Why Does Healthcare Cost So Much in the United States?

Different costs for the same procedure in 2009. Figures from the OECD.

Staying healthy in the United States is expensive. In fact, in 2009, the average annual cost of health care was $7,960 per person — two and a half times what it was in Japan for the same year.

That’s just one of the numbers that were pored over in the new report out by the Organization for Economic Cooperation and Development, which compared health care costs across all 34 of its members. The report illustrates significant variation between costs in different countries.

But there were also some commonalities. Health spending has grown more quickly than GDP in the last decade in all of the member countries, except in Luxembourg.

And, Health at a Glance 2011 shows that obesity rates have doubled or even tripled in many countries since 1980. In more than half of OECD countries, 50 percent or more of the population is now overweight, if not obese. The obesity rate in the adult population is highest in the United States — rising from 15 percent in 1980 to 34 percent in 2008 — and lowest in Japan and South Korea, at 4 percent.

Graphic courtesy: OECD

The differences in cost of health care aren’t anything new. Frontline produced a documentary on the subject, “Sick Around the World” in 2008, which you can view here.

So what are some of the reasons that health care costs more in the United States? Are we healthier because of it?

PBS Newshour posed a few of these key questions to Matthias Rumpf from the OECD earlier this week. Answers were edited for space and clarity.

NEWSHOUR: From an international perspective, why are health care costs in the United States so much higher than any other OECD country?

MATTHIAS: High spending by the U.S. on health must either be because the price of healthcare is higher than in other countries, or else because it provides more health activities than other countries, or a combination of the two. Evidence suggests that both factors are important, but particularly prices. The same set of hospital interventions (including the normal delivery of a baby, a Caesarean section, a hip or knee replacement, etc.) cost 60 percent more in the United States than in a selection of other countries. Similarly, 50 high-selling pharmaceuticals cost 60 percent more in the United States than in Europe. But the United States also uses a lot of expensive diagnostic tests, such as MRI and CT scans, and performs a lot of interventions where it is not always clear-cut whether the procedure is necessary or not — tonsillectomies, knee replacements, and so on. On the other hand, perhaps surprisingly, the U.S. does not have many doctors relative to its population, not many hospital beds, and people do not spend long in hospital when they have to be admitted. Overall, therefore, high prices are the main reason for high health care spending in the United States.

NEWSHOUR: In which areas is the U.S. particularly lacking?

MATTHIAS: The primary care system — the network of family doctors and clinics that people can go to when they first think they have a health problem, and that can advise people on how to stay healthy — is underdeveloped in the United States. This is bad for people’s health, but also raises overall costs. For example, most people with diabetes, asthma or difficulties in breathing (COPD) should not need to be treated in hospital. They require monitoring, but this does not need to happen in hospitals, it is something that the primary care system should manage. It is far cheaper for a family doctor to check that people are following their treatment properly and that it is appropriate, than for things to go wrong and someone to be admitted to hospital as an emergency. Greater attention to the primary care system is urgently needed in the United States.

NEWSHOUR: Does the U.S. provide too much health care?

MATTHIAS: It is almost impossible to say this definitively. Only a physician can really judge the needs of his patients. However, there are reasons to be concerned. The number of tonsillectomies, knee replacements, hip replacements, coronary grafts, Caesarian sections, MRI and CT diagnostic tests and several other areas are much higher in the United States than in most other countries. These are procedures where it is not always definite that they should take place — it is up to the physician and the patient to decide what is best. In countries where there is a greater stress on controlling costs, and different tort law rules, there are fewer such interventions. It is probable that the medical culture in the United States is more likely to ‘do something’ than in other countries — yet overall health outcomes are not better in the United States.

NEWSHOUR: How do Americans compare with other nations in terms of general health?

MATTHIAS: The United States has the highest proportion of adults — 90 percent — reporting that they are in good health, far above the OECD average of 69 percent.

Yet, life expectancy is lower than the OECD average, at 78.2 years compared to 79.5, in 2009. This is despite the United States being a rich country and spending so much on health care. It also has a large rate of premature mortality — people dying before the age of 70 – at 50 percent higher than the OECD average for females, and 30 percent higher for males. Not all of this is due to the healthcare system of course. For instance, there is not much that the health care system can do to prevent deaths from traffic accidents or homicides.

In the United States as in other countries, there are important disparities in health status across different population groups, defined by race or by socioeconomic status. For example, the life expectancy at age 25 for people with the lowest level of education compared with the highest level of education in the United States is 11-16 years less for men and 10-12 less for women. A range of interventions, including some related to the health care system and other broader measures of population health and prevention, are needed to reduce these disparities.

Infant mortality is another indicator that has traditionally been used to gauge both the performance of the health care system and broader socioeconomic factors. Rates are generally low in OECD countries. However the U.S. rate, at 6.5 deaths per 1000 live births, is well above the OECD average of 4.4.

NEWSHOUR: Has the U.S. always been more expensive in terms of health care? If not, when did things start changing?

MATTHIAS: Health expenditure as a share of GDP in the U.S. has always been higher than the OECD average, but the gap has widened a lot in recent decades. Some countries have had similar shares in the past — Canada in the 1960s — but since 1970, the U.S. has outstripped all other high-income OECD countries, with a five-fold increase in health spending per capita in real terms. Health expenditure as a share of GDP was 40 percent higher than the OECD average in 1970. It is now 80 percent higher.

NEWSHOUR: Can we learn from other countries that have brought down costs?

MATTHIAS: No countries have brought down costs — health care costs are rising everywhere (with the occasional year-to-year variation), so the real issue is whether other countries are providing good quality care at lower costs than the United States. A few things are common to the high-performing health systems:

  • An emphasis on primary care, to ensure that most care takes place outside of (expensive) hospitals
  • A system which encourages use of (cheaper) generic drugs, when there are alternatives to expensive brands
  • Tight regulations of prices and fees, for at least those services that are paid for by public programs
  • Adherence to clinical guidelines, so that excessive use of expensive diagnostics or unnecessary health care is prevented

It’s also important to note that talking about ‘the United States’ is misleading. Some of the health care provided in the United States has more in common with the ‘national health service’ model of national provision of integrated care — the Veterans Administration, for example. Some of the health care provided by the VA, and indeed in the private sector, is probably the best in the world. Some other health care is, however, poor. The variation is enormous, and talking about averages sometimes confuses people.

After all, many people in the United States probably think that publicly-owned and operated health care is necessarily unresponsive to people’s wishes and the staff are undermotivated.

This can indeed happen, but is far from being the general rule in many OECD countries, who have efficient, well-financed, responsive health care systems — but at much lower cost than in the United States.

NEWSHOUR: Are there any health care areas in which the U.S. system is faring better than other countries?

MATTHIAS: When we look at the quality of cancer care, the United States stands out as having excellent results. Screening rates for breast and cervical cancer are excellent, so problems can be diagnosed early on. Your chances of living five years after being diagnosed with breast cancer, or cervical cancer, or indeed several other cancers, are better in the United States than almost anywhere else in the world.

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Posted: December 6th, 2011 | Author: | Under: Health & Medicine | Tags: , , , , , , ,

8 Startups That Are Shaking Up The Healthcare Industry

Health care is one of the most searched topics on the Internet. From questions about which plan is best for you, to information about different medical conditions, the Web is often the first place people turn for answers.

Check out these eight startups that are revolutionizing the way we understand and utilize our health care to make life a little easier.

1. stickk

With its roots beginning at Yale University, stickK co-founder Dean Karlan noticed a need for accountability when it came to personal health. Karlan himself fell victim to the habit of setting weight-loss goals and never seeing them through. After entering into a financial contract with a friend to lose 38 pounds each, Karlan realized the true power of accountability. With major money on the line and an added ‘no negotiation’ clause, both men found themselves 38 pounds lighter at the end of their trial. Inspired by his success, Karlan wanted to share his newfound “Commitment Contracts” with the world.

So, how exactly do these contracts work? You begin your contract by setting a personal goal. This goal can be anything from shedding some unwanted pounds to quitting a bad habit, such as smoking. Once you set your goal, you can add financial incentives—deciding where you want your money to go, should you fail. Then comes your referee. Users can designate a friend to be their personal goal monitor—who reports back to stickK on your progress. Finally, you can select supporters to cheer you on in your commitment to personal health.

2. ZocDoc

In 2007, ZocDoc was created to provide the citizens of New York with a way to make dentist appointments online. Four years later, it has evolved into a Web site that now serves 12 major cities in the U.S and over 60 fields of expertise. ZocDoc allows users to search by medical specialty, along with your insurance provider and zip code. With one click, all of the doctors in the selected field in your area and insurance network are visible—along with their available appointments. By clicking on an appointment time, you can actually book the appointment on the spot.

ZocDoc continues to be at the forefront of this technology—even adding an app for your phone. They also produce a blog that offers information on everything from different medical conditions to healthy lifestyle practices.

3. Cake Health

If you ask the average person to explain a hospital bill or insurance plan in depth, the answer you’ll often receive is a blank stare. Medical bills and insurance paperwork are the bane of most patients’ existence. That’s exactly what Rebecca Woodcock, co-founder of Cake Health, grew tired of after watching a friend find herself in financial and unnecessary trouble due to a medical condition.

Cake Health offers users a way to track, organize and understand their medical bills and insurance policies. Once you enter your health care information into your personal and secure account, you are able to see exactly where your money is going and even track your deductibles and claims history. Cake Health also offers users alerts and reminders for things like possible overcharges, reaching your deductible and prescription refills.

4. One Medical Group

One Medical Group believes in more quality time with your doctor and less time in the waiting room. Founded by Dr. Tom X. Lee, One Medical caters to an atmosphere of hospitality. Much like with a concierge doctor, patients are given the time and care not often seen in today’s medical offices.

With locations in San Francisco, D.C. and New York, One Medical is changing the way patients interact with their doctors. The practitioners see, at a maximum, 16 patients per day—about 9 less than the average doctor. This allows patients more quality time with their doctors. Patients can also log in to their personal account to book same-day appointments, view medical records and even refill prescriptions—saving an extra trip to the doctor. One Medical also allows patients to email their doctor directly with questions and even treatment updates.

5. RedBrick Health

A health technology and services company, RedBrick Health is leading the health care industry to Consumer-Owned health. This concept allows employers to promote wellness in their company, as they guide their employees to take ownership of their personal health.

RedBrick offers personal wellness programs—such as biometric health screenings—to employers looking to decrease their insurance costs. These programs reward healthy behavior in employees while also promoting long-term healthy lifestyle choices. They believe healthier employees increase productivity in the workplace. RedBrick stands by their mission to help people live the fullest and healthiest lives they can possibly live.

6. Avado

With products for both the provider and patient sectors, Avado is changing the way doctors run their practices—making visits easier on their patients. Their Patient Relationship Management (PRM) system offers a way to effectively engage in a partnership with their patients. The PRM allows doctors to send patients reminders to take their vitals, perform their physical therapy and even reminders to take their medicine.

Avado allows patients to have a true relationship with their physicians, and at the same time, feel like they have a voice with their personal health care. Avado’s PRM system is a great way for patients to record and track their health history by uploading their vital statistics. This tool is not only helpful to individuals, but to families in need of organization when it comes to their medical needs.

7. Bloom Health

With a vested interest in both employers and their employees, Bloom Health is changing the way you can choose health insurance. Bloom Health offers employers a way to give their employees options when it comes to health care.

How does it work? Employers offer a defined amount of money toward each employee, and through Bloom Health’s personality report, individuals can choose which plan suits them best. After taking a quiz, employees are given the best insurance plans based on their individualized results. Next, they can compare and contrast plans against what they currently have. Should the employee choose a different plan, Bloom Health takes care of the application process with one click.

8. Sharecare

Realizing the educational power of the Internet, Dr. Mehmet Oz and Jeff Arnold created Sharecare—an interactive Q&A platform to provide quality health care information to the public. Sharecare gives people clear and concise information about their health, all in one place.

Renowned doctors, expert researchers and leading medical professionals come together to offer the most current treatment options, wellness advice, nutrition information and much more. Commercial brands answer questions about their products, so users can make an informed decision about their well-being.

Sharecare established an Advisory Board, hosting the finest medical professionals in the industry. They represent the different areas of medical expertise and are committed to consumer health education. Sharecare also has an A-Z reference library for many medical topics. Simply type in a question and get instant answers from top medical professionals around the world.

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Posted: October 23rd, 2011 | Author: | Under: Health & Medicine, Technology | Tags: , , , , , , , , ,

Health Care Legislation – Hate it or Love it?

On March 23rd, President Barack Obama signed into law, a major healthcare reform legislation, The Patient Protection and Affordable Care Act (HR 3590), following the passage of the bill by the House of Representatives on March 21st by a vote of 219 to 212, which was the previously passed healthcare legislation by the US Senate. The House also passed a second bill on Mar. 21, the so-called “fixer bill,” Health Care and Education Affordability Reconciliation Act of 2010 (HR 4872), which modifies certain provisions of the newly passed legislation and which has moved to the Senate for consideration.

While I was pleased that President Obama and the Democrats were finally able to deliver much needed reform to an ailing American healthcare system, the compromises that were made to pass the bill are troubling.

  • First, language allowing reimportation of lower cost drugs from Canada and other developed nations was eliminated from the bill.
  • Second, the provisions allowing the contentious 12 year data exclusivity provision for generic versions of biologic and biotechnology drugs remained in the final bill.
  • Finally, and perhaps most importantly, any language alluding to or implying that the US government, may, in the future, be able to negotiate or regulate drug prices was obliterated.

In short, the pharmaceutical and biotechnology industries received all of the assurances and guarantees that were in the deal brokered by Billy Tauzin, the former head of the lobbying group PhRMA, between the White House and PhRMA over a year ago. Surprisingly, Tauzin was fired by PhRMA several weeks ago because its leadership mistakenly thought that Tauzin conceded “too much” to the Obama Administration when he brokered the original health reform package with the White House. (At the time that Tauzin was fired, health care reform legislation appeared to be on life support and all but dead).

In the final analysis, big pharma and biotech will give back $85 billion over ten years —largely by agreeing to give back some of the profits it was allowed to be collected from the egregiously flawed Medicare Part D legislation passed during the odious Bush Administration.  While $85 billion may seem like a lot (to the average American citizen) to give back, it is important to note, that the size of the global pharmaceutical and biotechnology markets is over $600 billion per year.  Although growth in these markets is beginning to slow in developed nations like the US and Japan (to high single digits), it is beginning to explode in heavily populated developing nations like China, India and Brazil where it is roughly 12-18%.  But simply, despite assertions to the contrary, business in the biotechnology and pharmaceutical markets is booming and likely to continue for the foreseeable future.

In other words, the newly passed healthcare reform legislation is a “sweetheart deal” for the US life sciences industry (YIPPEEE FOR THE BIOTECH SIDE OF ME!).

Ironically, while the healthcare reform bill insures that almost all Americans will be entitled to healthcare coverage and that insurance companies cannot deny healthcare benefits to persons with pre-existing medical conditions, the legislation may actually limit the access of Americans to potentially life-saving biotechnology drugs. This is because the 12 year data exclusivity period for generic versions of branded, biotechnology drugs (otherwise know as follow-on biologics or biosimilars) remained in the final version of the healthcare reform bill.

This provision disallows approval of follow-on biologics for a period of 12 years from the data that the original biologic received US regulatory approval.  For example, if a branded biologic or biotechnology product garners US regulatory approval in 2010, the earliest date that a generic version of this product would be able to appear on the US market would be 2022.  Moreover, in some instances, the 12 year data exclusivity provision may extend the so-called patent life of a product. Using the example above, if the patents protecting the product happen to expire in 2019, the innovator company is guaranteed an additional three years of marketing exclusivity before generic versions of the product can appear on the US market.  Finally, the 12 year data exclusivity provision effectively prevents foreign biosimilar manufacturers from competing in the US biotechnology market until about 2018; a strategy designed to allow the US to maintain its dominance of the global biotechnology market.  Interestingly, despite the approval of six or more biosimilars in Europe, these products have failed to catch on and are not able to compete with their branded, innovator counterparts.

My thoughts if I were in the shoes of a physician:

“I should quit being a physician, and file for unemployment.  This way I would earn more to take care of my expenses.” – Quote from my amazing, great sister.

There are tons of articles out there that cover the pain from the current medical practitioners out there, and there are countless quotes from physicians in regards to the new health care legislation.  In all seriousness, their jobs definitely did get tougher.

Here’s a great recent article that sums it up.

The current public that are ignorantly saying that doctors are overpaid (frick – athletes and hollywood are overpaid, and there should be some new tax law that attacks the entertainment industry) – really need to put themselves in their shoes.  The current reimbursement rates and endless red tape forces many primary care physicians to hire more staff and see more patients in order to cover their costs. Their costs continue to rise, driven by rising malpractice premiums and payroll and small business taxes and fees.  Several physicians have held their own paychecks for several months in order to make payroll.  Also, we’re not forgetting the several hundreds of thousands of medical student loans to pay back.

This bill is extremely penalizing the people who are out to save lives, and I completely understand their pain.  I’ve spent countless amount of days working and shadowing doctors in clinic – and realistically, they already have an extreme patient load.  There were days where we had one patient chart after another for 10 straight hours without having a proper break.

In conclusion, I laud President Obama’s persistence and give him props for his ability to deliver (as promised) health reform to the American public. I have no doubt that the legislation will help to improve the delivery of healthcare in the US and hopefully improve the overall health of Americans. However, while the new healthcare reform legislation is a first, positive step, the American healthcare system will never entirely be “fixed’ until healthcare practitioners are not penalized in all ends including malpractice insurance, and until US drug prices are regulated—like they are in the rest of the world.

My Urban Nerd readers – what are your thoughts?

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Posted: April 11th, 2010 | Author: | Under: Health & Medicine, Viewpoints | Tags: , , , , , ,