How the Insanity of Unregulated Health Care Costs are Killing Average Americans
Unscrupulous providers are charging $2400 for Covid-19 tests amidst spiraling poverty
I was shocked to hear a colleague of mine just paid $500 dollars to have his daughter tested for Covid-19. Surely not? A similar test in the UK retails for 60 GBP (around $80). Even in Africa, a Covid test will set you back between $80–$100) Apparently, not so in the US.
To make matters worse, my friend is a doctor and if anyone should have access to reasonably priced tests, surely it would be the medical profession? You would think so, but you’d be wrong. It turns out the $500 was relatively cheap when compared to charges from a lab in Dallas.
Insurers have paid Gibson Diagnostic Labs, based in Dallas, Texas as much as $2,315 for individual coronavirus tests. In a few cases, the price rose as high as $6,946 when the lab said it mistakenly charged patients three times the base rate.
The laboratory has no special or different technology from, for instance, major diagnostic labs that charge $100. It is one of a number of medical labs, hospitals and emergency rooms taking advantage of the way Congress has designed compensation for coronavirus tests and treatment. It is shameful and only happens in the medical industry.
In Texas alone, the charge for a Covid-19 test can range from as low as $27 to the $2,315 that Gibson Diagnostic charges. Whilst insurers choose to pay these amounts, the eventual costs will be passed down to patients via increased premiums. Insurers and Providers are not obliged to disclose pricing, meaning that the extent of the problem could be far worse.
America’s decision to create a “self regulating” market free of price control within the medical industry has had disastrous consequences. U.S. patients face some of the highest costs globally for medical services, products and pharma. It’s an expensive business, staying healthy in the US.
Medical care in the United States costs double or triple what it would in a peer country. An appendectomy, for example, costs $3,050 in Britain and $6,710 in New Zealand, two countries that regulate health prices. In the United States, the average price is $13,020.
The second outcome of this ‘free market” is huge price variation, as each doctor’s office and hospital sets its own charges for care. One 2012 study found that hospitals in California charge between $1,529 and $182,955 for uncomplicated appendectomies. Read that again, to let the insanity sink in.
The blame can be laid squarely at the door of unscrupulous and extortionately greedy health care providers — right across the entire spectrum of the industry — enabled by institutionalized bribery (read lobbying) and massive payments across the entire political spectrum to ensure the status quo is maintained.
All the while, Americans die, unable to access or pay for even the most basic of health care that is often provided for free in third-world countries.
Welcome to capitalism gone mad. The fact that no American president has been able to dismantle this infrastructure speaks volumes to the control large medical companies exert over America’s political system and the actual value American politicians place on human life. As with everything, it is the poor that suffer most, disadvantaged communities and people of color, often the hardest working members of our communities.
What’s gone wrong in the US?
To explain this a little more clearly, we’ll be using insulin as our example and a little background first to drive home the true depth of our absent shame.
When Frederick Banting discovered insulin in 1923, he refused to put his name on the patent. He felt it was unethical for a doctor to profit from a discovery that would save lives. Banting’s co-inventors, James Collip and Charles Best, sold the insulin patent to the University of Toronto for a mere $1. They wanted everyone who needed their medication to be able to afford it.
Today, 30 million Americans with diabetes rely on insulin. It has become the poster child for pharmaceutical price gouging. The cost of the four most popular types of insulin has tripled over the past decade, and the out-of-pocket prescription costs patients now face have doubled. By 2016, the average price per month rose to $450 — and costs continue to rise, so much so that as many as one in four people with diabetes are now skimping on or skipping lifesaving doses.
New “incremental improvements” made by the three US manufacturers apparently justify these surging prices although there is little evidence to suggest newer formulations differ spectacularly in terms of the benefit offered to patients.
Colarado has taken the step of capping insulin prices within the state, but only a small proportion of America’s diabetics benefit from this. Most patients with diabetes remain vulnerable to the whims of drug company pricing, since companies can still set whatever prices they wish. And no drug is better for understanding how this happens than insulin.
The US is a global outlier on money spent on the drug, representing only 15 percent of the global insulin market and generating almost half of the pharmaceutical industry’s insulin revenue. According to a recent study in JAMA Internal Medicine, in the 1990s Medicaid paid between $2.36 and $4.43 per unit of insulin; by 2014, those prices more than tripled, depending on the formulation.
The doctors and researchers who study insulin say it is yet another example — along with EpiPens and decades-old generic drugs — of companies raising the cost of their products because of the lax regulatory environment around drug pricing.
According to Jing Luo, a researcher at Brigham and Women’s Hospital,
“They are doing it because they can and it’s scary because it happens in all kinds of different drugs and drug classes.”
In the United Kingdom, the government has an agency that negotiates directly with pharmaceutical companies. The government sets a maximum price it will pay for a drug, and if companies don’t agree, they simply lose out on the entire market. This mechanism has the effect of driving down the price of drugs.
Not in the United States.
Drug companies haggle separately over drug prices with a variety of private insurers across the country. Add to this the following insanity, namely that Medicare, the government health program for those over age 65 — and the nation’s largest buyer of drugs — is barred from negotiating drug prices. Pharma’s largest customer has no say over the prices they pay.
This bizarre arrangement is unique to the medical industry. No other market, in any other industry, would tolerate or support this, It gives pharma more leverage, and leads directly to the kind of price surges seen with EpiPens, recent opioid antidotes — and insulin.
Drugmakers do this because they can
Insulin’s drug pricing problem is much bigger than anything one state — or drug company for that matter — alone can fix.
The three major insulin makers — Eli Lilly, Novo Nordisk, and Sanofi — testified before the House Energy and Commerce’s oversight subcommittee in April of 2018, focusing more attention on the issue. Lawmakers, including Sens. Chuck Grassley (R-IA) and Ron Wyden (D-OR), have also been investigating the problem and sending letters to drug companies asking them to account for their outrageous price hikes.
Federal fixes to reduce insulin prices have also been proposed — like the Affordable Drug Manufacturing Act, introduced by Senator Elizabeth Warren (D-MA) and Representative Jan Schakowsky (D-IL). It would have, among other things, allowed the federal government to manufacture drugs or hire an outside contractor, and set fair prices for essential medicines, such as insulin. Not surprisingly, the bill didn’t go anywhere.
While the pressure around insulin may be mounting, we’re now seeing the terrible impact of rising insulin prices on patients: people being forced to taper off insulin so they can pay their medical bills, and winding up with kidney failure, blindness, or even death.
Some desperate patients are forced to head to Canada, where drug prices are more heavily regulated and, according to the new NEJM editorial, where a carton of insulin costs $20 instead of the $300, the price patients often pay in the US. “Of course, there isn’t enough insulin in all of Canada to make large-scale importation feasible,” the editorial authors wrote.
Clear solutions that will never be implemented
Seeing a problem and being able to identify a simple solution. America’s free-market Healthcare system would seem, to the uninformed observer, to fit snugly into this model.
The problem is clear. The consequences are self-evident. The costs are measured not only in financial terms, but in the loss of human life. The solution is glaring in its simplicity.
Cap costs and end the free market system!
And yet, generation after generation of political will has failed to rectify the issues surrounding American Healthcare. A cynic might say it hasn’t been in their financial interests to do so, an optimist might suggest change is in the air and an idiot might conclude that human life is worth more than that house in the Hampton's.