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.

Dysfunctional Healthcare

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 for everyone.

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 the U.S.

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 what works.

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 killed them.")

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.

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