The U.S. is Paying Too Much For Healthcare and Receiving Too Little

When it comes to most things, you get what you pay for. Paying more for a ticket to a baseball game means you will have better seats. Patronizing an expensive restaurant results in higher quality food. But when it comes to healthcare – a matter of life and death for every man, woman and child in this country – it's backwards.

According to a 2012 report by the Organization for Economic Co-operation and Development (OECD), the United States spends some 17.6 percent of its GDP on healthcare – far more than any other OECD country – but does not see quality increases commensurate with its spending. While the U.S. has 2.4 practicing physicians per 1,000 people, the OECD average is 3.1. Most OECD countries have an average of 3.4 beds, but the U.S. has only 2.6 for every 1,000 people.

Congress has spent so much time squabbling over who should be paying for healthcare that it has failed to ask the most pertinent question – why do we pay so much?

This month, the Center for Medicare and Medicaid Services (CMS) released inaugural data detailing the prices hospitals charge for common procedures, which revealed a wide range of price fluctuations between different hospitals, with no real method to the madness.

Case in point – the country’s most expensive hospital is located in Bayonne, NJ, where it costs nearly $100,000 to treat a case of chronic lung disease - five times as much as what most others hospitals charge for the same procedure.

In March, TIME journalist Steven Brill’s investigative piece, Bitter Pill: Why Medical Bills Are Killing Us, explored the insanity of America’s healthcare system, evaluating hospital bills to determine why hospitals charge what they charge. What Brill found was that hospitals were charging outrageous prices for everyday items – $1.50 for a generic version of a Tylenol pill, which you can buy 100 of on Amazon for $1.49 as well as overpriced gauze pads, hospital gowns and more. Even with the more complicated stuff, hospitals were still charging well beyond what they would need to make even a reasonable profit from the treatment.

Brill’s culprit? The chargemaster – a massive computer file that lists every product and service the hospital offers and how much it costs. These are the frightening “list” prices that uninsured patients see on their bills. When Brill asked hospital administrators why chargemasters listed such preposterous prices, they could only tell him, “It’s complicated.”

What is not complicated is the profit these “nonprofit” hospitals are making. Billions. Hospital CEOs (yes, hospitals have them), take home salaries on par with any Wall Street executive – well into the six-figure range and often beyond.

In 2013, the U.S. will spend as much as $2.8 trillion on healthcare, which is $750 billion more than the country would if it spent the same per capita as other developed nations. The country’s Medicare and Medicaid insurance programs will cover some $800 billion of the price tag and the other $2 trillion will be picked up by private health-insurance companies and individuals who have no insurance or who will pay part of the bills covered by their insurance.

Besides destroying the personal finances (if not, lives) of millions of Americans, these exorbitant costs put U.S. firms at a disadvantage on the international stage as they are forced to pay for employees’ health insurance.

While the Affordable Care Act, better known as Obamacare, has introduced many good reforms such as preventing insurance companies from denying people coverage due to pre-existing conditions, the bill was ultimately bought and paid for by the Pharma/Healthcare/HMO lobby. Between 1998 and 2012, the lobby spent some $5.3 billion – more than even the defense lobby – to influence Congress and purchase votes.