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Ensuring better and more equitable healthcare for US citizens

By Mindo - 19th Dec 2018

Health insurance in the US is essential to receive medical treatment. However, frequently, it only solves part of the problem because families can still face crippling medical bills not covered by their policies, an issue that has sparked moves by a growing number of US States to tackle soaring costs.

It is an ‘across-the-board’ issue that can affect everyone, from young families to the elderly. It was highlighted when it emerged in October that American prize-winning Nobel physicist Dr Leon Lederman, who died at the age of 96, had to sell his Nobel Prize at an auction to help pay his medical bills in a nursing home.

There was also the case of a family who received a bill for $18,000 (€15,000) from a San Francisco hospital when their infant son spent three hours there after a fall, had a nap in his mother’s arms, drank some infant formula and was discharged a few hours later.

The bulk of the bill was a $15,666 fee labelled ‘trauma activation’. That essentially meant assembling a team of medical professionals that can meet a patient with potentially serious injuries in the emergency room. A night in an American hospital, usually not including tests and treatments, costs an average of $5,220 (€4,500).

In the case of Dr Lederman, who died on 3 October and who won a Nobel Prize in 1988, he was reduced to selling his prize in 2015 for $765,000 to help pay medical bills in a nursing home. A private room in a nursing facility costs, on average, $7,698 (€6,670) per month. And Medicare, which covers the vast majority of Americans over the age of 65 years and those with permanent disabilities, generally does not cover long-term nursing care.

Dr Leon Lederman, Nobel prize winning physicist

Soaring costs

The soaring costs of drugs and high-tech medical care are a major part of the problem. The US has one of the highest per capita expenditures on healthcare, with estimates suggesting that by 2020, it will spend approximately 28 per cent of its GDP on healthcare. Ireland currently spends 7.4 per cent of its GDP on healthcare.

The problem is exacerbated by the fact that when Americans can’t afford to take the drugs they need or can’t afford to take them as often as recommended, their illness becomes worse and ultimately more expensive to treat. Thus, medical professionals say, medication adherence by patients is critical in helping to control costs.

“Medication non-adherence is a significant contributor to avoidable healthcare costs in this country,” according to Drs Aurel Luga and Maura McGuire of Johns Hopkins University, writing in the journal Risk Management and Healthcare Policy. They estimate that between $100 billion and $300 billion of avoidable healthcare costs have been attributed to non-adherence in the US annually, representing 3-to-10 per cent of the country’s total healthcare costs.

“While the impact on disease outcome and cost is more pronounced in some illnesses than others, stakeholders agree that increasing medication adherence would improve health outcomes and save billions of dollars,’’ they conclude.

Valid as these concerns are, they do not address the bigger problem of the skyrocketing costs of drugs in America. A US Senate report this year titled Manufactured Crisis: How Devastating Drug Price Increases Are Harming America’s Seniors, found that the most commonly used brand-name drugs for seniors are increasing at 10 times the rate of inflation.

The price of 12 out of the 20 most commonly prescribed brand-name drugs for seniors increased by over 50 per cent in the last five years, while the price of six of the 20 increased by over 100 per cent. In one case, the manufacturer list price for a single drug increased by 477 per cent over a five-year period.

Although 48 million fewer prescriptions were written for the top-20 most commonly prescribed brand-name drugs for seniors between 2012 and 2017, total sales revenue resulting from these prescriptions increased by almost $8.5 billion during the same period.

On 10 October, President Donald Trump signed two Bills banning ‘gag clauses’ that keep patients in the dark about how to save money on prescription drugs. These clauses are sometimes included in the contracts insurers have with pharmacies and they prevent pharmacies from telling customers they can save money on a drug if they pay with cash instead of using their health insurance. But this is a relatively small measure in the grand scheme of things, particularly as regards the issue of the cost of funding the Medicare programme.


Since Medicare was signed into law in 1965, it has provided health insurance coverage for more than 130 million Americans. It pays for healthcare services, including, but not limited to, hospitalisations, physician services, medical devices and prescription drugs.

“Medicare has made a significant contribution to the lives of older Americans and people with disabilities by bolstering their economic and health security and helping to lift millions of older Americans out of poverty,” the Kaiser Family Foundation emphasised in a report looking at ways to sustain the programme.

“Prior to Medicare, more than half of all Americans over age 65 were uninsured and nearly a third of seniors were in poverty. Today, virtually all seniors have Medicare coverage and the official poverty rate among those aged 65 and older is just under 9 per cent,” according to the report. “For younger people living with disabilities, Medicare has also provided life-saving and life-sustaining access to care and treatment that would otherwise be out of reach for many and has allowed millions to stay in their homes rather than be institutionalised.”

Despite these benefits for seniors and people with disabilities, Medicare can still leave patients facing crippling costs because, unlike most private health insurance policies, it does not place an annual limit on the costs that people pay out of their own pockets.

Many Medicare beneficiaries have supplemental coverage to help pay for these costs, but with half of beneficiaries having an annual income of $22,500 or less in 2012, out-of-pocket spending represents a considerable financial burden for many people, as undoubtedly was the case with the late Dr Lederman.

Addressing the funding for Medicare and improving the programme frequently become tied-up in political wrangling, with Republicans generally favouring cuts in the programme and Democrats pushing to expand and improve it.

The core problem, however, is the cost of pharmaceuticals and if this were tackled forcefully, it would bring down the cost of the Medicare programme, while at the same time reining-in healthcare costs for all Americans. President Trump pledged in the past to address this issue but little has happened on the ground and, if anything, the problem has become worse.

By law, Medicare is not allowed to directly negotiate drug prices, which results in the Government spending tens of billions of dollars unnecessarily. Democrats have long pushed for Medicare to be able to negotiate on pricing, while Republicans have opposed such measures. In the past, President Trump has hinted at a willingness to break from his party on the issue, saying drug prices are too high and pledging he would work to bring them down. But, so far, prices have only increased, many at a staggering rate.

Pharma influence

Little change can be expected without a concerted push by the White House. “The pharmaceutical industry’s representation and influence within the Trump administration do not suggest a true desire to address the primary cause of high drug costs for patients— the prices set by pharmaceutical companies. Indeed, the pharmaceutical industry’s influence in the administration is already paying off — for the industry, not patients,” according to Ms Madeline Twomey, Special Assistant for Health Policy at the Centre for American Progress.

“Despite his tough rhetoric on drug prices, President Trump has failed to take meaningful action. “Unfortunately, it seems clear that the pharmaceutical industry’s influence in the White House has led Trump to back away from the bolder proposals he supported during his [presidential] campaign,” Ms Twomey contends.

“Meaningful progress on this issue would require lowering costs system-wide in addition to lowering costs for individuals. In other words, reforms must directly address prices and price increases. While more limited proposals may have positive impacts, significant progress is only possible if Trump tackles the actual prices that pharmaceutical companies have set.”

She cited an analysis by the Pharmacy Benefits Consultants group which found that over the 14 months to May this year, 20 prescription drugs saw price increases of more than 200 per cent. The analysis found that the price of one prescription skin care cream increased by a staggering 1,468 per cent.

However, some States are not waiting for the federal Government to take action to control costs. Up to August this year, an estimated 24 States have passed 37 Bills to curb rising prescription drug costs. The drive to bring down costs may gain momentum in the new Congress in 2019 because Democrats seized control of the House of Representatives in November’s mid-term elections. But Republicans will still control the Senate in 2019, so getting any legislation passed in that chamber will be an uphill battle.

Reasons for high US spending

Meantime, costs are continuing to increase without sufficient return for the high spend. Despite spending nearly twice as much in 2016 as 10 other high-income countries on medical care, the US performed less well on many population health outcomes, according to a study this year in the Journal of the American Medical Association.

The US spent 17.8 per cent of its GDP on healthcare in 2016. The average spending of 10 high-income countries — the UK, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland, and Denmark — was 11.5 per cent. Ireland’s health expenditure was €20.3 billion in 2016, representing 7.4 per cent of GDP.

The conventional wisdom is that healthcare costs are so high in America because the country has too many doctor visits and hospital stays, as well as extremely expensive medical procedures and specialists, while at the same time spending too little on social services for the poor. This notion has been challenged in a study by Harvard TH Chan School of Public Health, the Harvard Global Health Institute, and the London School of Economics, which suggests the prices of labour and goods, including pharmaceuticals and devices, and administrative costs appear to be the main drivers of the problem.

“Contrary to some explanations for high spending, social spending and healthcare utilisation in the United States did not differ substantially from other high-income nations, [so] efforts targeting utilisation alone are unlikely to reduce the growth in healthcare spending. A more concerted effort to reduce prices and administrative costs is needed,” it emphasised. “Prices of labour and goods, including pharmaceuticals and devices, and administrative costs appeared to be the main drivers of the differences in spending,” according to the study.

Experts have previously suggested that high utilisation rates could explain high spending but looking at hospital discharge rates for various procedures, such as knee and hip replacements and different types of heart surgeries, the researchers found that use of such services in the US is not so different compared to other countries. In fact, compared to the average of all the 10 nations cited in the study, Americans appear to go to the doctor less often and spend fewer days in the hospital after being admitted.

Another popular argument is that the US system has an unnecessarily high number of specialists, who typically earn more than general physicians, and that drives up spending. However, according to this report, “the ratio of primary care physicians to specialists was similar between the United States and other high-income countries.”

According to the researchers at the Harvard Chan School, what tends to set the US apart is inflated prices across the board. In the US, drugs are more expensive and hospital services and diagnostic tests cost more. A lot more money is also spent on planning, regulating and managing medical services at the administrative level.

“These data suggest that many of the policy efforts in the US have not been truly evidence-based,” says study author Prof Ashish Jha, Professor of Global Health and Director of the Harvard Global Health Institute. 

Prof Ashish Jha

International comparison

Specialists, nurses and primary care doctors, however, all earn significantly more in the US compared to other countries. General physicians in America made an average of $218,173 (€191,300) in 2016, the report noted, which was double the average of generalists in the other countries, where pay ranged from $86,607 (€76,000) in Sweden to $154,126 (€135,000) in Germany.

As for the drug market, the US spent $1,443 per capita on pharmaceuticals. The average pharmaceutical spending of all 11 countries came to $749 per capita.

Individual services cost a lot more, too. In 2013, the average cost in the US for a coronary artery bypass graft surgery was $75,345 (€66,122), whereas the costs in the Netherlands and Switzerland were $15,742 and $36,509, respectively. CT scans were also more expensive.

The US saw an average payment of $896 (€785) per scan compared with $97 (€85) in Canada, $279 (€244) in the Netherlands, $432 (€378) in Switzerland and $500 (€438) in Australia in 2013. The cost in Ireland is about €250.

Similarly, the mean payment for an MRI in the US is $1,145 (€1,003), compared with $350 (€306) in Australia and $461 (€404) in the Netherlands. The cost in Ireland is about €295.

The average price of an appendectomy in the US, at $16,000  (€14,000), is at least double the average price in comparable countries, according to the Kaiser Family Foundation. The average price of a knee replacement was $28,184 (€24,500) in 2014, or 40 per cent more than the average price in Switzerland, 53 per cent more than in the UK and 77 per cent more than in Australia. The average price of a hip replacement in the US is almost  $30,000 (€26,000), some 50 per cent higher than in Ireland.

“As for salaries, high income may boost performance, and studies have suggested that some countries don’t pay their healthcare professionals enough. What’s more, high wages in the US may reflect the time and higher amounts of money American health professionals must invest in their education and training. Taking this investment into account, however, does not explain the more than $200,000 difference in compensation observed for physicians between countries,” the researchers emphasise.

“As the US continues to struggle with high healthcare spending, it is critical that we make progress on curtailing these costs,” said study author Ms Irene Papanicolas of the Department of Health Policy and Management at Harvard Chan School.

On the plus side, one of the more notable findings in this report is that, at least in some areas, the quality of healthcare in the US fared comparably to other countries. Long wait-times for treatment, for example, are not as much of an issue for Americans as they are elsewhere, not least in Ireland. In treating heart attacks and strokes, the US actually had the best record of any country.

Yet costs and access to such quality healthcare are often insurmountable barriers for many Americans. An estimated 22 per cent of the population has missed a consultation because they could not afford it. Americans also have the lowest rate of insurance coverage compared to similar countries. In 2016, for example, about 10 per cent of the population did not have health insurance.

The point of insurance is to protect patients’ finances from the costs of everything from hospitalisations to prescription drugs, but out-of-pocket spending for people, even those with employer-provided health insurance, has increased by more than 50 per cent since 2010. The Kaiser Family Foundation reports that in 2016, half of all insurance policy-holders faced a deductible, the amount people need to pay on their own before their insurance kicks in, of at least $1,000. For people who buy their insurance under the Affordable Care Act, that figure is higher still — almost 90 per cent have deductibles of $1,300 for an individual or $2,600 for a family.

State laws

More than 20 States also have legislation to protect users from out-of-network costs that can run into many thousands of dollars. In so-called ‘balance billing,’ medical providers that are out of network are unable to reach an agreement with the insurer on a reasonable price for service and the patient ends up being billed for the remainder.

The Kaiser Family Foundation recently analysed medical bills from large employer plans and found that nearly one-in-five inpatient hospital admissions include a claim from an out-of-network provider. The Foundation’s Kaiser Health News highlighted the case of Mr Drew Calver, 44, of Austin, Texas, who had a heart attack that resulted in a four-day emergency hospital stay. Despite having healthcare coverage, he wound up with the six-figure bill of almost $109,000 (€95,000) due to such ‘balance billing’.

State laws vary in their approach to restricting such claims, with some prohibiting them entirely, while others require insurers to pay the charge if necessary, and some do both. In States that have adopted both approaches, out-of-network providers are directly prohibited from balance billing patients for additional charges beyond what the health plan pays. In addition, insurers must guarantee that the consumer is not liable for balance-billing charges.

Fresh hope?

While such moves by States are helpful for patients, fundamental progress in controlling costs is unlikely without the political will at the top in Washington and President Trump is not getting high marks from most experts when it comes to controlling healthcare costs. Some are hoping, however, that the incoming Congress in January 2019 will try to push measures to tackle the problem. In the first weeks of the new Congress, Democratic Congressman Mr Lloyd Doggett of Texas is expected to introduce a Bill, not just to enable Medicare negotiation on drug costs, but to authorise the federal Government to award drug licences to competing companies when manufacturers and Medicare fail to agree on a given medicine price. His party’s leaders have also said they foresee a hostile 2019 for pharmaceutical companies if they continue to resist proposals to rein in prices. 

Mr Lloyd Doggett

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