The Price We Pay: What Broke American Health Care--and How to Fix It

by Marty Makary

The doctors replied that, on average, they believe 21% of everything done in medicine is unnecessary.4 Breaking it down further, the doctors in that survey estimated that 22% of prescription medications, 25% of medical tests, and 11% of procedures are unnecessary. Literally billions of dollars are spent on care we don’t need.

Our team eventually identified about 1,100 U.S. churches, synagogues, and mosques that served as vascular screening centers13—despite a scientific consensus that people should not be screened this way for this disease.

Hospital officials confessed that they inflate bills more and more each year to generate more revenue since their insurance companies pay only part of the sticker prices. Insurers confessed they demand bigger and bigger discounts in their contracts with hospitals in order to keep up. Both acknowledged that they pass on higher hospital bills to the public in the form of higher insurance premiums.

Hospitals, in order to ensure they have enough cash on hand on a macro level, spend a lot of energy playing the markup and discount game. In fact, they are consumed by it. For example, if a hospital made $100 million the prior year, dialing up all bills by 5% as their expenses go up by 4% is a safe bet without having to accurately itemize every service. Hospitals use software called the “chargemaster” that automatically inflates prices to achieve a desired margin.

One study found that for every ten doctors, the average U.S. hospital has seven nonclinical full-time-equivalent (FTE) staff working on billing and insurance functions.13

In 1969, the IRS became less clear on what qualifies a hospital for tax exemption.7 It created the “community benefit standard,” which recognizes the “promotion of health” as in and of itself a charitable purpose. Hospitals were no longer required to have a demonstrated level of charity care to become tax exempt. This new lower standard created debate about the minimum requirement to establish a “community benefit.”

The law is clear in the United States. Hospitals are required to treat patients during an emergency, regardless of insurance status.

The day the polio vaccine was announced as safe and 90% effective, Jonas Salk refused to commercialize it or obtain a patent. He and polio vaccine developer Albert Bruce Sabin, a physician at Johns Hopkins, refused to make money from their discovery. Salk and Sabin had seen firsthand how polio paralyzed as many as 20,000 children each year, sentencing some to life in an iron lung machine. Our hospital had wards of them. But Salk and Sabin believed that the polio vaccine was the property of humanity. Because of their compassion, most of the world’s children quickly had access to the medical breakthrough.