Put simply, American health care costs so much because it is poor quality care and it is inefficiently administered. Poor quality care comes in three general categories: a) delivering clinically inappropriate care; b) preventable injury to patients while hospitalized; and c) failing to deliver known clinically effective care. Taken together, these various kinds of poor quality care cost more than $700 billion per year. American health care financing, largely delivered through private health insurers, is inefficiently administered relative to other first world countries. Excess administrative costs in the US health care system are approximately $400 billion per year. In summary, with health system reform that improves quality and efficiency, Americans could save $1 trillion per year.
Question: Where does all the money come from that is spent on healthcare in America?
Answer: Almost two thirds of the more than $3 trillion spent annually on health care in the US comes from taxpayers.
Americans pay higher health care taxes than do the citizens of any other country. These taxes support all kinds of federal, state, and local governmental healthcare programs like Medicare (federal program for the elderly), Medicaid (state/federal program for the poor), CHIP (state/federal program for children); VA (federal program for military veterans), IHS (federal program for Native Americans), and many many many other federal programs and a few state programs.
All government employees have health care benefits paid for by the taxpayers. And tax credits are given to large employers who provide a health benefit to their employees.
It is a painful irony that tens of millions of American taxpayers, who pay the world’s highest health care taxes, find themselves without health care financing when they need it, or with inadequate health care financing leaving them vulnerable to bankruptcy even if they have ‘coverage’.
The most common cause of personal bankruptcy in the United States is the cost of health care after illness or injury.
In no other first world country are citizens bankrupted by the care they need to treat illness or injury.
Question: Americans spend more on health care, isn’t that because Americans have the world’s best (highest quality) health care?
Answer: Well, no, not really. In fact, the best measure for health care system productivity (or quality) that I have been able to find is international comparisons on reducing death which is amenable (or preventable) to health system interventions. Some deaths are not preventable even if the best possible health care were consistently available across an entire population. For instance, death in the very aged population will not be amenable to health system interventions; old people will simply die at some point no matter how much health care is applied. So, if you study deaths in a population that good quality health care could prevent, and compare those rates across all first world nations, you will find that Americans are least likely in the first world to prevent death which should be amenable to high quality health care. We pay the most for health care by far, but our health care system is least able to do the job that medical care is supposed to handle.
See below for a more nuanced answer recently published in the NY Times.
Why do I believe that Obamacare was and is a failure?
1) health system reform is not (or should not be) about ‘coverage’ (i.e., finding ways to buy insurance for more people). People do not need insurance, they need high quality, and therefore lower cost, health care. Obamacare is a federal law which forces people to buy health insurance, whether they can afford it or not. And allows states to bring more people onto the Medicaid program (government health financing for the less well off).
2) Obamacare provided lip service only to the reforms that are really needed to reduce the waste and inefficiency of the American way of doing health care business. The health insurance business model causes $400 billion/year in inefficiency waste. American health care delivery is decidedly poor quality because of inappropriate care, patient injury, and failing to do best practice care, leading to a cost for quality waste of about $700 billion/year.
3) Obamacare reinforces the principle mistake of American health care business as usual, which is the idea that market forces can be harnessed to improve health care delivery. Thus, Obamacare makes the cost problem worse, which is the principle driver of the problem of no health financing for millions of Americans.
For these and other reasons, Obamacare began as a failure and continues to fail.
Bernie Sanders: Will Trump have the guts to stand up to drug companies?
Opinions
Bernie Sanders, an independent, represents Vermont in the U.S. Senate.
President Trump and other Republicans have talked about the greed of the pharmaceutical industry. Recently, Trump said (rightly) that Big Pharma is “getting away with murder.” But talk is cheap. The question is: Will Republicans really have the guts to join me and many of my colleagues in standing up to the drug companies to fight for American consumers and end the disgrace of having our country pay by far the highest prescription drug prices in the world? If Trump believes what he has said about the industry, he will rally his party to help save American lives. Here’s why.
The five largest drug manufacturers made more than $50 billion in profits in 2015. Meanwhile, nearly 1 out of 5 Americans could not afford the medicine they were prescribed. The result: Millions of Americans became sicker, and some ended up in emergency rooms at great cost. Others unnecessarily lost their lives.
It is beyond comprehension that while Americans are suffering and dying because they cannot afford the medications they need, the 10 highest-paid chief executives in the pharmaceutical industry collectively made $327 million in 2015. These executives get richer while Americans die. That’s not acceptable.
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The root of this problem is that we are the only major country not to negotiate drug prices with the pharmaceutical industry. You can walk into a pharmacy today and the price could be double or even triple what you paid for the same medicine a year ago, and there are no legal barriers in place to stop these arbitrary increases. Pharmaceutical corporations can raise prices as high as the market allows. If people die, it is not their concern. If people get sicker, it is not a problem for them.
Yet, 50 miles from my home in Vermont, the same medications manufactured by the same companies in the same factories are available for a fraction of the price. A 90-day supply of Januvia, which treats diabetes, is $505 in the United States but $204 across the northern border. A 90-day supply of Advair, used in asthma inhalers, costs about $222 in Canada and approximately $464 in the United States. A year’s supply of one of the most important treatments for advanced prostate cancer, Xtandi, is sold for about $30,000 in Canada. Patients here pay about $130,000.
Outrageously, our government, and therefore U.S. taxpayers, paid for research that led to Xtandi’s discovery.
This state of affairs is unacceptable. Until recently, Trump agreed. Yet after one meeting with pharmaceutical lobbyists, the president started reversing course. Instead of negotiating drug prices down, he talked about cutting taxes for drug companies that already make billions on the backs of American consumers.
Again, this cannot continue. That is why I am introducing legislation to end this insanity, allowing Americans to buy the same drugs they receive now, but from Canada, at far lower prices.
The drug companies, with nearly 1,400 D.C. lobbyists and enormous amounts for campaign contributions, will fight back. Recipients of their contributions in Congress will tell us that allowing the importation of prescription drugs would compromise the safety of Americans. This is absurd: We can eat fish and vegetables from all over the world but somehow cannot import brand-name prescription drugs, manufactured by some of the largest companies in the world, from an advanced country such as Canada? It’s nonsense.
But you don’t have to take it from me: Members of the pharmaceutical industry say the exact same thing. Peter Rost, a former vice president of Pfizer, said in 2004 that it was “outright derogatory to claim that Americans would not be able to handle reimportation of drugs, when the rest of the educated world can do this.”
Furthermore, the United States already imports roughly 80 percent of the key ingredients in its medicines from other countries, including developing countries such as India and China. According to Kaiser Health, 19 million Americans have bought cheaper prescription drugs from other countries. To afford their vital medications, they shop online, sometimes from pharmacies that haven’t been properly regulated. Our bill will in fact improve safety by ensuring that only prescription drugs sold by Food and Drug Administration-certified foreign sellers, such as pharmacies regulated by Canada’s health system, will be permitted to be imported, protecting Americans from the snake oil some are buying right now.
The bill will also deal with the most critical safety issue: Drugs don’t work at all if patients can’t afford them.
Drug companies won’t surrender the billions in profits they receive from U.S. consumers easily. The pharmaceutical industry is one of the most powerful political forces in this country. Drug companies have spent more than $3 billion lobbying since 1998 and have many members of Congress defending their interests; during the 2016 election alone, the industry made more than $58 million in political contributions.
So we will need to fight together to get Americans the medications they need at prices they can afford. If the president meant what he said during the campaign, he will join me in this fight. It can’t wait any longer.
Today, after a meeting with pharmaceutical industry
lobbyists and executives, he abandoned that pledge, referring to an idea
he supported as recently as three weeks ago as a form of “price fixing”
that would hurt “smaller, younger companies.” Instead of getting tough,
Trump’s new plan is that he’s “going to be lowering taxes” and “getting
rid of regulations.”
New drugs are generally covered by patent monopolies, so
drug companies have a lot of pricing power; other companies can’t
produce the same drug without paying royalties, so there’s little
competition. But most countries use their nationalized health care
systems to negotiate a good deal on drug prices. Manufacturing pills is
cheap, so it’s usually still profitable for a company to sell medicine
at a pretty steep discount.
The United States doesn’t have a nationalized health care
system, but we do have Medicare for senior citizens, and since the USA
is a very large country, that’s still a huge potential bulk purchaser.
But a 2003 law written by congressional Republicans and signed by George
W. Bush prohibits the federal government from using that negotiating
power.
As recently as January 11, President-elect Trump was promising to revisit this policy.
“Pharma has a lot of lobbies, a lot of lobbyists and a lot of power. And there’s very little bidding on drugs,” he said at a press conference at Trump Tower in Manhattan. “We’re the largest buyer of drugs in the world, and yet we don’t bid properly.”
Today he apparently changed his mind. According to Herb Jackson, the designated pool reporter for the day, Trump’s new policy on prescription drugs is that drug companies should get tax cuts and deregulation (emphasis added):
I'll oppose anything that makes it harder for
smaller, younger companies to take the risk of bringing their product to
a vibrantly competitive market.That includes price-fixing by the biggest dog in the market, Medicare, which is what's happening. But we can increase competition and bidding wars, big time.
So what I want, we have to get lower prices, we have to
get even better innovation and I want you to move your companies back
into the United States. And I want you to manufacture in the United
States. We're going to be lowering taxes, we're going to be getting rid of regulations that are unnecessary.
Many people watching the chaotic rollout of Trump’s executive orders on immigration,
his demands for investigations into phantom vote rigging, his
mysterious ties to Russia, his financial conflicts of interest, and his
bizarre lies about Inauguration Day crowd size have found themselves
wondering why more Republicans don’t stand up to him.
This event with PhRMA lobbyists explains why. On most of
the big public policy issues of the day, Trump is a very conventional
Republican. And on those issues where he hasn’t been conventional,
Republican Congress members and business executives feel confident they
can turn him around. On some issues, they probably won’t. But on this
issue, it seems like they did.
