# Why is American healthcare so expensive? **URL:** \ **Category:** Great Debates\ **Created:** [December 18, 2013, 5:21pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656 "2013-12-18T17:21:54Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [December 18, 2013, 5:21pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/1 "2013-12-18T17:21:54Z")
As I understand it, healthcare problems wouldn’t be such a problem if healthcare costs were brought under control. What is the source of these problems and what portion do they contribute to overall problem? Some issues that I know of include overutilization (e.g. physicians overprescribing tests), an aging populace, a heavier populace, huge rack charges from hospital stays (e.g. $10 for an aspirin tablet), and utilizing emergency rooms for routine care. Also, when it comes to rack charges, I have heard that part of the reason they are so high is to subsidize patients who walk out on their bills. I don’t believe this because such institutions are making huge profits (although they can’t distribute them since they are usually non-profit). What’s the straight dope on that? Also is anything currently being done about this? Is anything in the works? Thanks, Rob ---
**Author:** ![Procrustus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/procrustus/32/2994_2.png) [@Procrustus](https://boards.straightdope.com/u/Procrustus)\ **Post date:** [December 18, 2013, 5:24pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/2 "2013-12-18T17:24:13Z")
Because the people in charge of setting the prices are making a boatload of money this way. ---
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [December 18, 2013, 5:51pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/3 "2013-12-18T17:51:15Z")
Well, sort of. Hospital administrators are very well paid, but they aren’t keeping the profits that the institution rakes in. Another factor that I forgot to mention was prescription medication. What are the margins on such medicines for the big companies like? Thanks, Rob ---
**Author:** ![Procrustus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/procrustus/32/2994_2.png) [@Procrustus](https://boards.straightdope.com/u/Procrustus)\ **Post date:** [December 18, 2013, 5:55pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/4 "2013-12-18T17:55:41Z")
> [@sweeteviljesus](#): > > Well, sort of. Hospital administrators are very well paid, but they aren’t keeping the profits that the institution rakes in. > > Another factor that I forgot to mention was prescription medication. What are the margins on such medicines for the big companies like? > > Thanks, > Rob Hospital administrators like a nice healthy bottom line, profit or non-profit. The other problem is that consumers generally have no incentive to bitch about prices, as they don’t typically pay the bills. The Health Insurance companies do, but, as we know, they’re wildly profitable and not going to rock the boat too much. We also spend a whole lot of money on very old people, who would probably rather we didn’t. ---
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [December 18, 2013, 6:05pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/5 "2013-12-18T18:05:16Z")
We might not pay the bills, but we sure pay the premiums. The health insurance companies don’t pay the rack charges and Medicare, according to the Time article, pays cost. My point about the administrators is that the hospitals may be making a lot of money, but they don’t see it (although they probably get bonuses for not loosing money). ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [December 18, 2013, 6:06pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/6 "2013-12-18T18:06:53Z")
> [@Procrustus](#): > > The Health Insurance companies do [pay the bills], but, as we know, they’re wildly profitable and not going to rock the boat too much. Even worse, insurance companies _like high prices_! Ultimately they get X% of the pie; they want the pie as large as possible. ---
**Author:** ![Keeve](https://avatars.discourse-cdn.com/v4/letter/k/f07891/32.png) [@Keeve](https://boards.straightdope.com/u/Keeve)\ **Post date:** [December 18, 2013, 6:19pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/7 "2013-12-18T18:19:24Z")
I think this thread will end up in GD. It’s just too difficult to come up with objective criteria of which expenses are necessary and which are unnecessary. > [@sweeteviljesus](#): > > Also is anything currently being done about this? Is anything in the works? Ever hear of Obamacare? > [@sweeteviljesus](#): > > We might not pay the bills, but we sure pay the premiums. You do and I do, but plenty of other people don’t. And that’s a big part of the problem. But, as I wrote above, how do we decide how big this part is? Is it responsible for 30% of the situation? 60%? 10% Another slippery factor: Doctor’s fees are high (how high is TOO high?) because their malpractice insurance is high. (Again, how high is too high?) The malpractice is high because of so many lawsuits. (But how many is too many?) Putting caps on these expenses would surely bring prices down, but who will be willing to give up the right to sue in a case where he truly believes that his doctor was incompetent? ---
**Author:** ![yellowjacketcoder](https://avatars.discourse-cdn.com/v4/letter/y/4bbf92/32.png) [@yellowjacketcoder](https://boards.straightdope.com/u/yellowjacketcoder)\ **Post date:** [December 18, 2013, 6:22pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/8 "2013-12-18T18:22:12Z")
John Green offers [this explanation](https://www.youtube.com/watch?v=qSjGouBmo0M) on YouTube. ---
**Author:** ![Procrustus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/procrustus/32/2994_2.png) [@Procrustus](https://boards.straightdope.com/u/Procrustus)\ **Post date:** [December 18, 2013, 6:25pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/9 "2013-12-18T18:25:08Z")
> [@Keeve](#): > > Another slippery factor: Doctor’s fees are high (how high is TOO high?) because their malpractice insurance is high. (Again, how high is too high?) The malpractice is high because of so many lawsuits. (But how many is too many?) Putting caps on these expenses would surely bring prices down, but who will be willing to give up the right to sue in a case where he truly believes that his doctor was incompetent? Actually [no.](http://www.citizen.org/documents/a-failed-experiment-report.pdf) ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [December 18, 2013, 6:26pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/10 "2013-12-18T18:26:46Z")
> [@yellowjacketcoder](#): > > John Green offers [this explanation](https://www.youtube.com/watch?v=qSjGouBmo0M) on YouTube. Can you summarize his explanation for those who can’t or won’t watch a video? ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [December 18, 2013, 6:27pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/11 "2013-12-18T18:27:41Z")
> [@Keeve](#): > > Another slippery factor: Doctor’s fees are high (how high is TOO high?) because their malpractice insurance is high. (Again, how high is too high?) The malpractice is high because of so many lawsuits. This part is probably false. [Tort reform in Texas](http://www.insurancejournal.com/news/southcentral/2013/09/03/303718.htm) was passed presumably to combat this situation. Indeed, the number of malpractice lawsuits went down. Malpractice premiums also went down - almost by half. Cost to customers? [Not so much](http://www.statesman.com/news/news/local/new-study-tort-reform-has-not-reduced-health-care-/nRpcp/). If there is an effect on overall healthcare cost, it doesn’t appear to be a big factor. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [December 18, 2013, 6:29pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/12 "2013-12-18T18:29:30Z")
Every hospital and physician practice spends a decent chunk of money trying to collect money from insurance companies. Meanwhile, every insurance company spends a decent chunk of money processing those claims and denying them when they can. The amount spent collectively on this is a lot. ---
**Author:** ![yellowjacketcoder](https://avatars.discourse-cdn.com/v4/letter/y/4bbf92/32.png) [@yellowjacketcoder](https://boards.straightdope.com/u/yellowjacketcoder)\ **Post date:** [December 18, 2013, 6:35pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/13 "2013-12-18T18:35:29Z")
> [@Dewey\_Finn](#): > > Can you summarize his explanation for those who can’t or won’t watch a video? Sure, sorry about that. The summary is that while there’s a lot of things the US spends more on (defensive medicine, malpractice, extra paperwork, etc) these are a very small portion of the healthcare wastage. The biggest thing is that other countries have a centralized negotiating authority that drives prices down. The example given in the video is: in Britain, the NHS negotiates with makers of artificial hips, and since whoever gets that contract gets the contract for the whole country, there’s great incentive to drive prices down. In the US, negotiating is done on a person hospital or per person level, where you don’t have the influence needed to drive prices down. Except for Medicare, which has notably lower costs than the rest of the US healthcare system. ---
**Author:** ![yellowjacketcoder](https://avatars.discourse-cdn.com/v4/letter/y/4bbf92/32.png) [@yellowjacketcoder](https://boards.straightdope.com/u/yellowjacketcoder)\ **Post date:** [December 18, 2013, 6:36pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/14 "2013-12-18T18:36:58Z")
> [@Dewey\_Finn](#): > > Every hospital and physician practice spends a decent chunk of money trying to collect money from insurance companies. Meanwhile, every insurance company spends a decent chunk of money processing those claims and denying them when they can. The amount spent collectively on this is a lot. If you watch the video I linked (which I realize you can’t now, since I summarized it for you in another post), Mr. Green links the cost of paperwork at $90B a year, compared with $50B a year for malpractice insurance, and $500B for lacking centralized negotiation. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [December 18, 2013, 7:03pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/15 "2013-12-18T19:03:19Z")
Similarly, in Canada, the provinces have a common approach to buying prescription drugs for their health systems, which keeps prices low. In the US, I understand that a law passed by Congress forbids federal agencies from using their marketing clout to negotiate lower deals; they have to pay the list price. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [December 18, 2013, 7:22pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/16 "2013-12-18T19:22:15Z")
> [@Northern\_Piper](#): > > In the US, I understand that a law passed by Congress forbids federal agencies from using their marketing clout to negotiate lower deals; they have to pay the list price. I think you’re referring to the Medicare Part D prescription drug plans, which subsidize drug costs for people eligible for Medicare. Those programs must pay the list price for drugs (which is bonkers) but other federal programs are not bound by this mandate. For example, the VA hospital system can negotiate prices with drug suppliers and does so effectively. ---
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [December 18, 2013, 7:37pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/17 "2013-12-18T19:37:53Z")
So, according to yellowjacket’s vid, the big chunk of the pie is the stuff Bitter Pill was talking about, namely the exorbitant rack charges. This money gets concentrated in non-profit entities who use it mostly to expand their facilities. Still, in Austin, we had to pass a bond issue so that UT Austin could have a medical school. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [December 18, 2013, 7:39pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/18 "2013-12-18T19:39:40Z")
Here are a couple of links to (pre-Obamacare) 2008 NYT articles with some answers to the OP. Originally posted an in older SDMB thread. [Why does US Health Care Cost So Much?](http://economix.blogs.nytimes.com/2008/11/14/why-does-us-health-care-cost-so-much-part-i/) [Part II](http://economix.blogs.nytimes.com/2008/11/21/why-does-us-health-care-cost-so-much-part-ii-indefensible-administrative-costs/) In the first, you will find this: > [@Uwe Reinhardt](#): > > 1. higher prices for the same health care goods and services than are paid in other countries for the same goods and services; > > 2. significantly higher administrative overhead costs than are incurred in other countries with simpler health-insurance systems; > > 3. more widespread use of high-cost, high-tech equipment and procedures than are used in other countries; > > 4. higher treatment costs triggered by our uniquely American tort laws, which in the context of medicine can lead to “defensive medicine” — that is, the application of tests and procedures mainly as a defense against possible malpractice litigation, rather than as a clinical imperative. > > There are three other explanations that are widely — but erroneously — thought among non-experts to be cost drivers in the American health spending. To wit: > > 1. that the aging of our population drives health spending > > 2. that we get better quality from our health system than do other nations, and > > 3. that we get better health outcomes from our system ---
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [December 18, 2013, 7:45pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/19 "2013-12-18T19:45:53Z")
> [@Keeve](#): > > Ever hear of Obamacare? What is the ACA doing to control costs? Thanks, Rob ---
**Author:** ![Lightnin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lightnin/32/180_2.png) [@Lightnin](https://boards.straightdope.com/u/Lightnin)\ **Post date:** [December 18, 2013, 7:47pm UTC](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656/20 "2013-12-18T19:47:20Z")
My guess is it’s that we support an entire industry which acts as a middleman- the insurance industry. Their entire goal is to skim off as much money as possible from the patient/doctor transaction, and that is, ultimately, what drives the prices higher and higher. [Next page](https://boards.straightdope.com/t/why-is-american-healthcare-so-expensive/676656.md?page=2)