Michigan Association of Health Plans

Does Health Care Need to Cost This Much?

Originally published by The Wall Street Journal 

In “Why We Spend So Much on Health Care”  (U.S. News, Aug. 1) the graphic comparison of health-care spending and life expectancy between the U.S. and some OECD nations represents a massive wake-up call. Our nation’s health care is the most important threat to our nation’s autonomy. Our current strategy for health-care reform is unlikely to solve its cost and quality problems. As a result, the increasing portion of our nation’s economy allocated to health-care spending will eventually, if not reversed, bankrupt our federal government.

We should all take a deep breathe and acknowledge our nation’s long-term, future predicament. Our preoccupation with its cause is drowning out the reality of its future occurrence.

Paul J. Nelson, M.D. Omaha, Neb.

Your timely article misses three key points on why the U.S. spends so much more on health care than other developed nations. First, our administrative costs are a much higher percent of spending owing to the multitude of payment systems for health-care costs from self-pay, to multiple insurance companies, to multiple government payment systems. Second, our physicians earn more than peers in other nations and our hospitals charge more, leading to much higher procedure costs. For example, the average cost of hip replacements in the U.S. ($29,000) was nearly double that of the U.K. ($16,300) in 2014 (Kaiser Family Foundation). Finally, unlike most other OECD nations, our government doesn’t negotiate pricing with drug companies. Had your charts included these factors, readers would have an even better sense of why our health-care bills and share of GDP spent on health care exceeds that of other nations.

Kay Plantes, Ph.D. La Jolla, Calif.

I will keep this article on health costs because of the density of information it contains regarding the financing of health care. One graph that I didn’t see is the suicide and burnout rate of doctors, which I believe mirrors the unhappiness of patients. The other trend I didn’t see documented is the increasing number of physicians employed by hospitals, which apparently has had no effect on decreasing health-care costs. The last graph does explain why health care will only deteriorate in the years ahead, documenting the increase in lobbying spending by the health-care industry.

Brian Kent, M.D. Tulsa, Okla.

The most instructive point in your analysis of health-care costs is with respect to consolidation and how that drives up prices. True enough, but the entire system is rigged to let the hospitals avoid competition. States adopted certificate-of-need laws starting in the 1960s and that limited the availability of beds and other hospital services. That regulatory burden protected the hospitals from competitive forces by prohibiting new hospitals and services unless they could demonstrate a need, of course, adopted with good intentions. The assumption was that unlimited access would drive up costs for care. It had the opposite effect—the limitation on new hospitals and services entrenched the current providers and permitted them monopoly (or at least oligopoly) pricing power. The added consolidation is only heightening the impact.

The irony is we know (and your article implies it) that increased competition, not reduced competition, will have a damping effect on pricing. So eliminate the certificate-of-need requirements and we’ll see how the market will work to reduce pricing.

Jay Kirschbaum Chesterfield, Mo.

Read the full story at The Wall Street Journal