Our Enduring Health Tragedy Is Its Cost

It is no exaggeration to say that health care has never occupied such a central place in our minds. COVID-19 is taking record numbers of lives in the U.S. even as remarkable progress is being achieved on promising vaccines that could provide herd immunity, assuming enough people take them.

Beyond trying to control this devastating disease, the future of the Affordable Care Act – and continued health insurance for 20 million people – is now before the U.S. Supreme Court. Health reform is also back on the front burner. President Biden is expanding access to care and insurance through executive orders, most notably boosting the Affordable Care Act.

Lost in this flurry of Defcon 1 health emergencies is the ongoing damage being done to our economy and wallets by health costs that are twice as large in the U.S. per person as in other developed nations.

Even as the economy tanked earlier this year, health spending soldiered on. Total spending for the year may dip because of drops in routine care, preventive screenings, and elective surgeries. But the decline could be as little as half a percent.

“We have never seen a year in which health spending actually goes down,” commented Drew Altman, head of the Kaiser Family Foundation. “It may be a long time before we see a reduction in health spending like this again.”

Once the pandemic is under control, we will still be saddled with a national health care bill of more than $3.8 trillion. Imagine what we could do with half of that money — an extra $1.9 trillion each and every year — either keeping it in our own pockets or using it to address climate change, aging infrastructure needs, or a host of other needs.

Wishing we could save health dollars won’t make it happen, of course. Enacting even the most comprehensive single-payer health reform proposal would lower per-capita costs but the national price tag for universal insurance could be staggering. Not that it has a glimmer of being approved by Congress.

Beyond policy issues, a lot of those $3.8 trillion dollars wind up as the salaries of nurses, doctors, and other health care workers. Who would want to reduce their paychecks these days, if ever? They are the heroic human faces of health care. But they also are part of an entrenched network of highly profitable and often uncompetitive health care giants – insurance, drug, equipment, hospital, and physician companies.

Teamed with powerful Washington lobbyists, they have mastered the art of picking our pockets. They have been far more effective at this, it should be noted, than in providing broader public access to quality health care. Analyses by the Organisation for Economic Co-operation and Development (OECD) regularly place the U.S. in the bottom third of important health outcomes among developed nations.

The beauty of the health industry’s work is that it has left very few fingerprints. In 1970, consumers directly paid 34 percent of national health expenses out of their own pockets, according to an analysis from the Peterson-KFF Health System Tracker.

By 2018, people were paying only 10 percent of health expenses directly. Over the same period, the share of national spending shifted to private and public health insurance plans rose to 75 percent from 43 percent.

Shifting health spending away from consumers has had multiple and mostly bad consequences. Consumers no longer pay their own health bills and have little if any idea what providers charge for health services or whether such charges bear any resemblance to underlying costs. Why should they even care, given that these costs have little bearing on their own out-of-pocket spending?

This disconnect also causes people to use more health care than they need, often stimulated by commercial health advertising unique to the planet. Private enterprise is supposed to bring competition, lower prices, and improved quality. It fails on all three counts in health care.

With insurers and Uncle Sam legally responsible for paying covered services, health care companies have little reason to favor quality of care over quantity. More care, whether clinically appropriate or not, translates into higher profits for shareholders.

Health reform proposals, which will face high hurdles in Washington, largely deal with expanding coverage and not lowering prices. Even aggressive proposals to cut drug prices would barely move the needle on total health costs.

If the excesses wrought by our health oligopolies are one facet of how capitalism works, these inefficiencies also are giving rise to another: disruptive new health companies. There is so much money and waste in U.S. health care that new entrants are drawn to the industry like bees to honey, seeing the chance to deliver better and lower-cost health solutions and still make enormous profits.

Walmart, CVS, Amazon, Apple, Google, and others are building large, consumer-facing health businesses that provide convenience and lower prices, often accompanied by publicly posted price lists. Over time, demand for health care will shift to these lower-cost providers.

But make no mistake. We’ve lost the larger war on health costs and are settling instead for endless skirmishes seeking only cost containment. Victory will be declared when health inflation is comparable to overall price increases in the economy. Huzzah.