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

by Marty Makary

Over the past two years I visited 22 cities across America, listening to each of health care’s stakeholders: hospital and insurance company leaders, policy makers, doctors and nurses and others.

Patients are willing to let me put a knife to their skin within minutes of meeting me, or to divulge secrets they’ve kept for a lifetime—just because I’m a doctor. In exchange for this trust, doctors like me promise to do our best to help, a contract articulated in the Hippocratic Oath.

This story reminded me that we don’t have malicious leaders in health care; we have good people working in a fragmented system.

Overtesting, overdiagnosing, and overtreatment are now commonplace in some areas of medicine.1,2,3 And the prices are so high that patients can’t pay the bills. About one in five Americans currently has medical debt in collections and half of patients with certain medical conditions, such as women with stage 4 breast cancer, now report being harassed by a collection agency for their medical bills.

one of the greatest risks to our economy: health care costs are increasingly suffocating business in America.

“Ballooning” and “stenting” refer to the way doctors insert tiny inflatable devices or wire cages into arteries to spread open blockages that restrict blood flow. It’s been going on for decades, but primarily in heart vessels.

Task Force that clearly state that there is no evidence to support screening for peripheral artery disease,2,3 many of them do a test to see if there are any blockages in the leg arteries, and then follow up with a procedure to improve circulation. Heart stenting nationwide was on the decline. But leg is the new heart.

“Where are they finding all these patients?” I asked Chatrathi. “In churches,” he replied.

The congregants had turned into patients. It might seem like a selfless act of community service. After all, here were medical providers examining patients in a church filled with underserved minorities. But after talking to Dr. Chatrathi, I saw this scene in a different light. These medical providers weren’t serving; they were prospecting.

This test should not be performed unless a patient has serious symptoms, like crippling leg pain. For anyone else, it’s likely to lead to medical care they don’t need, which can be expensive and dangerous.

And the woman being tested probably thought testing was good for her health. She would be responsible for a small portion of the cost, but all of us would pay for the rest of her bill through the Medicare program.

Rather than showing up to help patients, this practice was panning for gold.

health screening can be a double-edged sword. It can be a powerful tool to detect disease and prevent tragedy. But it can also be a business model to recruit patients for treatments they don’t need.

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.

Many of the crises we face in medicine today are not naturally occurring viruses or other hazards from nature. They are manufactured, like the crisis of smoking, or opioid addiction, or antibiotic resistance.

Leg artery procedures can generate $100,000 in one day when a doctor owns the facility. By comparison, I earn about $2,000 per day doing cancer surgery.

Doing a procedure pays well, but taking time to explain the importance of exercise, which increases leg circulation, pays poorly. I already knew our medical system gives incentives for us to perform procedures, whether patients need them or not. But the church health fair had vividly shown me just how prevalent unnecessary medical care had become.

Patients make decisions based on how we present options to them. We just give them a nudge.

More than 300,000 appendectomies are done in the United States each year, each with a hefty price tag. Most of these patients can be treated with antibiotics alone.

Sometimes we steer patients toward what’s best for them. Sometimes we steer patients toward what’s best for us.

By the time they’re done ringing the cash register, Medicare has spent approximately $10,000 per person, a cost that’s passed along to every other American. Private insurance will pay up to triple that amount for the same procedure.

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.

Varicose veins are typically a cosmetic problem. But the pamphlets and posters at the church fair made them sound life-threatening.

With every trip to a church health fair, we were saddened to see happy, grateful people, mostly African Americans, being fleeced by white physicians and their staff.

he felt used by the doctors he had been letting into his building. After that meeting, the pastor banned the vascular screening group from coming back to his church’s health fairs.

The idea of the medical industry intruding on Sunday worship brought to mind the biblical account of Jesus throwing the merchants out of the temple.

Bishop Brown thanked me. “We are just trying to take care of our people,” Bishop Brown told me. “Unless someone with expertise is honest with me, I don’t know what to believe.”

Collectively, the two root issues driving health care’s cost crisis—the appropriateness of care and pricing failures—would become increasingly vivid.

By being proximate to the problem, they are charting a way forward.

The politicians debated how to fund health care, but what we really need to talk about is how to fix health care.

Before Adam got discharged, a hospital representative came to his bedside to talk finances. He explained that the operation would cost $150,000. Henri and his parents had no way to know whether this was a fair price.

Henri’s family was disturbed by the ethics of a hospital that would try to charge $150,000 for something they would do for $25,000. They didn’t expect a hospital to operate like a used car lot. Their trust had been shattered. I empathized with them. The hospital had tried to take advantage of them when they were vulnerable.

we see the same markup and discount game in medicine. Hospital charges are notoriously inflated—and hard to pin to any actual costs. Each insurance company negotiates a different discount, which varies depending on who has the leverage. The result is that insured patients don’t pay full price, unless their insurance carrier doesn’t have a contract. Then they’re “out-of-network” and face whatever the hospital decides to charge. The only difference between the game in car sales and health care is the size of the margin.

The research showed no correlation between surgery price and quality.

The analysis revealed some markups to be 23 times higher than what was paid by Medicare (the government’s insurance program) for the exact same service.2 Were hospitals that tacked on giant markups simply located in poorer communities where patients were less likely to pay their bills? Our research found no association. It seemed strange that some hospitals just happened to have excessive prices while others did not.

“We have to make up the cost of taking care of the uninsured.” But was that true? Were they really forced to upcharge some patients to compensate for charity care?

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.

What does the game do? For one, it makes it nearly impossible for patients to know in advance what they will pay, but it enables insurance companies to have an agreed-upon discount rate on hospital bills. That discount rate is different for every hospital and a highly guarded trade secret. From talking to enough people in the industry, I learned that the secret discount that an insurance company gets ranges from 4 to 90%.

one hospital staff member told him he would not be able to find out the cost until after the baby had been born.3 And that’s for childbirth, one of the easier quotes to track down, since so many people are now asking.

When it comes to pricing, I don’t believe they’re intentionally hiding what’s available to them.

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.

Half of the Amish people we interviewed said that when they or a relative gets a serious sickness, they take the Amtrak train to Mexico. Why? Because the medical quality is good and the prices are fair and disclosed up front.

Uninsured patients who make too much money to qualify for Medicaid also get hit with the inflated sticker price. If they don’t pay up, they get sent to collections, which means they’re hassled by debt collectors and have their credit ruined. Debt collectors can be ruthless and often violate consumer protection laws.

“surprise” bills—bills for costs a patient presumed were covered by insurance but were not. About half of these bills are for lab work, facility charges, or imaging tests.6 The other half of surprise bills are generated by doctors working behind the scenes, such as pathologists or radiologists, who may be out of your insurance network, meaning they don’t have a negotiated discount rate with your insurance company.

The markups certainly did not correlate with the amount of free medical care the hospital was providing, or with how poor the patient population was.

Think of the problem of being out-of-network. The recommended solution is to join the network. The game proposes a solution that exists only because it created the problem in the first place.

“The law allows us to charge whatever we want. If we want to charge a million dollars, she has to pay it.”

hospitals and insurers have small armies of business people who negotiate discounts. Doctors and nurses don’t see these people. Their offices are off campus, even tucked away in the tallest skyscrapers in some big cities.

The game creates a giant middle layer of health care: the repricing industry, dedicated to negotiating bills among three or four parties after care is delivered.

health care stakeholders spent $514 million lobbying Congress in 2016.