Why Do We Pay So Much for Health Care—But Get Such Poor Results?

The diagnosis is daunting, but clear. We must together rise above politics and treat this cancer inside us.

Are there solutions that can work to heal our ailing system?
Are there solutions that can work to heal our ailing system?

As a primary care physician practicing for three decades in the same location, I have had the privilege of seeing patients regularly across a span of many years. I have celebrated my patients’ joys and triumphs, but also mourned with them in their deepest tragedies and sorrows. I have shared and continue to share in their trials and vulnerabilities, and often as more than their doctor; patients sometimes confide in me things they do not even share with their families.

The result: I have encountered far too many heartbreaking stories, more than enough to be certain that our health care system is deeply broken. Too many patients watching their savings disappear overnight in the face of staggering medical bills, even those resulting from low-quality care. Too many people working tirelessly for the false promise that health insurance equals financial security. Too many families living in fear of slipping into poverty because of one illness. The physical, financial, and emotional pain is often unbearable, creating a bitterly vicious cycle that continues to spiral downward.

In the midst of a fray of political demagoguery and confusion, countless American families are struggling at the hands of a system they may not fully understand.

These stories are sobering reminders that as nationwide debates about health care in America amplify again during this election season, real-life casualties of our broken system suffer quietly. The mainstream conversation is often frustratingly complex and politically-driven. Meanwhile, in the midst of a fray of political demagoguery and confusion, countless American families are struggling at the hands of a system they may not fully understand.

The heart of the problem with the American health care system can be boiled down to one troubling question: why are Americans paying much more per person for health care than those in other developed nations, but getting much less in terms of quality? As a physician with over 40 years of experience practicing medicine in the United States and the United Kingdom, I naturally view this tragic “pay more, get less” paradox through a clinician’s eyes. As is taught in medical school, it all starts with carefully diagnosing the problem.

Let us start with diagnosing the “pay more” element of the paradox. First, the facts: we are paying far more for health care than any other Western industrial nation. Consider that in 2012 the U.S. paid $8,745 per person on health care. This was double what was paid on health care per person in most developed countries in the world, including France and the U.K. Spending growth has continued, and the U.S. today spends about $10,000 per person annually. As a direct consequence, many sources site medical bills as the number one cause of personal bankruptcies (which are akin to financial “death”) across the U.S. A study in The American Journal of Medicine found that 62 percent of all 2007 bankruptcies, using a conservative definition, were medical bankruptcies. Sadly insurance is not enough to offer protection; over three-quarters (78 percent) of medical debtors were insured at the onset of their illness.  And this is a crisis not only on the personal and family level, but also on the national level. Health care spending in the U.S. has increased dramatically over the years and continues to grow.

What is behind these staggering costs? I explore several primary factors that are discussed in depth in my book, Dying of Health Care. The first four of these factors are caused by doctors and the latter five are caused by other players in the system, leaving doctors and patients alike as victims: excessive testing, overprescribing, direct-to-specialist referrals and consultations, doctors not assessing costs to the system overall, health insurance and medical billing industry waste, overpriced pharmaceuticals and medical devices, direct-to-consumer pharmaceutical advertising, increasing administrative costs for medical practices, and a fragmented hospital system.

One of these factors that is a particularly tough pill to swallow is the cost of health insurance and medical billing. Health insurance companies are like a middleman between providers and patients, so their costs should be kept as low as possible since the money is not being used to care for patients directly. Unfortunately, the costs are astronomical and far greater than in other nations. Because of how difficult insurance companies have made it for providers to get paid for their services (their incentive is to maximize their profits), they have in effect created their own menace: medical billing companies. Fifteen years ago, I had never heard of the medical billing business, but today it is one of the most thriving components in the health care industry. If insurance companies are like the middleman between providers and patients, medical billing companies are like the middleman to the middleman; both of them take a significant cut of your health care dollars. As a poignant example of the heavy burden that medical billing codes and processes create, Duke University Hospital at one point had 900 beds for patients… compared to its 1,300 billing clerks.

Another important factor to highlight briefly is excessive testing, which has multiple causes. Unfortunately, testing begets more testing, as one test often leads to a desire to order other follow-up testing due to coincidental findings. And these tests sometimes lead to unnecessary invasive procedures, which can harm or even kill a patient. Excessive testing, of course, also costs a great deal of money at the same time, thus contributing to both sides of the “pay more, get less” paradox.

Now, on to the “get less” half of the paradox. It would seem reasonable that the U.S. spends far more on health care than any other nation in the world, so long as our health results are the best in the world as well. Unfortunately, this is very far from the truth. That American patients are “getting less” in terms of quality is not a question to debate. To evaluate this, there are several studies that consider a variety of health metrics and rank the health care systems of nations around the world. The common conclusion across all of them: the U.S. is not delivering the quality that the price tag would suggest. And, truthfully, it is not even close. As just one example, a 2014 study ranked the health care systems of 11 developed nations, considering factors such as quality of care and access to doctors. It found that the U.S. ranked last overall. Within particular subcategories, studies have shown that the U.S. ranks 25th out of the 34 developed countries in the Organization for Economic Cooperation and Development (OECD) in terms of hospital beds per 1,000 people, and it ranks 28th in doctors per 1,000 people.

In my opinion, life expectancy is the best metric to consider in evaluating a health care system because it is the cumulative effect of all aspects of health. Sadly, our life expectancy ranks 27th among the 34 OECD nations. So, let us bring together our analysis of the “pay more” and “get less” components. The U.S. spent $8,745 per person in total health expenditures in 2012, as discussed, and its total population life expectancy at birth was 78.7 years.  Compare this to Spain, which spent $2,998 per person and achieved a life expectancy of 82.5 years. Take a look at the chart below, which plots the life expectancy of several countries against per-person health care spending. In reading the chart, the most efficient and effective systems fall in the upper left area. From our conversation thus far, you would expect the U.S. to be an outlier in that its system is so expensive and not as effective. But saying it is an outlier is a major understatement.

Life expectancy at birth and health spending per capita
Life expectancy at birth and health spending per capita

Note particularly how far the U.S.’s life expectancy mark falls below the trend curve, which is where you would expect it to fall based on its amount of spending. Clearly, something is seriously amiss.

Perhaps the saddest element of “getting less”: iatrogenic diseases, or diseases caused by medical or surgical intervention, are a major issue in the U.S. In her commentary in The Journal of the American Medical Association, Dr. Barbara Starfield of Johns Hopkins University, citing three previous studies, estimated the number of American deaths due to iatrogenic causes to be 225,000 per year. In other words, about 225,000 American deaths per year are actually caused by medical care. If classified as such, this would make iatrogenic causes the third most common cause of death in the United States, after heart disease and cancer. To make matters worse, as Dr. Starfield points out, these numbers may actually be on the lower end of comparable estimations, and they only include iatrogenic diseases that directly lead to death. Indeed, iatrogenic diseases are a contributor to our disappointingly low life expectancy numbers as well as the high cost of our health care.

The consequences of our painful paradox – the heartbreaking stories I mentioned at the beginning – are real and they are tragic. Over the years, I have seen that the physical, emotional, and financial health of a patient are closely tied together. All three aspects are crucially and inseparably intertwined; any one of the three can adversely, or positively, affect the other two. Too many times I have seen serious, unexpected illnesses – in addition to physically threatening my patients’ health – eliminating their financial security. Of course, when these patients find themselves without the means to support their families or sometimes to even survive, there is an unbearable psychological impact and that, in turn, affects their physical health.

The reality is that there are solutions that can work to heal our ailing system that both improve the quality and reduce the cost of our health care.

The urgency to act has never been greater. We have travelled through 100 years of band-aid health care reform attempts, leading up to a confusing mix of mostly private and some public care. The most recent and perhaps the most controversial reform, the Affordable Care Act, is not a viable solution to mend our system. We are still on a path of financial un-sustainability, and people’s premiums, co-payments, co-insurances, and deductibles have only risen. As author of the best-selling America’s Bitter Pill, Steven Brill, explained, “Put simply, with Obamacare we’ve changed the rules related to who pays for what, but we haven’t done much to change the prices we pay.”

The reality is that there are solutions that can work to heal our ailing system that both improve the quality and reduce the cost of our health care. These include implementing a more standardized system of medical decision-making that takes into account cost and empirically proven effectiveness, which would smooth out the wide divergences that come from the subjectivity of medical decision-making. A single-payer system for all, in my view, is a critical solution that will rein in our costs and improve our care by eliminating the waste surrounding insurance and medical billing companies, creating negotiating power for cheaper pharmaceuticals and medical devices (these are far more expensive in the U.S. than abroad), uniting electronic health records to reduce inefficiencies, changing the way doctors are paid away from the fee-for-service system (which rewards for quantity of care, regardless of effectiveness), and overseeing the standardization discussed previously. The truth, in fact, is that the United States is almost totally alone among developed nations in lacking universal health care.

Regardless of your perspective on the appropriate treatment for our health care woes, we as a nation must be knowledgeable and engaged about the subject. We must be aware of the distressful, painful stories of Americans (including, I am sure, many of the people reading this article) who have been victims of a broken system. We must boldly look through the cloud of political posturing and journalistic sensationalism and stand up for the health of our children, our parents, our brothers, and our sisters.

The diagnosis is daunting, but clear. We must together rise above politics and treat this cancer inside us.

N.F. Hanna, M.D. is a primary care physician with nearly 40 years of experience practicing medicine in the U.S. and U.K. He is the author of the newly released book, Dying of Health Care: How the System Harms Americans Physically and Financially, and How to Change It.

Why Do We Pay So Much for Health Care—But Get Such Poor Results?