jersey than in all of Britain, according to the Intersocietal Accreditation Commission, which accredits medical facilities.

It is not just echocardiograms. The costs for treatments are higher for a huge number of treatments.

This is the whole problem of the US health system. Providing good quality care at the lowest cost is not the only or even the main driver here. Making a lot of money for hospitals and medical professionals and health insurance companies rank highly and that distorts the system in ways that are irremediable. Is it any wonder that the per capita costs of health care in the US are 44% higher than that of the next most expensive country (Switzerland) and over twice the median cost of the OECD nations and yet, even after Obamacare, we still have 15% of the population who are uninsured and poor overall quality of care.

We need a government-administered single-payer system to replace the current crazy system.

Comments

  1. says

    Military suppliers charge taxpayers $600 for a hammer, a $1000 for a toilet seat and $24 for a six pack of cola. Why shouldn’t hospitals and insurance companies be able to charge patients $100,000 for hospital stays, for procedures they didn’t need?

  2. Henry Gale says

    @leftover

    I believe the examples you use are all over-hyped. Much of what the military uses is designed especially for specific purposes.

    That said, I know from my personal experience helping older family members navigate the healthcare system that primary care doctors are well aware of the reimbursement rates and allowable frequency of tests. As a result, they have a type of timeline for each patient as to when they can get reimbursed for a test.

    So, tests are often ordered, like a stress test or an EKG, not because it’s needed but because the doctor can get reimbursed.

  3. Crimson Clupeidae says

    Military suppliers charge taxpayers $600 for a hammer, a $1000 for a toilet seat and $24 for a six pack of cola.

    As noted above, these are much overhyped, particularly by the right wing echo chamber. They are also not factual. What you often see as a ‘price’ is the actual net cost, which will include things like shipping to the remote forward base in the middle of a desert somewhere, on the occasion that they aren’t completely fabricated numbers.

  4. Some Old Programmer says

    I should be inured by now, but I still get surprised by the weird combination of mendacity, avarice and incompetence that characterizes large businesses, particularly in the US healthcare field.
    We recently had a family member endure a substantial hospital stay for a serious infection. All manner of high and low tech interventions were necessary, as well as a short stint of dialysys after discharge. We’re fortunate that they’ve mostly recovered.
    The outpatient dialysis clinic was initially reimbursed on the order of 10% of their billing–they were not in-network. Yes, the insurance company fully expected us to ensure that all services provided were on their approved list–it was silly of us to assume that the referral from our in-network nephrologist would be to an in-network clinic.
    Most recently we got a statement from the insurance company regarding the hospialization. The hospital bill was well into 6 digits. The insurance company informed us that nobody owed anything–the claim had been filed too late.
    Astounding. Dismaying. Yes, we don’t need to pay a share of the insurance-discounted services provided. But those costs will be shifted somewhere–likely to the poor sods that don’t have insurance.

  5. Mano Singham says

    Some Old Programmer,

    Yes, I too have long become used to the fact that nothing can be taken for granted and that you have to check whether referrals (including lab tests) are to people that are covered by your insurance company.

  6. Katydid says

    As a result of a medical catastrophe, I’m now permanently on a set of medications and need periodic bloodwork. It’s astounding how much variation there is in what insurance policies will cover. My company has been changing our policy willy-nilly, meaning every time I go to renew a prescription, I have absolutely no idea how much my prescriptions will cost. In September, I paid $1580 for 3 months’ supply. Then I switched to my husband’s insurance during open season, and just last week, for the exact same set of meds, I paid…$300. However, in January there will be a new health insurance, and I can’t begin to tell you what my meds will cost me in March, the next time I refill the prescription. Where I used to be able to get my bloodwork drawn in the doctor’s office and processed by the doctor’s own lab at the time of my checkup visit, now I have to cool my heels for 3 – 5 hours in one of the commercial labs and pay a $60 co-pay.

  7. says

    As noted above, these are much overhyped, particularly by the right wing echo chamber. They are also not factual.

    “Not factual”? Where exactly do you get your information from? When I said $24, that was misremembering, not exaggerating.

    http://www.dailykos.com/story/2006/11/04/266518/-Why-The-Hell-Has-War-Profiteering-Not-Been-A-HUGE-Issue

    Robert Greenwald appeared on Real Time with Bill Maher last night to discuss his new documentary, Iraq for Sale, which is about how corporations have been put in charge of Iraqi reconstruction and services previously run by our military. He mentioned how Halliburton is charging $45 for a six-pack of Coca-Cola

    I hope you’re not saying Jennifer Huculak should just stop complaining and pay the $950,000 medical bill she was handed after giving birth in the US. The insurance company refused to cover her bill despire the fact she and her husband had paid and met all the conditions of the insurance policy. They are victims of gouging for profit by companies refusing to honour their end of the contract even though she met hers.

    http://www.cbc.ca/news/canada/saskatoon/jennifer-huculak-kimmel-s-1m-baby-bill-denied-by-saskatchewan-blue-cross-1.2847097

  8. lorn says

    Two things about those $600 hammer type reports:

    First, while overpricing is possible some of this is simply a matter of over specification or extreme requirements. A case in point was the over a thousand dollar coffee machine on the B-52. The idea behind the B-52 was to have a long duration bomber able to do critical missions in extreme situations. Some of the potential missions are quite remarkable. The B-52 was designed to land on unimproved airfield where turning into the wind was not possible. So it has very tough landing gear, better to handle potholes, a low ground pressure compared with similar aircraft, better for landing on soft ground or snow, and the entire landing gear setup pivots sideways so that it can crab sideways and land in a 60 mph cross-wind. It was also perhaps the only bomber ever to be planned on an ability to take damage and complete the mission. Which gets us to that coffee machine.

    The coffee machine was notionally a survival system if the aircraft hull was blown open in the middle of a twelve hour mission. Hot coffee, and plenty of it, was intended to keep the crew awake and warm enough to keep going even as a -20F wind of several hundred miles an hour stormed through the airframe. The machine was a custom built unit designed from scratch to keep working after taking a physical and electrical beating and do its thing in an unpressurized aircraft at 20,000 feet. It was extensively tested to make sure it could do its job. Comparing it to a $10 Mister Coffee is ridiculous.

    Second, some of that pricing has to do with the way contracts are written, the legacy of the high inflation days prior, and the need to account for money spent without wasting more money getting into unnecessary details. Back in the 70s inflation was a major issue. Set price contracts simply wouldn’t work without some accounting for inflation over time so a clause correcting for inflation became the norm for most large contracts.

    If the contract was for $100 and there was 5% inflation allowance for the time period you get paid $105. The problem surfaces when the additional money has to be chased down. If you are producing a tool kit with a several dozen small parts and you have to account for that $5. You could simple increase the cost of each item 5% and the accounting would shake out but this was the day punch cards and manual input. Changing the cost on even a few dozen items could be a days work. Several days if there is an error. Much simpler, and safer in the system to simply tack $5 onto one item.

    How you get to that $600 hammer becomes obvious if you understand that that hammer is part of a $15,000 (1972 dollars) tool kit with several thousand individual pieces. The price of the tool kit went up due to inflation and to make the accounting work out they added the amount to a single piece instead of painstakingly repricing every piece separately.

    Yes, there are, some particularly egregious, cases of waste, fraud and abuse our there. But, as with most things, it is complicated and many of the cases cited as clear-cut abuse are simply the result of honest people working within a complicated system. The devil is in the details and you have to understand the complete story before judgment can be rendered.

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