My main flaws with this book are that:
1) it gets too bogged down in the minute details of its real life anecdotes and therefore often misses the forest for the trees. The real life stories there book uses should supplement its overall theoretical framework, and if I were to re-edit it I would have it structured so that it starts with an overall issue (I.e health insurance is broken) then use real life scenarios as evidence. Instead it usually starts a chapter off with a real story (Joe paid 100x more for a knee replacement than he would have if he lived in Sweden) and then devotes large chunks of the chapter to thoroughly going through the details of this story rather than focusing on more on the structural forces which caused Joe to pay so much for his stupid fucking knee.
2). The book fails to connect all its various strands of America’s medical-industrial-complex together (I.e big pharma, medical insurance, hospital fees, the medical device industry, etc ) in a satisfying or all-encompassing way because it gets bogged down by a pro-market, neoclassical frame of view.
According to the author here are the 10 golden rules of American healthcare:
1) More treatment is always better, and healthcare providers will tend to default to the most expensive treatment while they’re at it
2) A lifetime of treatment is preferred to being cured
3) Amenities and marketing are more important that good care
4) As technologies age, prices tend to rise rather than fall
5) Patients aren’t offered a robust amount of competing choices; they stuck buying American
6) More competitors vying for business often drives prices up
7) Bigger providers don’t translate to lower prices (contrary to the macroeconomic assertion that ‘economies of scale’ reduce production costs and therefore the cost of commodities) because they use their economic weight to tilt markets in their favor
8) There is no such thing as a fixed price for any type of procedure or test, and the uninsured always pay the highest prices
9) There are no standards for billing. You can be billed for any and everything
10) Prices will always rise to whatever the market can bear (what does this mean btw? Am I wrong in thinking all market prices are whatever the “market can bear”? What is an example of price being higher than the market can bear and why couldn’t the market bear it?)
This book claims “Health insurance is the original sin of the medical industrial complex”. I’d argue that any system that requires someone to pay to keep themselves alive and relatively healthy is the “original sin”, but even still health insurance plays an inseparable role today in maintaining America’s broken healthcare system. Originally, health insurance was only meant to help workers recover compensation lost due to sickness or injury keeping them out of work, while also keeping charitable hospitals afloat and able to maintain themselves. Health insurance became widespread once the government incentivized businesses to provide it by giving them tax rebates/subsidies for doing so. From the 1940s to the mid 1950s, the amount of insured Americans skyrocketed from around 10% of all Americans to 60% of all Americans. Once medical insurance became widespread, it became the main goal of profit chasing hospitals/doctors to make profits through insurance payouts. From 1967 to 1983 Medicare insurance payouts to hospitals increased from $3 billion to $36 billion. The book gives a real life example to demonstrate how widespread health insurance has led to booming profits: someone receives care for some shit that at one facility that costs around $1900 a pop. However, if this same person changes facilities just a few miles down the street the price for their care goes up to around $100,000 a pop. This occurred even though both facilities were providing the same service, which was simply mixing medicine, providing nurses, and giving the person a room to stay in for three hours. The only real difference was the facilities. The reason the insurance agrees to pay exorbitant prices at some places, even though they could easily pay less somewhere else, is because it’s simply easier for them to do so. The facilities charging the insanely higher rates to the insurance are generally much bigger clients who also have teams of lawyers and negotiators in place to jockey and jostle with insurance companies over fees. It’s easier and safer for the insurance to pay the trumped up fees than it is for them to lose these clients. Insurance then makes this money back, and then some, through raising the costs of premiums (amount you pay to your health insurance per month), deductibles (an amount that must be paid for covered healthcare services before insurance begins paying), and co-pays (also a set amount of money, but it's a fixed fee attached to certain covered services). Simply put, hospitals and other service providers have millions of dollars to spend on teams to fight insurance in order to maintain their profits, while the average person does not. This is why, once something is covered by insurance, its price tends to rise. The book gives an example of how, in many locations, physical therapy used to cost around $100 for somebody before it became covered by insurance providers; once the insurance companies pay for the PT, the price of the therapy shot up to $500 a session. Insure will brag to you that “you saved 96% on your stay!” without mentioning that this price was already heavily inflated just due to it being insured.
Inflated insurances payouts resulted in the cost of hospital stays increasing by 150% from 1997 to 2012. Because of this, the average hospital visit in America costs around 10 times as much as it would in Australia or Spain, which are countries whose healthcare systems provide similar quality healthcare results to America’s. Since it is hard to know how much a given surgery or procedure actually costs (like what should the price of an appendix removal be? What about being injected with a steroid?), this helps hospitals to set their own prices as high as they can. The entire process of insurance-backed price inflation snowballs into a positive feedback loop: as hospitals make more money, administrators and people with business degrees (AKA the money managers) start gaining more power within the hospitals and multiplying in number. As this happens they start implementing ways to raise profits over any other concerns, leading to hospitals recommending the most expensive treatments and services to their clients. Doctors are then financially incentivized by the higher ups (through bonuses and such) to ‘up code’ and provide more expensive treatments/care. An example of upcoding is classifying a patient filling out a questionnaire as a “health needs assessment” which is a billable charge. Injecting someone with steroids can be charged as ‘surgery’, and then further charged by using an ultrasound to “guide the needle”. Even though using such devices is completely unnecessary due to how easy the procedure is, the financial incentive to do so outweighs any practical reasons not to. Insurance companies don’t really fight such practices (although often they will try and fail to audit hospitals) because they can easily be undercut by smaller, more desperate insurers who are often raked over the coals by the hospitals.
If you are uninsured and ever go to the hospital you are basically fucked. Hospitals charge patients who are uninsured about 2.5 times higher than those that are. This almost certainly puts the patent in debt, often because they literally have no choice but to accept whatever the hospital is offering or possibly die. Professional debt collectors, who make their profits off of commission, are then hired out by the hospitals to basically loan shark uninsured patients until they’re drained of all funds. Hospitals also use residents as cheap labor to do grunt work like draw blood and change IVs, which they justify as “training”. In 2013, a study estimated that the average resident costs a hospital around $120,000 (including salary) to maintain, but federal subsidies usually cover about $100,000 of this. The work these residents do generally translates to a value of around $200,000. The profitability of residency therefore speaks for itself, which is why, between 2003-2013, the total number of residents grew by 20%. This growth of residency has occurred despite the passage of legislation all the way back in the 1990s intended to curtail the number of residents and the subsidies hospitals receive to train them. Organizations such as the American Hospital Association (AHA) have been able to lobby Congress to allow the practice to continue to grow. This book doesn’t explain how this lobbying has been so effective, which is why Richard Lachmann’s “First Class Passengers on a Sinking Ship” is essential reading.
The pharmaceutical industry is another pillar of the American medical-industrial-complex. Most modern pharmaceutical firms grew out of 19th century small businesses who sold unreliable potions without quality controls. In 1906, to regulate these small tonic/elixir makers, congress passed the Wiley Act (AKA the Pure Food and Drug Act) to monitor and regulate drug safety. Since most of the drugs back the didn’t actually do anything, the Act’s focus was more on preventing them from harming people rather than making sure they actually functioned as advertised. In 1938, the Wiley Act was replaced by the Food, Drug, and Cosmetic Act, which required government regulated testing before drugs could be marketed. For the first time drug manufacturers were required to prove to the young FDA that they were both safe and effective. Here is where a modern loophole was born: drugs had to be proven to both safe and more effective than doing nothing at all. This has never been refined, meaning that drugs today do not have to be compared to other drugs in terms of their efficacy. Drugs of similar/lesser qualities can therefore populate the market without being tested against each other. Pharmaceutical companies use this loophole to create drugs of lesser quality to those that already exist, then take over the market by outspending their opponents on marketing (btw drug advertising is banned in pretty much every developed country not named the United States of America) and legally bribing doctors to prescribe the drug. In 1980, the Bayh-Dole Act was passed to allow businesses to patent and commercialize inventions developed under federally funded programs, further reallocating funds from the working class into the pockets of drug companies. By creating a drug enforcement system characterized by strong patent protections and weak price controls, the United States became the global hub for drug manufacturing. By the early 2000s global drug makers spent over 80% of their money in the U.S. Today, the number of patents registered for the same drug have ballooned from an average of 2.5 in 1990 to 3.5 in 2005. By changing small, inconsequential parts of a drug or its production process, pharmaceutical companies can use patents to prevent other companies from being allowed to use their drug formula, thus inflating the prices of drugs (which that should already be public goods but aren’t thanks to the Bayh-Dole Act). This is why the pharmaceutical industry has grown twice as fast as the rest of the economy since the 1990s.
A final major pillar of our failing healthcare system is the medical device industry. Americans pay way more for medical devices than the rest of the world. Although it only costs about $350 to manufacture a hip or knee implant, the price to receive a hip or knee implant is usually around $36,000 in America; defibrillators cost people around $40,000 even though their actual parts consist of just a battery, some wires, and pads. The medical device industry is controlled by an oligopoly of a few massive producers/cartels. For most devices customers only have the option of buying from 1 of these conglomerates. For example, if you want a knee replacement in America your only options are to buy from either Stryker, Zimmer Biomet, DePuy Synthes, or Smith & Nephew. These corporations work together in groups like AdvaMed or the Medical Device Manufacturers Association (MDMA) to lobby congress and insure little to no new taxes or substantial price controls get placed on them. Device manufacturers have also used their muscle and take advantage of legal loopholes to more likely get their devices classified as class 2 by the FDA rather than class 3. This means that their devices go through a much less rigorous and scrutinous testing process by the FDA (the FDA spends around 20 hours evaluating class 2 devices vs 1200 hours evaluating class 3 devices). This results in devices being sold on the market with very little testing done, including not even being tested on animals or given clinic trials before being put into humans. Medical devices today are therefore much more dangerous than they should be.
Since profit is the overriding goal of the healthcare industry, funding does not go to “cure” research, as permanent cures aren’t as profitable as temporary ones. Take insulin for example. Most “advances” in fighting type 1 diabetes are just different ways to administer insulin (ex: different injectors, more fancy pumps, etc), whose price continues to skyrocket, while research towards actual cures must be crowdsourced. Instead of spending money on research, the healthcare industry as a whole spends around $500 million annually lobbying congress (more than any other industry). The industry itself, at its very base level (I.e at the sites where you actually get care from), is dominated by monopolies or cartels. There are virtually no competitive markets in America when it comes to healthcare services offered by hospitals. This is why, as far back as 2014, there was a historical number of hospitals mergers (95 that year), and this practice only continues to fester, leading to less competition and more monopolies as time goes on. As power and market share concentrates in fewer conglomerates and competition is squeezed out, these monstrosities can negotiate more effectively with insurance providers. They also tend to over test patients, while there are studies which show less independent hospitals leads to more inpatient death, suggesting that not only do these conglomerates over-treat/over test, but the treatments they give are often ineffective.
The book the fails to really give any reasonable suggestions on how to completely overhaul this system. It immediately concedes that the solution of single payer health insurance (AKA the government provides health insurance to everyone, and those who want more than what government insurance offers can opt out and pay for more expensive, but much smaller/less powerful private insurance firms) and socialized state-run healthcare is impossible in America today; it doesn’t really say why, as the book never gets into the actual nuts and bolts of healthcare under capitalism (again read Lachmann). It then provides completely half-assed solutions such as “ask your doctor to provide you with concrete data on how much each service they offer will cost you”. Yeah good luck with that.