nonprofit hospital health care pharmaceuticals

Bitter Pill
outrageous bills medicine

Why Medical Bills Are Killing Us

Medicine has become a huge business. How did that happen? Where’s all that money coming from? And where is it going? Analyzing bills from hospitals, doctors, drug companies, and every other player in the American health care ecosystem tells us. We excerpt this 2013 article from Time, Feb 20.

by Steven Brill

In the U.S., people spend almost 20% of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.

When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?

What are the reasons, good or bad, that cancer means a half-million- or million-dollar tab? Why should a trip to the emergency room for chest pains that turn out to be indigestion bring a bill that can exceed the cost of a semester of college? What makes a single dose of even the most wonderful wonder drug cost thousands of dollars? Why does simple lab work done during a few days in a hospital cost more than a car? And what is so different about the medical ecosystem that causes technology advances to drive bills up instead of down?

It's a uniquely American gold rush for those who provide everything from wonder drugs to canes to high-tech implants to CT scans to hospital bill-coding and collection services. In hundreds of small and midsize cities across the country — from Stamford, Conn., to Marlton, N.J., to Oklahoma City — the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives. And in our largest cities, the system offers lavish paychecks even to midlevel hospital managers, like the 14 administrators at New York City’s Memorial Sloan-Kettering Cancer Center who are paid over $500,000 a year, including six who make over $1 million.

Although it is officially a nonprofit unit of the University of Texas, MD Anderson's operating profit for the fiscal year 2010 was $531 million. That’s a profit margin of 26% on revenue of $2.05 billion.

The president of MD Anderson was paid last year $1,845,000. That does not count outside earnings derived from a much publicized waiver he received from the university that, according to the Houston Chronicle, allows him to maintain unspecified “financial ties with his three principal pharmaceutical companies.”

DePinho’s salary is nearly two and a half times the $750,000 paid to Francisco Cigarroa, the chancellor of entire University of Texas system, of which MD Anderson is a part. This pay structure is emblematic of American medical economics and is reflected on campuses across the U.S., where the president of a hospital or hospital system associated with a university — whether it’s Texas, Stanford, Duke or Yale — is invariably paid much more than the person in charge of the university.

America’s largest city may be commonly thought of as the world’s financial-services capital, but of New York’s 18 largest private employers, eight are hospitals and four are banks. Houston’s top 10 employers, five are hospitals, including MD Anderson with 19,000 employees; three, led by ExxonMobil with 14,000 employees, are energy companies.

The pharmaceutical and health-care-product industries, combined with organizations representing doctors, hospitals, nursing homes, health services and HMOs, have spent $5.36 billion since 1998 on lobbying in Washington. That dwarfs the $1.53 billion spent by the weapons industries and the $1.3 billion spent by oil and gas interests over the same period.

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JJS: If you want prices to be fair for both buyer and seller, you must have competition and you must not have privilege. That means, you must get government out of medicine. Don’t have government license doctors or grant patents to pill-pushers or let courts be abused by frivolous suits. Instead, have government enforce truth in advertising and have doctors advertise their results -- cured x%, killed y%, no change with z%. Let drug companies make money not from monopoly but by being first, honest, and effective. When they’re negligent, throw top managers in jail.

These reforms would lower costs so much, people would not feel the need to spread them out via insurance. Yet catastrophes would still occur and somebody would have to pay for them. Covering those costs might best be left to charities like the Red Cross. Otherwise, if you mandate insurance or provide it collectively, you reopen the Pandora’s box of greed and corruption.

Besides, once people get their Citizens Dividend from recovered rents, they’ll have more discretionary income, and once people no longer pay taxes but just pay land dues, again they’ll have more purchasing power. Plus, without the stress of economic insecurity and overwork wrecking people's immune systems, they’ll be much, much healthier and have the leisure to enjoy life. Maybe even big-time medical people would become less materialistic.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

How doctors can reduce medical errors, lawsuits

Common Sense Vs. Food & Health

As Recorded By a Nurse

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