Rising Health Costs
U.S. health care: expensive
and less effective at keeping people healthy
by Yves Engler
Z magazine, April 2004
Ford, General Motors, and DaimlerChrysler
recently joined a legal challenge to block two Michigan health
systems from building two new hospitals in the Detroit suburbs.
The Big 3 automakers, with a combined annual employee health bill
of nearly $10 billion, worry that the new hospitals will lead
to overcapacity in Detroit's Oakland County suburbs. They argue,
correctly, that in the hospital business, overcapacity pushes
medical costs up, because it encourages doctors to put more patients-particularly
those with good health plans who pay little out of pocket-into
empty hospital beds.
It's not surprising that businesses worry
about developments in the health sector since health coverage
has become one of the largest expenses for many U. S. employers.
Employers' health-care costs, which are expected to rise 12 percent
this year, have doubled since 1999 for each active employee to
an average of $7,308. (Companies have also downloaded costs onto
workers and retirees.)
One reason for the current "job loss
recovery" is rising health costs. Companies prefer to increase
existing employees' hours, even if they have to pay overtime,
rather than cover new workers' health insurance. The loss of more
than 2.8 million manufacturing jobs since August 2000 is that's
hard not to compare with Canada, where the labor market has been
booming and health care is publicly funded."
U.S. health expenditures are by far the
highest of any country in the world at 15 percent of GDP. No other
country spends even 11 percent of GDP. The U.S. also spends much
more in absolute dollars. U.S. citizens pay $5,440 on average
for health coverage while Canadians, the fourth biggest spenders,
shell out $2,927.
One commonly cited reason for the larger
U.S. health bill is the lack of price controls on drugs. Price
controls, however, are not the only reason U.S. drug prices are
higher than the rest of the industrialized world. Another important
reason is that the U.S. government-aside from Medicaid and the
military-has little control over the purchase of drugs, unlike
in countries with universal healthcare. Government drug purchasing
can drive down prices through bulk discounts, which is why the
pharmaceutical industry lobbied ferociously for the recent Medicare
drug plan to explicitly prohibit bulk price discounts. Not only
are drugs more expensive, but U.S. residents are the biggest pill
poppers in the world, at least partly because of deregulated pharmaceutical
industry advertising. (Drug consumption is so endemic that pharmaceutical
companies are reducing their drug trials in the U.S., in part,
because it's hard to find trial subjects not already on some drug.)
Pharmaceutical companies in the U.S. are free to charge whatever
they can to recoup their highest-in-the-world advertising costs.
Another contributor to higher costs in
the U. S. health system is the focus on expensive technologies
that are not necessarily of much use. Then there is the higher
rate of unnecessary procedures. The Wall Street Journal reports
"as much as half of the care provided to U.S. citizens is
unnecessary, including procedures that don't do any good, tests
that are repeated, and drugs for which there is no evidence of
benefit." Hospitals have a financial self-interest in increasing
medical procedures. So do fee-for-service doctors and specialists
who completely dominate U.S. health care. The Journal explains,
"Since doctors and hospitals are paid only for procedures
and treatments they provide, they are actually penalized if they
eliminate unnecessary procedures or practice preventive care."
Careful consideration of the efficacy
of every test or treatment, which should underpin all medical
evaluations, is too often overlooked when profits are to be had.
Contrary to popular wisdom, curative medicine is not always a
good. Though often beneficial in the short term, curative medicine
can also be detrimental to health. For instance, the Chicago Tribune
calculated that there were 103,000 deaths in 2000 from hospital-grown
infections. According to the Wall Street Journal, there are "an
estimated 51.5 million [prescription dispensed drug] errors annually,
with 3.3 million of them potentially serious or deadly. "
A better understanding of how different
drugs interact and a reduction in the number of unnecessary prescriptions
would decrease side effects. Likewise up to 75 percent of the
hospital infections are thought to be preventable, mostly from
better cleaning techniques by doctors and nurses. Yet our economic
system, which focuses almost exclusively on cures and technology
where the biggest profits are to be found, spends little on basic
hospital infection control.
Another significant contributor to U.S.
health costs are the higher administrative costs associated with
multiple insurers, each of which have their own bureaucracy and
advertising exI penses. Data reported last summer in the New England
Journal of Medicine shows that after adjusting for population,
the U. S. spends $209 billion more every year on extra administrative
costs than the Canadian single-payer (government) insurance system.
The study didn't | even take into account the addiI tional 10
to 15 percent of revenue that is siphoned off as profit by insurance
companies and profit-oriented hospitals.
Both U.S. and Canadian governments spend
approximately the same on healthcare-in 2001, Canada spent 7 percent
of GDP while the U.S. government spent 6.7 percent. But in the
U.S., 75 million are without insurance at some point every two
years while in Canada, government spending provides health coverage
Not only is the U.S. health system more
expensive, it is also less effective at keeping people healthy.
U.S. life expectancy is lower than every other rich nation, and
some poor ones. According to some estimates about 18,000 U.S.
residents die each year as a direct result of being uninsured.
Those who die are almost entirely the working poor. In addition,
"Canada's health care system far surpasses the United States
in avoiding unnecessary, disease-related deaths," according
to a study published in the American Journal of Public Health.
According to the International Journal of Health Services, "the
average ranking for the United States on 16 health indicators
in a 1998 comparative study of 13 countries by Starfield was 12th,
second from the bottom.
The public health care system in Canada
compared to the U.S., for instance, acts as a counterweight to
the entrepreneurial focus on cures over prevention and Canada's
"socialized" medicine, through more centralized and
rational planning, puts an increased emphasis on public health.
In most provinces, vaccinations are provided in a more accessible
and rational manner. Public health units are better equipped.
Quality public education is also more widely available than in
A publicly funded system does have a financial
incentive to do what really works. What works is prevention. While
estimates on the issue vary, health "experts" agree
that the majority of life expectancy improvements over the past
century are the result of public health promotion not curative
medicine. At one end of the spectrum, Laurie Garrett in the Betrayal
of Trust (Hyperion, 2000) estimates that "86 percent of increased
life expectancy was due to decreases in infectious diseases. The
same can be said for the United States, where less than 4 percent
of the total improvement in life expectancy since the 1700s can
be credited to twentieth century advances in medical care."
Others disagree with her strong enthusiasm for public health promotion.
Nevertheless, there is a general agreement that prevention is
We sometimes hear that "an ounce
of prevention is worth a pound of cure," which is confusing
since "prevention" is increasingly synonymous with check
ups-full body CT scans, cancer tests, etc. These technologies
are meant to diagnose a disease early so medicine can then cure
it. But the essence of prevention is really avoiding disease altogether.
The problem is there's big money to be made selling and administering
these so-called "preventive" medical technologies and
little in public health promotion. Major companies such as General
Electric and Johnson & Johnson sell billions of dollars worth
of preventive technologies that are really nothing more than entry
points into the curative medicine establishment. (There is also
evidence to suggest that many of the "preventive" tests
are of little medical use and can actually be damaging. The National
Post reports, "half of all prostate cancers picked up by
a widely used blood test are 'irrelevant'.... The findings suggest
thousands of men could be undergoing treatments that can leave
them impotent or incontinent for a cancer that might never have
In addition, doctors who are paid on a
fee-for-service basis-in other jobs, this is called piecework-
profit from check ups. So they have a financial self-interest
in defining "prevention" as a checkup or test. That's
not all. Lesley Doyal in The Political Economy of Health (South
End Press, 1981) explains, "power and prestige in medicine
are allocated to a very considerable extent on the basis of scientific
and technological innovation and on the extent to which particular
specialists [doctors] are able to exercise their instrumental
skills.... Doctors are trained to see themselves as scientists,
and, for the majority, job satisfaction is largely derived from
the scientific and technological aspects of their work. "
If it were only a matter of the difference
in profitability possibilities between public health promotion
and medical devices, or doctor's relationship to technology, the
word "prevention" wouldn't be so confusing.
Public health promotion, to properly combat
ill health, has to confront various entrenched corporate interests.
Anti-smoking campaigns, for instance, run afoul of big tobacco.
Activists challenge food companies' incessant advertising of larger
portions of unhealthy foods and domination of the food market,
but you're not supposed to talk about the link between a lack
of public transit or sensible, walkable urban planning, and obesity.
Anti-cancer activists are told "there's no problem"
with the fact that companies release an average of two to five
new chemicals into the environment each day, with little testing
for safety, or that worldwide production of chemical substances
has increased from one million tons in 1930 to 400 million tons
today. Even more traditional public health promotion, such as
improved sewage, water systems, vaccine systems, education, health
inspections, and infection control-all of which require increased
social spending (taxes) and so can be unpopular with wealth-owning
classes-have to confront neoliberal capitalism.
Aside from public health promotion and
access to curative medical care, poverty and socio-economic status
are significant determinants of illness and life expectancy in
every nation. A growing body of evidence suggests that countries
with lower levels of economic inequality have higher life expectancies.
According to the Financial Times, "if you look for differences
between countries, the relationship between income and health
largely disintegrates. Rich Americans, for instance, are healthier
on average than poor Americans, as measured by life expectancy.
But, although the U.S. is a much richer country than, say, Greece,
Americans on average have a lower life expectancy than Greeks.
"The reasons are that once a floor
standard of living is attained, people tend to be healthier when
three conditions hold: they are valued and respected by others;
they feel 'in control' in their work and home lives; and they
enjoy a dense network of social contacts."
Taking a look at Japan, Dr. Stephen Bezruchka
from the University of Washington explains: "Japanese men
smoke the most of all rich countries. Yet they are the healthiest
population on the planet. It seems you can smoke in Japan and
get away with it. It's not that smoking is good for you, but that
compared to other things, it isn't that bad. Smoking is much worse
for you in the U.S. than it is for the Japanese in Japan, where
the gap between the rich and poor is much less.... Similarly,
it isn't Japan's health care system that is responsible for its
remarkable health. Anyone who has looked at their system will
tell you it isn't much to write home about...Japan is a caring
and sharing society that looks after everyone and that matters
most for your health." (The Japanese only spend 43 cents
for every dollar spent on health care in the U.S., yet a Japanese
woman can expect to live to the age of 84 and men 77.2, while
the U.S. average is 79.5 and 73.8.)
What impacts human health-for good or
bad-is not simply the narrowly defined curative health sector.
Still it is important-for the psychological as well as physical
health of the uninsured and to strengthen the commitment to equality-that
the U.S. gains a system of universal health coverage.
Insurance companies, for-profit hospitals,
pharmaceutical companies, and doctors-the historical linchpin
of corporate medicine-oppose universal health insurance. They
are powerful political players. According to Acumen Journal, "since
late 1999 [U.S.] health care lobbying spending has consistently
passed that of any other industry. In 2002, that amounted to expenditures
of $264 million...the health care industry as a whole accounted
for 15 percent of the $1.8 billion in lobbying spending for 2002."
Nevertheless, the battle for government
health insurance will, increasingly, find some friends in the
(big) business community that worry about their companies' health
costs and tactical alliances for universal health insurance should
be made. The lack of universal, publicly funded, U.S. healthcare
system is an international embarrassment and, more importantly,
a waste of precious human health.
Yves Engler is a Montreal-based activist
currently writing a book on student activism.