There Is No Logic in American Healthcare Except Profit

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If you read a lot of healthcare news—or, likely, if you interact with our healthcare system with any regularity—you’ll likely come away with the impression that the way we do healthcare in this country makes no fucking sense.

Insurance is tied to your job, and if you lose your job, you lose any money you paid towards your deductible (your what?) while you worked that job. Hospitals can charge whatever they want for things, like $25 for a single aspirin, and sometimes you might get taken to the ER while you’re unconscious and wake up to find out the doctor who treated you was out-of-network, so you’re on the hook for the tens of thousands that your insurance won’t cover. (Also, out-of-network is a thing.) And drug companies can also charge whatever they want for prescriptions, and sometimes old drugs cost more for no reason.

The thing that ties all of this seeming insanity together is profit. In order to extract profit from these various points in the system, like insurance and medical care and drugs, the actors involved have to do things that seem illogical, or flat-out have nothing to do with caring for patients.


Take this story from NPR yesterday on hospital prices in Colorado, which expanded Medicaid in 2014. The theory was that hospital prices would go down because they would be treating fewer uninsured patients, for whom they could never recoup the high cost of care, and therefore wouldn’t have to overcharge others to make up for it.

But a state report found that hospitals have “begun shifting even more of their costs to commercial health plans,” according to NPR. Indeed, the report found that the average profit per patient has doubled, and the profit per patient with commercial insurance has risen from $6,800 to $11,000. The state’s hospital association blamed insurers for not passing on those profits to consumers—sorry, patients.


There are many complicated factors that go into hospital pricing—Medicaid and Medicare pay a lot less than commercial insurers, and the chief financial officer at one non-profit hospital chain in the state claimed that the accounting of their profits didn’t take into account expenses on expanding other physician offices. But then there’s this simple fact, from a senior adviser for the nonprofit Colorado Health Institute:

The state report shows how hospitals in heavily consolidated markets don’t have to cut prices as their bottom line improves, Toy says. “They can charge whatever the market will bear.”


They can charge whatever the market will bear. This is more true in healthcare than in most other industries—not only is it hard to shop around for care when you’re bleeding from the head or having a stroke, but it’s also hard-to-impossible to shop around for insurers. If you have employer-sponsored insurance, you probably only have one choice of insurer. If you get your insurance on the ACA exchanges, 42 percent of enrollees have just one or two choices of insurer. Most patients have no idea how much their hospital is going to charge them, and they won’t find out until they know how much their insurance will cover, which differs for every patient, and also hospital prices are baffling and complicated. And even if your insurance ends up paying for most of it, we all pay for higher hospital charges in the form of rising insurance premiums and deductibles. They don’t eat that cost—they pass it on.

But surely, you think, things must be more sensible for people with government insurance? Not so. This morning, NPR reported on the skyrocketing cost of specialty drugs for Medicare patients, who “could owe thousands of dollars in out-of-pocket drug costs every year for a single drug.” Medicare requires patients to pay 25 percent of the actual cost of their brand-name drugs—many of which can cost thousands of dollars a dose—until they hit $5,100 in spending. After that, they only have to pay 5 percent of the cost.


But 5 percent of thousands of dollars can still be deeply unaffordable for many, especially since Medicare patients already spend so much on healthcare: Around 40 percent of them spend more than 20 percent of their income on healthcare and premiums, according to a 2018 report by The Commonwealth Fund. NPR told the story of Tod Gervich, who “injects himself with Copaxone, a prescription drug that can reduce the frequency of relapses in people who have some forms of multiple sclerosis” three times a week:

His 40-milligram dose of Copaxone costs about $75,000 annually, according to the National Multiple Sclerosis Society. In January, Gervich paid $1,800 for the drug, and he paid another $900 in February. Discounts that drug manufacturers are required to provide to Part D enrollees also counted toward his out-of-pocket costs. (More on that later.) By March, he had hit the $5,100 threshold that pushed him into catastrophic coverage. For the rest of the year, he’ll owe $295 a month for this drug, until the cycle starts over again in January.


By March, Gervich had already had to spend $5,100 on drugs, and will have to spend $2,655 more by the end of the year, for a total of $7,775. And it’ll all start again in January—so, bad luck if you lose your job or your roof collapses in December.

The reason for this is so that the makers of Copaxone and Teva, can continue to profit off patients like Gervich, who needs that drug. (Copaxone comprised “half of Teva’s profit” in 2015.) God forbid that Teva, which had a gross profit of $8.3 billion in 2018, let Gervich pay less than seven grand to prevent a relapse of his multiple sclerosis. God forbid that the government actually protect people from being punished for having a disease by the predatory and destructive appetite for profit in healthcare.


Whatever the good policy goals of things like expanding Medicaid or the existence of Medicare, those goals will never be reached if you allow the logic of profit to warp them. The profit motive should be completely removed from healthcare; only then will it be primarily about keeping as many people alive, healthy, and able to enjoy life as we can.