Why Are American Health Care Costs So High?

by on August 20, 2013

In which John discusses the complicated reasons why the United States spends so much more on health care than any other country in the world, and along the way reveals some surprising information, including that Americans spend more of their tax dollars on public health care than people in Canada, the UK, or Australia. Who's at fault? Insurance companies? Drug companies? Malpractice lawyers? Hospitals? Or is it more complicated than a simple blame game? (Hint: It's that one.)

For a much more thorough examination of health care expenses in America, I recommend this series at The Incidental Economist: http://theincidentaleconomist.com/wordpress/what-makes-the-us-health-care-system-so-expensive-introduction/
The Commonwealth Fund's Study of Health Care Prices in the US: http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/May/1595_Squires_explaining_high_hlt_care_spending_intl_brief.pdf
Some of the stats in this video also come from this New York Times story: http://www.nytimes.com/2013/06/02/health/colonoscopies-explain-why-us-leads-the-world-in-health-expenditures.html?pagewanted=all

This is the first part in what will be a periodic series on health care costs and reforms leading up to the introduction of the Affordable Care Act, aka Obamacare, in 2014.

{ 22 comments… read them below or add one }

Linda Riddell August 21, 2013 at 10:19 am

Fantastic and entertaining summary of the issues. I’ll look forward to the rest of the series!


Bruce Jugan August 24, 2013 at 9:40 pm

Great video. You should check out the August 2, 2014 presentation by Dr. Jeffery Brenner at the National Association of Governors http://www.c-spanvideo.org/program/AssociationDa (his presentation starts at about the minute 30 point of the C-SPAN video).
His analysis shows that the majority of money is spent on very few patients who are constantly re-admitted to the hospital. According to data he collected in Camden, NJ; hospitals earn a lot of money for intensive, high-tech in-patient care; and nothing for following up with people at home.
It turns out the by following up with people at home; making sure they take their meds; making sure that they do the things they are supposed to do at home – keeps them out of the hospital and saves the payers (government and businesses) tons of money… unfortunately, the hospitals earn less…
Revising the financial incentives in the U.S. health care financing system so that doctors are compenstated more for collaborating and working together in an integrated way would do wonders to lower the cost of care.
High quality medical care can be done at a lower cost. Examples of integrated care are Kaiser Permanente in California, Geisinger Health System in Pennsylvania, and Intermountain HealthCare in Utah.
I’m an insurance broker in Los Angeles. My clients (individuals and small to mid-size businesses) pay for all of the excessive care and we want it to stop. It is bankrupting the government, businesses and families and we’re getting worse care.
Thanks for shedding light on this important issue.


John Hunt, MD September 17, 2013 at 3:17 pm

The facts may be correct; his interpretation is loudly stated but twisted by an unconsidered and concerning ideology. He suggests that we (who is WE?–the US government? America? Americans as a big smushy group??) anyhow, WE could save money if (for example) the government picked out the cheapest (while also best?) hip replacement for everyone: a one size fits all cheap solution.. Do you want Obama (or McCain or Romney) picking out what hip is best for YOU? What if what is best for you is not the same as best for the average person in America on which Obama bases his decision. Or worse, what if the hip that is best for you is not the one manufactured by the company owned by a big political donor to Obama’s campaign (which gets the contract from the government)?

John Green is absolutely correct that “We” don’t negotiate for better deals, and we don’t because we all have third party payers in between us and the source of the health care. This is known as MORAL HAZARD, and it is the overwhelming reason why the prices we pay are so high. The third party payers are stuck between us (who want them to pay more), the doctors (who want them to pay more) and their own survival and profitability (which compels them to pay less) and the government (which compels them to cover everything). It is a total mess.

The reason health care costs are so high is only one thing: 1) we as individuals (not the government!!) but WE as individuals don’t get off our butts (in advance preferably) to seek out the best deals. We should not be paying $124 for a month of pills, instead paying $7 for a month of pills, but it doesn’t bother us if AETNA pays it for us, does it? So we don’t care!! That is it. That is the reason… There need be no other.

We don’t have a free market here and the government does not yet have full control (price controls, supply controls, regulatory limits, etc). Other countries don’t have a free market, but they have full centralized control of that market and therefore have lower costs (and of course collectivization of outcomes). We have the a horribly dysfunctional hybrid system here in the US. No free market; incomplete government control.

Outcomes elsewhere in the world are better ON AVERAGE than our outcomes, perhaps.. But this is not a race of America vs Australia. This is not a race at all. This is: how can I get the best care for the money, as ME, the individual? Our system has removed the individual from the financial decision, but left him making the medical decisions. Other countries remove the individual from the financial decisions AND remove him from his medical decisions. and that is why their health care costs less.

The answer to save money is either to go socialist and give the political class control of your health care, or go free market and give yourself control of your health care. The hybrid we have now is totally stupid and ridiculously expensive.

Obviously, I have ZERO interest in giving the political class control of my health care, because I don’t think they really care enough about me to get to know me well enough to decide what is best for me. Even if they did get to know me well, they are so stuck in their collectivist GROUPTHING, that I don’t think the political class is capable of thinking that people are indeed individuals, need individual consideration and that the individuals themselves are in the best place to make their own decisions for themselves. So I want free market. I want the unfettered free market. No subsidization of the moral hazard of health insurance. No price controls by Medicare. No restrictions that only MD’s can provide health care (I am an MD). Get the couterproductive government the heck out of our way. That is the American Way, and what made us great as a nation. Sadly, what we are doing now is the “United States Government” way, a.k.a. the “fascist way” of government collusion with corporations and groups at the sacrifice of the individual.

John Green recognizes the problem of why costs are high, but his one proposed example of a solution is to let the government negotiate for the best cheapest deal and obtain all hip replacement widgets from one company is a method of cost control would certainly be approved by fascists. But it is an absolutely horrendous concept to the people of a nation that respects liberty and individuality.

John Green, there are great ways to save money and lower our ridiculously high costs. But giving more power to government sociopaths (the same ones who set up the NSA and want to bomb Syria) is the way of force and fraud and fascism. I suggest we try the other way: the way of freedom, liberty, respect for the individual, and optimization of individual health, based on the individual’s prioritizations and the individuals moralities.

Please read “Assume the Physician”. It is full of laughs and satire and fun and it will provide so much help to the people who want to solve health care cost problems, but also like to make their own choices. LAUGH AND LEARN at the same time!!


Geo B September 19, 2013 at 1:00 pm

Dr. Hunt – you have some great points – but please if you are going to critique, then offer better answers. If we put everyone on Medicare for example, you would still get some choice on what doctor you went to and still leverage their cost negotiating. How do we in the US retain freedom of choice and still get negotiating power? I do work at a hospital (not directly in the medical field) and I hear all the time that we lose money on Medicare patients – so to me that means we as a hospital need to do better at finding better financial arrangements. You do make one great point – in France a friend was shocked that his wife was treated for an illness by a pharmacist, not a MD – no X-rays, no blood work, your symptoms say you have X take Y as a cure if not feeling better in three days come back (she was better the next day). So yes we need cost savings all around.


Paul Prescod September 30, 2013 at 12:42 am

Geo B: your friend was “shocked” that a medical professional prescribed something which seemingly helped your patient to feel better the next day. It seems to me that the shock should have been a shock of relief as opposed to concern.

John Hunt says that John Green (the YouTuber’s) answer is “twisted by ideology.” But John Green is just reporting what the statistics say about America versus other countries. John Hunt (the MD) is the one who is obsessed with ideology, throwing around the words freedom and fascism. John Green (YouTuber) is the one following the evidence of what has actually been tried in countries around the world. John Hunt is the one asking for a simplistic system based purely on ideology, rather than either compassion or evidence.

John Hunt: in your system, imagine the case where a standard middle-class family has a baby with Cystic Fibrosis without insurance. Is your answer to that family “bankruptcy”? Or do you plan for them to fall back on the government and therefore continue with the mixed public-private system which you just decried?


John Hunt, MD October 13, 2013 at 7:32 pm

Paul, Ideology is not a bad thing to fall back on in this world of so much data, so much conflicting data, and so many ways that the same data can be presented with different resulting conclusions. Why does the notion of sticking to ideals suggest to you something bad? Using ideology to assure that an action is moral is a nice way to assure that utilitarian thinking does not become unlimited in its scope. The danger of utilitarian thinking is well shown in the largest experiments in human history. Ideology is just fine. It is a good thing. It a great way to call BS on something that sounds on the surface to make sense (like the NSA monitoring all our telephone calls to protect against terrorists) but that we know in our hearts is just WRONG (like the NSA monitoring all our phones calls!). Having an understanding of ones ideology helps us to analyze WHY it is wrong. The data that John Green uses is interpreted in the light of his underlying ideology. Mine is too. Yours too. This is true pretty much always even when we TRY to be unbiased. Data are always interpreted and presented in ways affected by the underlying ideology of the interpreter and presenter. An unbiased presentation really doesn’t happen. Presentation of ones biases is important so that the listener/reader can interpret in that light. I try to clearly present my biases (my ideology) which includes my unwillingness to initiate force against my fellow man. I like my ideology. My ideology has no adverse effect on anyone else at all, for I force it on no one (obviously). Also, John Green’s presentation of data are focused on some of the issues, and exclude others. This is also normal and common. Hell, he did a great job of presenting lots of good points, and I honor him for identifying moral hazard as the underlying reason why costs are so high (so few have realized this).

In many socialised nations, health care and group outcomes are cheaper and better than the crazy US system can promise (the benefit of limiting moral hazard), but there are other measurements that should be incorporated in a broader determination of “goodness”, including freedom of choice, the right to choose, the adverse effects of centralization of decisions on inventiveness and advances, the suppression of the individual mentality–replaced with a collective mentality (and the associated risk that collective mindset has in terms of blindly following charismatic leaders, following orders, starting wars and the like).

Re: your question about a middle class family with Cystic Fibrosis in a baby is excellent, although your comment that my desired system is based not on compassion or evidence is assumptive (and as you will see pretty far off the mark). You did not know this when you made your judgmental statement above, but, in fact, I am a Pediatric Pulmonologist and have taken care of hundreds of children with Cystic Fibrosis. I have loved them and spent uncounted sleepless nights caring for them. The answer for the financial impact of this very difficult and heartbreaking disease is not bankruptcy, of course. Indeed the answers aren’t necessarily easy. But if you exclude forcibly removing one persons property to pay for another’s needs (which my ideology does preclude), you are still left with many many other fully moral options, including catastrophic insurance for the baby purchased upon diagnosis of pregnancy, loving support of family, friends, doctors, churches, fraternal societies, charities, communities; the goodness of doctors who have spent their lives learning how to care for children with cystic fibrosis without demanding that other people provide the care or the money, and most importantly is the massively reduced costs of all health care if moral hazard is reduced. Decreasing moral hazard will reduce the costs owed by users of the health care so greatly that access to high quality care will become much more broadly available. Good example:–the massive increase in computing power with greatly decreased costs have brought computers into the hands of most everybody at affordable prices. The same process can happen in health care. But not when the moral hazard is there (which causes hyperinflation) and I would say that it won’t be as good–in the long run over decades– if the control of health care decisions are centralized and collectivized (socialised). But that is of course partly reflective of my anti-collectivist ideology. Imagine if the costs to take care of a children with CF were 1/20th of what they are now, or less. They absolutely can be. But not in our current system, and not with Obamacare.

As far as Geo B’s comment about what might be better solutions, I again fall back on my ideology. That ideology tells me that I may not be smart enough to make plans that affect everybody. I also don’t think Obama is smart enough to do it. I think no one is. I put much more trust in the invisible hand to figure it out, combined with the voluntary loving charity of a people who care for their neighbors and have proven that they so care so many times that it is essentially fact. Yes, that caring for ones neighbors has been reduced as the welfare state has co-opted more and more of those duties, but I don’t think we are too late to reverse it.

The answers include: I have to help people. Maybe you might think that you have to help people too. That would be great. My ideology does not support the notion that the answer includes forcing other people to help. Personally I think such “forced charity” is not only internally contradictory, but indeed cowardly and a slippery slope. It is the very same mentality that leads to some of the most horrific justifications of actions taken in the name of the “greater good” that have led to widespread loss of life, freedom and dignity.

I think over the years I have provided more help to children with cystic fibrosis than most people who use the sadness of CF as an example of why we need to socialize, or why we need to force Bill Gates to buy health insurance. I have considered it my contribution. I certainly don’t think it is right for me to be considered to be in a morally lower position than the people who just spend all their productive days doing nothing to help other than forcing others to care for children with CF.


Kathy Levenston December 29, 2013 at 11:20 pm

This video was interesting as I had previously thought the main reason our costs were higher in the US was due to the greater administrative burdens of 0ur complicated reimursement system.


Anthea Rogers January 2, 2014 at 4:13 pm

Found these exchanges fascinating…. I am UK based and believe passionately in our National Health Service.

In my view, you cannot rely on individuals to be philanthropic enough to give money to provide healthcare for others. Too many people are inherently selfish. Our system of taxation ensures that there is parity in health and that the system is accessible according to need.

Regarding the replacement hip scenario, I believe that individual surgeons favour particular products and as far as I am aware, there are a number of different products available – ie one size does NOT fit all, and the surgeon has a range of products to choose from. This principle applies to all products, not just to hips! The state does not dictate to that extent!

We have a system of private healthcare here too, although these hospitals generally don’t do any very high risk surgery requiring Intensive Care etc, unless you pay for private care in an NHS hospital, or you go to a private hospital in London.

I don’t feel that by living in the UK my individuality is restricted at all – I don’t feel that the state is controlling me. Regarding the welfare state, I don’t think you can rely on neighbours to provide care, there are too many safeguarding issues; we have a welfare state to ensure that individuals get the RIGHT care and that they are SAFE. The family unit is disperse these days, we do not live in large family units as other countries do, people have to work in order to survive financially – how can you do that at the same time as looking after an aging relative?

I work in education and also care of the elderly; unfortunately we also live in quite a selfish world where people think of themselves rather than of others – where does that leave the lonely, socially isolated older person with reduced mobility? I believe there has to be some state support for people in that position.


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