Why is Health Care So Expensive?

According to Steven Brill, whose 26,000 word article in Time is getting all kinds of attention, one big factor is price negotiation. An uninsured patient can’t negotiate at all, so they get charged $1.50 for a single Tylenol in a hospital. Insurance companies negotiate on their customers’ behalf, so they get charged less. And Medicare, which is the biggest player of all, negotiates hard — volume discounts and all, just like any big customer anywhere in the world — and thus pays the least for the same products and procedures.

Interestingly, Brill steps away from one obvious solution — have Medicare cover everyone — because he says it will leave doctors underpaid. Felix Salmon takes him to task for this, pointing out that Brill never states what “underpaid” is. Since my greedy doctor post remains my most read and commented of all time, I feel a certain obligation to chime in here. I have never seen any analysis that tries to show what doctors might get paid in an all-Medicare system. Maybe it would be pretty low; if GPs maxed out at $50,000 per year, they probably wouldn’t spend all that money and time at medical school. But maybe doctors would still get paid what they do now, and it would be hospital administrators (whose multi-million dollar salaries are the true villains in Brill’s piece) getting a pay cut. Or maybe it will be CEOs of drug companies getting paid less; who would complain about fewer $78 million severance packages being paid to CEOs?

You can read more commentary regarding Brill’s article here and here.

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2 responses to “Why is Health Care So Expensive?

  1. Yes, less $$$$ for administrators and drug company execs! Thanks for cogent analysis!

  2. I fell that part of the answer to this high health care costs is many individuals need to strive for better health. So many Americans are overweight and also unhealthy. It’s sad when I see teenagers smoking cigarettes. It’s sad when I see that overweight guy walking out of the convenience store with a large Gulp cup full of soda. It’s sad when I see that same car at the local bar drinking booze every day. It’s sad to see so many people hooked on drugs. It’s sad to see so many people still baking themselves in the sun for that golden tan.

    Maybe if every American would truly strive for good health, that might help drive down some of the high health costs because we won’t need to visit the doctors or be hospitalized, as often.

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