Vincent Li, Class of 2022
While we may frequently find ourselves stuck between a rock and a hard place when dealing with school, work, or family, these conflicts always come to pass. But for an increasing number of Americans, their definition of a rock and a hard place vastly differ. For them, their two options sum up to two horrific choices: depleting life savings and amassing a massive debt, or dying.
A recent research paper titled “Death or Debt” by pharmaceutical sciences PhD Adrienne Gilligan and her contemporaries investigates the effect that continued oncological treatment has on a person’s finances. According to the study published in The American Journal of Medicine, of the “9.5 million estimated new diagnoses of cancer… 42.4% [were] depleted of their life assets” two years into the treatment while “financial insolvency extended to 38.2%” at the four year mark (Gilligan et al., 2018).
According to Gilligan’s paper, the average incurred costs totaled over $90,000, which excludes the necessary costs to cover any further recurrences of cancer in the future and the income lost while undergoing treatment (Gilligan, 2018). Though cancer is no longer the death sentence many portrayed it to be in the past due to medical inadequacies, the emerging killers are now financial in nature. But why do these horror stories of debt-inducing healthcare only pop up in the States? Unlike 32 other developed nations, we do not employ a system of universal healthcare that essentially serves the function of Medicare, but for all citizens (“Foreign Countries”). The steep price Americans must pay for the sake of their health raises an issue that reappears in healthcare politics incessantly: why is our healthcare so expensive and why not adopt a single-payer system?
The United States spends, on average, over $10,000 on healthcare per capita, or more than double what other developed nations like the United Kingdom and Canada pay—both under $5,000 (Sawyer & Cox, 2018). So, where exactly do the funds that contribute to this discrepancy go? In short, that money falls into one of a few categories: administrative costs and a higher cost of services resulting from a lack of price caps (Frank, 2017).
Not only are our total healthcare costs number one in the world, but so are our administrative costs. According to a New York Times article, though many administrative functions are necessary, like “processing bills and payments”, we also end up diverting a large percentage of our resources in determining whether to accept or decline a claim or enforcing enrollment, all consequences of not having a single organized system under the government (Frakt, 2018). To accomodate for the extra workload under our current system, “for every 10 physicians, there are nearly 7 full time, non-clinical employees” whose workload primarily pertains to the aforementioned work (Sakowski et al., 2009). Still, the most abhorrent comparison remains the cost of care, which stems from the fact that we disallow the government to negotiate prices and set price caps on expenditures like pharmaceuticals, surgical procedures, and specialized care. As reported by the International Federation of Health Plans in 2015, compared to countries with universal public healthcare like Australia, the cost of an angioplasty, for example, increases by 183% if performed in the United States (as cited in Kamal & Cox, 2018).
Again, why not a single-payer healthcare system if it works in so many other countries and ostensibly reduces the costs of administrative work and what we pay for medical care? The reason why universal healthcare is infeasible in the United States is because we fear a government function as overbearing as national healthcare and are unwilling to impose profit caps on the industries that are relevant to providing care.
A great deal of fear regarding a socialized form of healthcare stems from the shortcomings of the Affordable Care Act (ACA), more commonly referred to as Obamacare. For many Americans, this is the closest and most familiar they are with the concept of “universal healthcare.” According to the Kaiser Family Foundation, a great deal of opposition to the ACA is due to the mandatory health insurance requirement and the belief that the ACA is responsible for issues entirely irrelevant to its reach--namely blaming health insurance for leading to increased prices in other industries (Rovner, 2017).
As a quick aside, here’s a summary of how health insurance works. As consumers, we are referred to as sponsors who purchase some sort plan. These health insurance plans typically have various perks, such as dictating what doctors and hospitals may cover you, as well as the amount you pay for coverage. This payment is made primarily through a monthly fee known as a premium. Under these plans, consumers pay a certain amount per visit, known as a copayment, as well as a deductible, which is the portion of medical bills that you must pay prior to any insurance contribution is made (“Understanding Health Insurance”). Different plans will require different thresholds on the amount you must pay in your deductible before costs are beginning to be paid by insurance companies.
Now, here’s the thing. Health insurance profits are capped under Obamacare (“Medical Loss Ratio”). Most of their spendings are in paying off claims. In fact, their margins rank along the lower end of the spectrum when considering pharmaceutical companies, private hospitals, and medical technology producers. According to the Altarum Institute in 2017, the rise in pharmaceutical prices, as epitomized by the entire Martin Shkreli debacle, is driven by the companies that have the patents for those drugs (as cited in “High & Rising Drug Prices”). For example, the quarterly profit margin on Pfizer, the largest pharmaceutical company in the United States, has averaged about 30% each quarter in 2018 thus far, following a high peak of 89.57% in December of 2017 (YCharts, 2018). Versus the single digit percentage profit margins that insurance companies make, it is no surprise that our premiums are rising. If the cost of care is inflated by the medication you need, or the cost of medical devices being produced, premiums have to rise to match them. Otherwise, insurance companies will be unable to provide coverage and pay for the rest of your medical expenses under whatever plan you have.
It is an impossibility to have universal healthcare be affordable and viable without prolonging wait times and compromising quality if we continue to allow these industries to run unchecked. Americans don’t want the government to have the ability to regulate these prices for fear of overextending their powers beyond the scope of healthcare. The issue is that prices are being driven up even with “competition” in certain sectors of healthcare.
So no profit and price caps, no go. This is especially relevant given how the recent Proposition 8 in California that would have allowed only a 115% profit cap on dialysis centers failed to pass. Opposition lobbying had over $100 million in funding, $60 million directly from the largest dialysis company in California, DaVita Kidney Care. In passing the proposition, dialysis centers would have to refund any revenue “above 115 percent of the costs of (a) direct patient care, such as wages and benefits of non-managerial clinic staff who furnish direct care to patients, pharmaceuticals, medical supplies, and (b) healthcare improvements, such as staff training and patient education and counseling” (“California Proposition 8,” 2018).. The entire point of the 115% cap on revenue wasn’t to lead to the dilapidation and subsequent closing of dialysis centers across California. The entire point was to limit the price of dialysis that patients would have to pay and to redirect funds back into the maintenance of the facilities, technology, and workers’ salaries. This is the same for all forms of profit caps; they are meant to prohibit companies from driving up prices in an exorbitant manner and to spend more revenue in improving their services.
Ultimately, universal healthcare is a heavily contended topic that most likely will not see the light of day in the United States any time soon. Still, the first step towards accomplishing something that will placate all sides is the enforce profit caps. Furthermore, there is merit in providing a baseline for the medical treatment universally available to Americans, all the while still requiring insurance for more specialist-intensive needs. This would obviate a great deal of preventable illnesses and still keep costs down. There is already an established precedent as seen in the health insurance industry, and frankly speaking, the upward trend of per capita spending on healthcare by Americans is something that needs to be addressed sooner rather than later.
References
A recent research paper titled “Death or Debt” by pharmaceutical sciences PhD Adrienne Gilligan and her contemporaries investigates the effect that continued oncological treatment has on a person’s finances. According to the study published in The American Journal of Medicine, of the “9.5 million estimated new diagnoses of cancer… 42.4% [were] depleted of their life assets” two years into the treatment while “financial insolvency extended to 38.2%” at the four year mark (Gilligan et al., 2018).
According to Gilligan’s paper, the average incurred costs totaled over $90,000, which excludes the necessary costs to cover any further recurrences of cancer in the future and the income lost while undergoing treatment (Gilligan, 2018). Though cancer is no longer the death sentence many portrayed it to be in the past due to medical inadequacies, the emerging killers are now financial in nature. But why do these horror stories of debt-inducing healthcare only pop up in the States? Unlike 32 other developed nations, we do not employ a system of universal healthcare that essentially serves the function of Medicare, but for all citizens (“Foreign Countries”). The steep price Americans must pay for the sake of their health raises an issue that reappears in healthcare politics incessantly: why is our healthcare so expensive and why not adopt a single-payer system?
The United States spends, on average, over $10,000 on healthcare per capita, or more than double what other developed nations like the United Kingdom and Canada pay—both under $5,000 (Sawyer & Cox, 2018). So, where exactly do the funds that contribute to this discrepancy go? In short, that money falls into one of a few categories: administrative costs and a higher cost of services resulting from a lack of price caps (Frank, 2017).
Not only are our total healthcare costs number one in the world, but so are our administrative costs. According to a New York Times article, though many administrative functions are necessary, like “processing bills and payments”, we also end up diverting a large percentage of our resources in determining whether to accept or decline a claim or enforcing enrollment, all consequences of not having a single organized system under the government (Frakt, 2018). To accomodate for the extra workload under our current system, “for every 10 physicians, there are nearly 7 full time, non-clinical employees” whose workload primarily pertains to the aforementioned work (Sakowski et al., 2009). Still, the most abhorrent comparison remains the cost of care, which stems from the fact that we disallow the government to negotiate prices and set price caps on expenditures like pharmaceuticals, surgical procedures, and specialized care. As reported by the International Federation of Health Plans in 2015, compared to countries with universal public healthcare like Australia, the cost of an angioplasty, for example, increases by 183% if performed in the United States (as cited in Kamal & Cox, 2018).
Again, why not a single-payer healthcare system if it works in so many other countries and ostensibly reduces the costs of administrative work and what we pay for medical care? The reason why universal healthcare is infeasible in the United States is because we fear a government function as overbearing as national healthcare and are unwilling to impose profit caps on the industries that are relevant to providing care.
A great deal of fear regarding a socialized form of healthcare stems from the shortcomings of the Affordable Care Act (ACA), more commonly referred to as Obamacare. For many Americans, this is the closest and most familiar they are with the concept of “universal healthcare.” According to the Kaiser Family Foundation, a great deal of opposition to the ACA is due to the mandatory health insurance requirement and the belief that the ACA is responsible for issues entirely irrelevant to its reach--namely blaming health insurance for leading to increased prices in other industries (Rovner, 2017).
As a quick aside, here’s a summary of how health insurance works. As consumers, we are referred to as sponsors who purchase some sort plan. These health insurance plans typically have various perks, such as dictating what doctors and hospitals may cover you, as well as the amount you pay for coverage. This payment is made primarily through a monthly fee known as a premium. Under these plans, consumers pay a certain amount per visit, known as a copayment, as well as a deductible, which is the portion of medical bills that you must pay prior to any insurance contribution is made (“Understanding Health Insurance”). Different plans will require different thresholds on the amount you must pay in your deductible before costs are beginning to be paid by insurance companies.
Now, here’s the thing. Health insurance profits are capped under Obamacare (“Medical Loss Ratio”). Most of their spendings are in paying off claims. In fact, their margins rank along the lower end of the spectrum when considering pharmaceutical companies, private hospitals, and medical technology producers. According to the Altarum Institute in 2017, the rise in pharmaceutical prices, as epitomized by the entire Martin Shkreli debacle, is driven by the companies that have the patents for those drugs (as cited in “High & Rising Drug Prices”). For example, the quarterly profit margin on Pfizer, the largest pharmaceutical company in the United States, has averaged about 30% each quarter in 2018 thus far, following a high peak of 89.57% in December of 2017 (YCharts, 2018). Versus the single digit percentage profit margins that insurance companies make, it is no surprise that our premiums are rising. If the cost of care is inflated by the medication you need, or the cost of medical devices being produced, premiums have to rise to match them. Otherwise, insurance companies will be unable to provide coverage and pay for the rest of your medical expenses under whatever plan you have.
It is an impossibility to have universal healthcare be affordable and viable without prolonging wait times and compromising quality if we continue to allow these industries to run unchecked. Americans don’t want the government to have the ability to regulate these prices for fear of overextending their powers beyond the scope of healthcare. The issue is that prices are being driven up even with “competition” in certain sectors of healthcare.
So no profit and price caps, no go. This is especially relevant given how the recent Proposition 8 in California that would have allowed only a 115% profit cap on dialysis centers failed to pass. Opposition lobbying had over $100 million in funding, $60 million directly from the largest dialysis company in California, DaVita Kidney Care. In passing the proposition, dialysis centers would have to refund any revenue “above 115 percent of the costs of (a) direct patient care, such as wages and benefits of non-managerial clinic staff who furnish direct care to patients, pharmaceuticals, medical supplies, and (b) healthcare improvements, such as staff training and patient education and counseling” (“California Proposition 8,” 2018).. The entire point of the 115% cap on revenue wasn’t to lead to the dilapidation and subsequent closing of dialysis centers across California. The entire point was to limit the price of dialysis that patients would have to pay and to redirect funds back into the maintenance of the facilities, technology, and workers’ salaries. This is the same for all forms of profit caps; they are meant to prohibit companies from driving up prices in an exorbitant manner and to spend more revenue in improving their services.
Ultimately, universal healthcare is a heavily contended topic that most likely will not see the light of day in the United States any time soon. Still, the first step towards accomplishing something that will placate all sides is the enforce profit caps. Furthermore, there is merit in providing a baseline for the medical treatment universally available to Americans, all the while still requiring insurance for more specialist-intensive needs. This would obviate a great deal of preventable illnesses and still keep costs down. There is already an established precedent as seen in the health insurance industry, and frankly speaking, the upward trend of per capita spending on healthcare by Americans is something that needs to be addressed sooner rather than later.
References
- Blue and Silver Stetoscope. (n.d.). Retrieved from https://www.pexels.com/photo/blue-and-silver-stetoscope-40568/
- California Proposition 8, Limits on Dialysis Clinics' Revenue and Required Refunds Initiative (2018). (n.d.). Retrieved from https://ballotpedia.org/California_Proposition_8,_Limits_on_Dialysis_Clinics'_Revenue_and_Required_Refunds_Initiative_(2018)
- Department of Health. (n.d.). Retrieved from https://www.health.ny.gov/regulations/hcra/univ_hlth_care.htm
- Frakt, A. (2018, July 16). The Astonishingly High Administrative Costs of U.S. Health Care. Retrieved from https://www.nytimes.com/2018/07/16/upshot/costs-health-care-us.html
- Frank, R. H. (2017, July 07). Why Single-Payer Health Care Saves Money. Retrieved from https://www.nytimes.com/2017/07/07/upshot/why-single-payer-health-care-saves-money.html
- Gilligan, A. M., PhD, Alberts, D. S., MD, Roe, D. J., DrPH, & Skrepnek, G. H., PhD. (2018). Death or Debt? National Estimates of Financial Toxicity in Persons with Newly-Diagnosed Cancer. The American Journal of Medicine,131(10), 1187 - 1199.e5. doi:https://doi.org/10.1016/j.amjmed.2018.05.020
- High & Rising Drug Prices: Myth vs. Fact | AHA. (n.d.). Retrieved from https://www.aha.org/2017-12-11-high-rising-drug-prices-myth-vs-fact
- How do healthcare prices and use in the U.S. compare to other countries? (n.d.). Retrieved from https://www.healthsystemtracker.org/chart-collection/how-do-healthcare-prices-and-use-in-the-u-s-compare-to-other-countries/#item-the-average-price-of-an-angioplasty-or-bypass-in-the-u-s-is-higher-than-in-comparable-countries
- How does health spending in the U.S. compare to other countries? (n.d.). Retrieved from https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#item-average-wealthy-countries-spend-half-much-per-person-health-u-s-spends
- Medical Loss Ratio. (2018, July 24). Retrieved from https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Medical-Loss-Ratio.html
- Peering Into The Black Box: Billing And Insurance Activities In A Medical Group. (n.d.). Retrieved from https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.28.4.w544
- Pfizer Inc Profit Margin (Quarterly):. (n.d.). Retrieved from https://ycharts.com/companies/PFE/profit_margin
- Rovner, J. (2017, December 13). Why Do People Hate Obamacare, Anyway? Retrieved from https://khn.org/news/why-do-people-hate-obamacare-anyway/
- Understanding Health Insurance Costs: Premiums, Deductibles & More. (n.d.). Retrieved from https://www.medmutual.com/For-Individuals-and-Families/Health-Insurance-Education/Health-Insurance-Basics/Understanding-Costs.aspx
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