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The Healing American Healthcare Podcast
The Healing American Healthcare Podcast

Episode 9 · 1 year ago

The Cost of US Healthcare & Hospitals

ABOUT THIS EPISODE

Ed Eichhorn discusses the exorbitant cost of healthcare as well as hospital care in US and what needs to change for it to not be such a financial burden for the American people. 

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Hello, this is at Ikorn. I'm the founder of the healing American healthcare coalition and I am a coauthor of healing American healthcare, a plan to provide quality care for all while saving one trillion dollars a year, that I wrote with Dr My Cushinson. I wanted to explore with you some of the issues about our high cost of care and the United States and what we need to do to improve healthcare. You know, bringing down the cost of healthcare in our country is not going to be easy, but it's really important for us to think about doing that. If you've been following the complications in our healthcare system or you're an advocate for a changing our healthcare system, you know that there are really four things that we need to try to accomplish. First of all, we need to reduce the cost of healthcare. The cost of healthcare in our country is about nineteen percent of the GDP. We are twice as expensive as the average cost of the other members of the Organization for Economic and cooperative development of the UN. In fact, in some cases, if you...

...look at our data on public cost versus private insurance cost, our public cost on a per capita basis is higher than the costs spent by other nations for all of their healthcare. So reducing the cost of healthcare is really an important thing that we have to undertake. Second thing is we really need to have universal healthcare. All of those other nations of the world do have universal health care systems and we don't. Approximately twenty million Americans have no healthcare coverage and another forty million Americans have an adequate coverage or they're under and short, and that means sixty million Americans, are almost twenty percent of our population, do not have access to good quality health care. Now that factor in itself raises the cost of health care because they, as a group, tend to avoid healthcare unless they are really, really sick. So instead of seeing a physician if they have a stage one cancer, they wait until they have a stage four cancer, which greatly increases the cost of their care and greatly diminishes the...

...opportunity for them to actually survive the care because of the difficult nature of the disease as it has matured in their bodies. The third thing is our health care system is very bureaucratic. Just billing for healthcare in the United States is extremely high. Generally speaking, we spend about two hundred forty dollars per person for every man, woman child in our country for hospital billing alone. If you compare that number, which is around two hundred forty dollars a person, with a country like Japan, they only spend fifty dollars a person for their billing, which is less than three percent of their cost. So we really need to make a healthcare less bureaucratic. Now, one statistic in this area that I like to cite is for every physician working in healthcare in the United States, there are sixteen people at work in healthcare. Half of them have no patient contact of any kind. That's the bureaucratic part of our health care system. In fact, over the last ten years the number of medical billers...

...in the United States has grown from Seventyzero to a hundred and seventy thousand people. And when employment surveys look at the United States today, one in nine Americans works in healthcare, whereas ten years ago it was one and twelve. So we need to figure out how to make it less complicated for billing and if we do these three things, lower the cost of care, provide care for everyone and make care less bureaucratic. We should improve our longevity statistics, because right now they are not very good. Our average life expectancy in the United States has dropped by a full year during two thousand and twenty as a result of the pandemic. It's dropped from seventy eight point eight years to about seventy seven years. But for African Americans it dropped by over two and a half years, and so for the last ten or twelve years we have generally lagged the other nations in the Organization for Economic and cooperative development by at least three and a half years and in some cases by as much as seven years.

If we are able to do the first three things we need to do, we ought to have better quality care and we ought to be able to extend the life expectancy of all Americans. So let's talk about call for a few minutes. Hospitals are about thirty two percent of the cost of care in the United States, and that's about a trillion dollars a year. And the hospital market is not uniform. About sixty percent of the hospitals are private, nonprofit hospitals, twenty percent are owned by governments and another twenty percent are for profit companies. If you look at them in terms of rural hospitals versus hospitals that are in cities, rural hospitals are under a great deal of pressure. Six hundred of them are in financial difficulty and at least two of them close every month. When a hospital closes in rural America, it has a great economic impact on the community that it had served because more often than not it's the largest employer in the community, so that doctors and nurses in that community,...

...who are also consumers in that community, may go to other parts of their state or their country for employment once that facility closes. So it creates a great deal of economic pressure in that community and it also affects longevity and the quality of health care because the people who live in that community, in order to get a health care that they need, will have to drive perhaps two hours to go to the nearest hospital. So there is a crisis in healthcare for a world America. Now there's a similar crisis in inner city hospitals because cause of the population that they serve and the amount and type of insurance that their customers have. Much like rural hospitals, they will have a lot of Medicare and Medicaid patients in their facilities and also people who are uninsured, and that puts financial stress on the operation of that hospital as well. So when you back out of that picture and look at our hospitals, where, broadly there are about threezero hospitals in the United States out of the approximately five...

...thousand that we have that either break even or lose money every year. Well, how we address that? Because at the same time, the hospital segment part of it makes seventy six billion dollars a year and there's a great change in the hospital market that Congress is beginning to try to address. There are two things that hospitals are doing to improve their ability to leverage their insurance negotiations with payers. They are horizontally and vertically integrating. What I mean by horizontally integrating is they are buying other hospitals, could be a nonprofit or for profit hospital. Most of this is occurring in the nonprofit sector. They will buy competitors or other hospitals so that they now have a block of hospitals and what they will claim is this is going to be more efficient and cost less, and what they mean by that is it will cost less for them to opera rate. But over the last ten years, as these hospitals have come together...

...in this way, their average billing to private insurance has got up between twelve and seventeen percent a year, largely because of their bargaining position. For example, if they are in a state where they've done this, like they have in New Jersey, where there's four large hospital organizations, when they negotiate with the payers, they can say no, no, no, we don't want to lower price, we already have a million of your patients being covered in our hospitals and we need to increase our prices. And the Insurance Company doesn't have a lot of leverage and needs to coverage, so usually the prices go up. The other thing that they're doing is their vertically integrating. About sixty percent of all the primary care doctors in the United States work in a group or they work for hospital, and when doctors go to work for a hospital, that means the hospital can change the billing for the services that they provide. They can build a facility fee, which they're allowed to do, but that increases the cost of care because every time you go for a colonoscope or...

...whatever it is, that doctor might provide within the scope of practice. The cost for that go up because of the facility fee. As I mentioned, a Colonos could be. The price for doing that in a practice that's been acquired by the hospital could be as much as a hundred sixty percent higher than it was before. Hospitals are also buying imaging centers and they raise the price of an Mr I as well. The average price for an MRI, depending upon the cept code, could be about three hundred and fifty dollars. Well, in a hospital that could be a thousand dollars when they're done with the additional fees they're allowed to charge. So how do we bring those costs under control? Well, I think what we need is we need a pricing structure that's uniform pricing structure for every hospital. Under the trump administration they wanted to have, which I believe we now have, ability for you to see the price in any hospital for any service that they may charge, and that's a good thing to have, but I think we should be controlling those prices so that private insurance prices would start at a specific level. Perhaps a hundred and...

...forty percent of Medicare currently those prices range from a hundred and seventy percent of Medicare to two hundred thirty percent of Medicare, but I think we should establish a price level at which hospitals would be able to compete. Now Anti Trust aspects of the government are looking at hospitals now and whether or not they would allow them to continue to grow and buy other hospitals, and I think we should let them buy on their hospitals, but control the prices that hospitals can charge. That way, when they combine, their combining to lower administrative cost not just to increase pricing. And if we did that sort of thing, a couple of things would happen. One, rural hospitals would actually get paid more to the hospitals that are acquiring other hospitals could also acquire inner city hospitals and help to build up their revenue base because the insurance base that they might receive would be a little bit higher. So I think that would help stabilize the hospital industry while lowering its costs. Another thing that we should do in...

...hospitals is we should lower the cost of drugs that are ad ministered there. Hospitals do increase the cost of drugs and supplies that they provide to in patients and I believe they should be controlled to be only a ten percent markup on any drug or supply that they might buy. One example of this is, in fact, hip replacement that was done in a teaching hospital in New York City. The person was forty nine years old and worked in healthcare as an actuary. This patient got the bill and it was eightyzero dollars and he thought that was too high. So he went to his insurance provider and said Gee, this sounds like too much money, and the insurance provider said, well, that's our contract with that hospital, that's what the charge is. So he went and got the hospital bill and found that exactly which hip replacement hardware had been installed during his surgery and he found out that the provider of that who manufactured it, charge the hospital one sixteen hundred dollars for that implant.

His hospital bill reflected a charge of twenty threezero five hundred dollars just for the implant itself. Hospital should not be allowed to do that. They should be allowed to mark up these materials for their inventory and cost only. Steven Brill and his book Americans Better Pill charted a number of hospital bills and he found that when you received a tile all in the hospital, you could be charged as much as the wholesale cost of the whole bottle of TAILEANL and this simply shouldn't be if we were able to constrain these costs within the hospital environment, I believe that we would be able to bring the cost of hospital care down in a significant way while improving the funding of hospital care in rural America and in inner cities. So that is one area of cost reduction. In future podcasts I will talk about pharmaceutical cost reductions that we should consider, reducing the cost of waste in our system and reducing the cost of bureaucracy. And if...

...we do all of those things together, we would be able to reduce the cost of care in our country by approximately a trillion dollars. So until we bring up this topic next time, stay well, continue to use mitigation. We are masks, Wash your hands, keep yourself separate from other folks, buy six feet or so and when the vaccine is available for you, go out and get yours. Thanks and I'll see you next time.

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