A review of the national accounts of thirty industrialized nations reveals that the United States has the highest cost of patient care by far when compared to any other country in the world. As a percentage of Gross National Product, health care in the U.S. consumes over 16% of total productive output, representing almost $6000 per year for every man, woman, and child in America. This is almost double the average of any other country—and it is rising at more than twice the rate of inflation.
This wouldn’t be so bad if the United States actually got its money’s worth. Unfortunately, the most recent year’s annual report from the Organisation for Economic Co-operation and Development (OECD Health Data 2009) shows once again that the U.S. ranks at or near the bottom on a range of key health indicators, from life expectancy to infant mortality, adult obesity, number of deaths from natural causes, rate of medical errors, and number of doctors and nurses per capita. When it comes to the provision of effective health care, it seems our free market system has fallen down in its ability to move goods and services from provider to consumer in the most efficient and cost-effective manner.
Why does this disparity persist? Are doctors better paid in the United States? Do we have more sophisticated equipment, or larger and better hospitals? While it’s true that our privately funded health care system allows for two tiers of medical care, represented by the typical metropolitan (public) hospital serving the general community, as well as the more exclusive (private) institutions such as the Mayo Clinic, these more expensive facilities represent a minority of total doctor billing. And although American doctors do enjoy higher incomes than in most other countries, one recent study estimates this contributes only 6% to the differential cost of health care in the United States.
So what accounts for the large discrepancy? A portion of it can be explained by the far higher incidence of medical malpractice lawsuits that are brought against doctors and hospitals in the United States—due in part to the unique form of lawyer compensation in the U.S. , where lawyers are normally paid as a percentage of the plaintiff award rather than a flat per diem fee for actual days worked on the case. Americans sue 50% more often for medical malpractice than in Britain or Australia—and a whopping 350% more than in Canada. But a lower portion of these lawsuits are settled in favor of the plaintiff, and the average payout is actually slightly less in the U.S. than in these other countries. The net effect is that malpractice litigation represents less than one percent of total health care spending in the U.S.
All of this accounts for less than a fifth of the differential cost of medical service in the United States; so where’s the remainder? The main reason health care costs are so high in the U.S. is because HMO and Medicare rates are structured to pay much higher fees to doctors for complex medical procedures and tests, and because doctors prescribe so much more (relatively expensive) medication as standard practice when compared with anywhere else in the world. Fully eighty-five percent of every physician visit nowadays involves some sort of diagnostic test, sixty-four percent involves the prescription of one or more medications, and almost nine percent involve some sort of surgical procedure that is either ordered or performed. Unfortunately, many of these tests and expensive procedures are unnecessary—one Congressional investigation found that as many as 64% of such procedures have questionable merit.
America’s drug habit accounts for much of the additional deficit. The United States has the largest and wealthiest pharmaceutical marketplace, representing almost half the globe’s spending on drugs, with per capita expenditures nearly double the rest of the world. The global pharmaceutical industry is now a six hundred billion dollar business, with six of the top 10 largest companies headquartered in the U.S.—and every year these drug companies top the Fortune 500 rankings for industry profitability by a large margin.
These American drug companies have found increasingly creative ways to inveigle their way into the minds and pocketbooks of doctors and patients. Physicians are constantly bombarded by carefully crafted marketing pitches by the pharmaceutical companies to prescribe their latest and greatest drugs, which are assiduously supported by extensive research studies. Some doctors are offered (and accept) generous grants from these companies to conduct new clinical trials of their products. In case that isn’t enough, drug companies regularly invite targeted doctors to lavish and expensive all-expense-paid dinners, conferences, and vacations at the most exclusive venues, where they can hear or speak on the latest findings of the industry. And just to be sure the doctors are issuing prescriptions in sufficient quantities for their products, these companies hire specialized data mining firms to collect information from drugstores concerning which drugs each doctor in their designated sales regions is prescribing.
Even though conflict-of-interest guidelines issued by the American Medical Association (AMA) and the Pharmaceutical Manufacturers Association (PhRMA) in 2002 were designed to curtail many of these activities, an on-going investigation of hidden income arrangements between pharmaceutical companies and doctors by Senator Charles E. Grassley, former director of the National Institute of Mental Health, revealed a variety of influential and high-profile academic and clinical researchers have received millions in unreported income from drugmakers. Just recently, Dr. Frederick K. Goodwin, the famous psychiatrist and host of the popular NPR radio program The Infinite Mind, whom many listeners have relied upon to provide objective and informed advice for treating their children’s mental health issues, and who has long been promoting the safety and necessity of treating various mental disorders with psychotropic drugs, was found to have accepted $1.3 million dollars in promotional fees from nine of the largest pharmaceutical companies—income which he had failed to report under previous required disclosure agreements.
Doctors have learned which side their bread is buttered on, and unfortunately it’s not where many of us would like to see it: in longer and more consultative patient-visits. Our American system of free enterprise has created a powerful structure and system of incentives whereby doctors are consciously and unconsciously encouraged to spend the minimum amount of time with each patient, and the maximum amount of time ordering tests, performing surgery, and prescribing medication. The result is a disappointingly short initial physician consultation, usually ending with a quick shove out the door with a prescription, and/or an appointment to see a specialist to conduct more expensive and invasive procedures. Sadly, this practice is not only causing rising trauma to our national accounts, it is increasingly harming the individual patient.
By Reid Jenner