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The Biggest Shell Game in the World

The Biggest Shell Game in the World

Healthcare has been all in the news these days with the U.S. Senate considering its version of whatever is to replace Obamacare. So it seems fitting to take a look at the intractable morass that is the American healthcare system. Which, as I see it, is better seen as the biggest shell game in the world, and as long as it is, resolving the issues surrounding it are likely to remain intractable.

You probably know what a shell game is. That’s the scam that sometimes crops up on city streets where the scammer, also known as a tosser, places a small ball or pea under one of three shells or cups, and then moves the shells or cups around on the table. The marks – people betting they can beat the tosser – have to guess which shell or cup contains the ball or pea. But of course the game is rigged, often with the ball or pea surreptitiously removed from the table altogether, so the marks lose their money. And that, of course, is the scammer’s objective. They’re not in the game for their health.

Now I don’t claim to be an expert on our healthcare system, but I’ve engaged with it enough and watched some of its inner machinations over the years to see how it resembles a classic shell game. You’ve probably seen it, too. How about those band aids that show up on the hospital bill for $8 (or whatever the current going rate is – a hospital in New Jersey charged a patient $8,200 for a band aid on a cut finger, plus $800 for a tetanus shot and a few other basic things). Or those $15 Tylenols, which can add into the hundreds of dollars during a typical hospital stay? And what about those nameless “specialists” who rush up to patients as they’re heading into the operating room so they touch the patient’s arm, crack a joke or two, and then send a sizable bill for hundreds or thousands of dollars for their “services.” And then there are those “itemized” hospital bills that can run pages long. Ever try checking one of those for “errors”?

I’ve done some research, too. For instance, the average cost of an MRI in the U.S. is $2,611. But price around to various hospitals and health centers, and you’ll find costs ranging from about $1,000 up to twice the national average (that’s what I found). Doing some number crunching, I determined the actual cost, depending on the rate of utilization and maintenance costs for any given installation, should be in the $250 – $500 range, which is close to what an MRI costs in Canada when paid for privately or with private insurance. The national average cost of a CT scan is $1,200, but the actual cost can range from $250 to $4,600. And during the discussion going on in the past week, I heard one person say they actually paid $9,000 for a CT scan. And that was after pricing around and driving something like 60 or 80 miles to get to it. What a deal!

The shell game doesn’t end there. A three-day hospital stay costs, on average, $30,000, and the average emergency-room visit runs $1,233. But I personally know of a case where someone was billed $6,300 for a four-hour visit where she spent most of that time sitting in a room by herself with a monitor draped around her neck. And that was 10 years ago. Yet, there are community health centers where one can be seen and treated for $20, or less. I’ve even had minor surgery at one of these centers, performed by a doctor, for $20. I can’t imagine what the same procedure would have cost had I gone to a hospital or private clinic.

Costs can also vary enormously, depending on whether one has insurance, the kind and terms of the insurance, is on Medicaid, pays cash, pays on time, or doesn’t pay at all. All these factors, which go to the heart of how our healthcare system is run and costs are assigned, guarantee these results. And the problems go beyond healthcare, reaching down into our educational system, where the outrageous costs of medical school cause medical students to run up enormous student-loan debt, often of a quarter of a million dollars and more. While eventually many of these medical graduates will earn significant salaries, the salaries for recent graduates and residents are a far cry from generous, falling in the range of $51,000 to $66,000 per year, before taxes, for an 80-hour work week. Taking that $51,000 figure, a new doctor working 48 weeks a year is averaging $13.28 an hour, less than many retail employees.

While the House, the Senate, the Administration, the Congressional Budget Office, and commentators on all sides of the current healthcare debate parse the finer points of the various bills and proposals on the table, the bigger issues seem to be lost in the cacophony. I can’t help but think that the special interests, the insurance companies and industry lobbyists, are given more consideration than the lowly patient. And whenever one hears the word “comprehensive,” it’s time to run for the exits since the fix is almost certainly in.

Perhaps the biggest issue of all concerns the near-complete divorce of healthcare costs from market forces. Healthcare providers, whether hospitals, private doctors, diagnostic labs, or clinics, are essentially businesses and, in aggregate, they form an enormous industry. In what other business or industry are costs not known, not set out in formal tariffs or schedules, and not subject to public scrutiny? Even airlines, for all their multitudinous fares and conditions, are forced to lay out their tariffs, and before customers buy tickets they know exactly how much they will cost.

While government regulates – to various degrees of effectiveness – the nature and quality of healthcare and medical practice, it does little to promote market forces. It is my contention that any healthcare provider should be required to post the rates or costs for any given procedure, action, or item. Even if there are different tariffs for different methods of payment, the consumer will at least have something to go on in deciding how and where to spend his or her healthcare dollar. And this will inevitably lead to price competition between providers and a brake on upwardly spiraling costs.

This divorce of healthcare costs from market forces also stems from how many Americans obtain their insurance, which is paid for or subsidized by their employers. There is no incentive for many Americans to price around (even if they could, given the price morass) and obtain the best bang for their buck. “Oh, the insurance will cover it,” is often the refrain. Now some insurance policies and plans do enforce certain limits on what providers within the plan can charge or be reimbursed for, and that helps control costs to some degree, but there is often a downside to the insured.

One downside is a limitation of choice, but the other side is the cost of administering these various insurance plans, approvals, billing, and so forth. In the U.S., 25% of healthcare spending goes to administrative costs. A full quarter of what we spend on healthcare. In our neighbor to the north, Canada, the administrative burden is half that – 12% – and most other countries have far lower administrative burdens than ours. Perhaps the only country that comes close to our burden is The Netherlands, with a 20% administrative burden.

While the U.S. often is criticized for lack of public support for healthcare, in fact our governments, federal, state, and local, spend more on healthcare than that spent by the governments of most other OECD countries. Overall per capita spending on healthcare puts the U.S. at the top of a list of 13 high-income countries – more than $9,000 per year, nearly three times the OECD average and more than double the next biggest spender, France – it is also near the top of the list of countries in public per capita spending on healthcare. Only Norway and The Netherlands spend more public funds on healthcare than the U.S., while Switzerland and Sweden rank just below the U.S. In fact, per capita public spending on healthcare in the U.S. is a third higher than in Canada.

What this indicates is that the U.S. does – and doesn’t – have a spending problem when it comes to healthcare. We’re certainly spending much more than what other countries are spending on healthcare overall, and even our public spending on healthcare exceeds what most other countries spend. But we’re not getting the results of some other countries in terms of total coverage of the population. And while it’s true that U.S. health results, measured in terms of life expectancy, infant mortality, and some other indicators, are below those of other countries even with our high outlays, there are mitigating factors influencing those results that are not as present in other countries.

By most standards, the quality of care in the U.S. is good, even excellent. And compared with other countries – including, again, our neighbor to the north – waiting times to see doctors, referrals to specialists, and to receive diagnostics and operations are significantly lower overall, though these can vary significantly from one area or region to another. While gaining access to the healthcare system can pose a challenge to many Americans, once that access is gained things tend to work pretty well, and better than in some countries with so-called universal coverage.

So where do we go from here? Okay, I have some ideas. These are my proposals, and while I can’t cite empirical data supporting their efficacy, I think they merit serious consideration and may allow us to gain control over this nationwide shell game:

● Introducing market forces by requiring all healthcare providers to develop, publicly post, and operate under specific costs and tariffs;

● Instituting public oversight of costs and charges of healthcare providers, including hospitals, clinics, private practitioners, and diagnostic labs, and allowing private suits and administrative processes challenging unreasonable or unsupportable costs;

● Encouraging individual initiative by expanding health savings plans where people can set aside a portion of their income to be applied to healthcare costs, and allowing them to roll over funds not expended from year-to-year;

● Encouraging employers to offer their employees allowances which employees can use to shop around and acquire their own insurance plans (often at lower cost than group policies), and further allowing tax deductions to cover insurance premiums and other healthcare costs;

● Allowing insurers to offer a variety of plans covering a range of services, and not requiring services that a given insured determines he or she is unlikely to need, such as mental health services or pregnancy coverage;

● Not restricting insurers to certain states but allowing them to operate across state lines;

● Taking steps to reduce the administrative burden and associated costs;

● Directing greater public funding toward community health centers and using these centers to provide health care, on sliding cost scales, especially to lower income and uninsured parties;

● Encouraging formation of healthcare cooperatives, both private and public, and allowing both insured and uninsured people to join them;

● Developing public policies and pressure to reduce the cost of medical education;

● Allowing write-offs of most or all debt or costs incurred by medical students in return for a certain period of service, at reduced salary levels, in rural and other under-served areas (as is done in some countries);

● Developing policies increasing the numbers of medical, nursing, and allied health students to address national shortages in these fields, applying the law of supply and demand to reduce costs and improve access;

● Applying both public and private initiatives to controlling the cost of pharmaceuticals;

● Instituting reasonable limits on medical malpractice claims to help contain the cost of malpractice insurance.

Again, I don’t claim to be an expert on healthcare, and I don’t claim to have all the answers. But I think these steps could go far toward expanding access to healthcare, controlling costs, and getting the runaway train of American healthcare back under control, without further straining public budgets. And it’s time we put a stop to the shell game inherent to the American healthcare system.

I welcome comments, criticisms, and other suggestions to what is said and proposed here. And please share this posting with your social networks and others who might have interest in the topic.

This piece also appears on Medium. Follow me there, and here, and if you like it please comment and share it.

2 Replies to “The Biggest Shell Game in the World”

  1. Looking at the prices you give here, for some of the basic procedures, just simply horrifies me. Living in France, the cost for a simple scan is around 70 euros, a head scan is around 35 euros and to have an appointment with a specialist doctor is around 28 euros. A basic 5 days hospitalisation is around 6500 euros and after our social security and medical insurance has paid for most of this, the amount left for us to pay would be around 2300 euros. We often joke about how if we fall ill while visiting the USA, it’s cheaper to put up with the pain and catch a flight back to france than to get treated in an american hospital! Those prices are simply outrageous. I have heard about pregnant women tourists, finding themselves giving birth in the US and then being unable to pay the amount demanded, having to get family and friends to help out for donations! I don’t know at what point the medical costs blew up to such heights. In France, the government has capped the amounts demanded by hospitals because if the prices were too high, people wouldn’t be able to afford having treatment and would actually refrain from consulting doctors to get better when the health problem was minor and by the time they were being urgently hospitalised, their medical situation was much worse and would ultimately cost way more. Reason why the price for a scan is so low – better to incite people to have cheap preventive analysis than to wait for things to get worse and at the end cost way much more for everybody.
    Of course, although lots of countries admire the French Social Security system, is not “perfect”. When it was first put in place, the idea was that the full time working and healthy population would finance it for those who were ill or in poor health. But the reason why the social security budget has been in the red for so many years is because of an increase in unemployment (so less working people funding the budget) but also the french tendancy to pop social security funded pills or consult their doctors for just about every twinge of pain in their little fingers. And as always, there have been people who have systematically chosen to profit and abuse of the generosity of the system. But more recently, the successive governments have chosen to reduce the types of medication that get reimbursed by social security; mostly treatments that were not 100% effective or were more “comfort” treatments. Most of the companies in France propose a secondary health insurance cover to their employees for a small amount of money per month and taken directly out of the paycheck. The insurance plan often covers the wife and children too. So depending on the insurance plan conditions you have, when you stay in hospital, the national social security will reimburse you a certain percentage of your costs and it’s possible that your insurance will pay back 100% of the remaining costs – meaning your hospital stay won’t cost you anything ! In some cases, the insurance will only cover a certain limited percentage of the costs, so you’ll still have to pay a certain amount but it’s still a much lower amount than the original cost.
    Each company chooses the additional health insurance company for it’s employees and negociates the best conditions for them. But the employees are not obliged to choose it. They can choose to take their own health insurance company or use the one their spouse has from his/her company. But the advantage of using the one provided by our employer is that in a large company, the deal negociated by the employer is really good, because the insurance company knows that a large number of employees signed up is worth giving some good prices and good reimbursement coverage.

    Of course, all this is the result of months and sometimes years of constant negociations between the successive governments, the trade unions and employee representatives, the industries and the health insurance companies.

    The main issues we have in France mostly concern geographical areas that have no longer have enough doctors or specialists – and this either means people have to wait longer to see one or they have to travel long distances to get an appointment. And there is also the situation of the younger medical students preferring to go into private practices than to go public and this means that lots of aged public doctors or specialists are retiring without a replacement to take over their clients/patients.

    But at least, whether the government is on the left, the right or in the middle of the political scale, never would one side choose to completely repeal/replace the existing system put in the place by the opposition. And they would never let themselves be influenced by Medical Industry lobbying. Each time it has been found out that such or such Government minister or senator working for the Health ministry had previously worked for a medical conglomerate with biased influenced views, this person is usally pushed out of the government.

    It’s a pity that indeed, the US situation is looking like a Shell Game scam. Because to the difference of a shell game, where all you risk at loosing is our money, in the real world, the risk is that people will die if they can no longer get healthcare or if they cannot even afford the most basic of treatments. It might become the same situation as that imposed by one of America’s most hated people, Martin “Pharma Bro” Skreli, buying a HIV life saving treatment company and bumping the price up from $14 to $750 over night. And there is also a similar situation with the life saving EPIPEN injector, with the Mylan company hiking the price from $100 to $600. One has the impression that it is no longer the well being of the patients that counts but pure greed. Yes, we know that the cost of developping new treatments is very expensive but this in no way justifies the nearly criminal price hiking of treatments that have been selling for years. If anything, these products should be sold cheaper after a few years.

    The US healthcare is not meant to be for only for a privileged few that can afford it but it should be accessible to all. The government shouldn’t claim that everything in the existing healthcare system is all bad, but look at what works and keep that and concentrate on the parts that need improving on.
    Your bullet point list is a very sound one, especially for someone who is not a specialist in this domain – and seems to be better than some of the points suggested by so-called eminent Specialists.
    It’s just a pity that the americans health and well being has become a political quagmire battle and a possible smoke screen for potential tax cuts and scams.

  2. As an American I’m also horrified by the costs of many basic procedures here, all the more so because what they represent is cost shifting from one patient to another and not representative of the actual costs. Thus, the “shell game” comparison, which I think clearly applies.

    For someone with insurance, as I finally have been able to obtain with a supplemental plan under Medicare — our program for people 65 and over — after many years without it, the costs I pay for various services and tests is equivalent, or even lower, to those you cite. And then there are the community health centers I mentioned which, by observation, I don’t feel are sufficiently promoted, funded, or used. We do have some things that work, but overall things are out of joint, and the political arguments on both major sides of the aisle widely miss the mark, in my estimation.

    BTW, anyone traveling to the U.S. is strongly encouraged to obtain a travel health insurance policy, assuring that the coverage extends to the U.S. (not all do, largely due to the high healthcare costs here).

    While not everything employed by the healthcare systems of France or other countries necessarily would work here, clearly more can be done to get a grip on healthcare costs and, inherent to them, access to the system. And I think the first and most important step is bringing market forces to bear, as I say in my piece. Without that, and a degree of oversight over charges, there is simply no incentive for providers to control costs and things will continue to deteriorate, regardless what law or government program is in place.

    Thanks for your useful and interesting observations.

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