Why is medical care expensive

Why the US healthcare system burned down so badly

Kara Eastman has just successfully led a revolt. The US politician from Nebraska wants to take the US health system apart and reassemble it. She calls for universal health coverage to be introduced for all citizens in the United States. Eastman, in his 40s, is running for the Nebraska Democrats. In the fall she wants to move into Congress in Washington.

Your proposal is problematic in the eyes of many US voters. The health system there is based on voluntariness and individual choices. Eastman demands that in future the state oblige every citizen to take out insurance. To many Americans, that sounds like socialism.

On her blog, Eastman explains why she advocates a universal system. Her mother, suffering from cancer, not only fought against the tumor, but also with her debts to hospitals and doctors. "Health systems are complicated, but we should agree that we don't want our mothers to worry about medical bills at the end of their lives."

Successes in primaries

An old conflict is just flaring up again in the United States. The Democrats support universal health insurance. From New York to California, from Texas to Michigan, they have celebrated successes in party primaries. But where does the dissatisfaction come from, why the criticism of the status quo?

State health systems can be roughly divided into clearly distinguishable types. In Europe there is a nationwide system of universal, solidarity-funded and public health care. Universal, as defined by the World Health Organization, means that all citizens have access to medical care without the risk of financial ruin.

Funded by solidarity means that all citizens have to pay too - through taxes as in Italy or through insurance contributions as in Austria. Finally, public means that health care is provided directly by state institutions, or that the state lays down the rules of the game for private individuals in great detail. That's the way it is in Europe.

Without universal access

The US, on the other hand, is one of the last rich countries that essentially does not offer universal access. There, private, competing insurance companies are responsible for the health system. Citizens in the USA can choose for themselves what type of insurance someone has, how high the premiums are and what services the insurance covers. In many cases, employers offer insurance through private service providers. There is also the option of having individual insurance.

The USA is struggling with serious problems. What is certain is that American health care is by far the most expensive system in the world. The per capita expenditure on health is currently around 9,890 dollars per year in purchasing power parity.

For comparison: In Austria the expenditure was 5,200 dollars, in Germany it was 5,600 dollars. No country in the world even comes close to the US cost. These statistics cover private and public expenditure, for medication as well as for visits to the doctor and hospital stays.

Low life expectancy

However, higher spending does not lead to better results for the general public. Life expectancy in the US is lower than in Austria or Chile, a country that spends just a quarter as much per capita on health as the United States. However, life expectancy depends on many factors such as diet, social status and disposition and is therefore only of limited significance.

The industrial nations organization OECD therefore regularly compares the performance of health systems apart from life expectancy. The US does well in some categories for the quality of medical services. But according to the OECD, they are nowhere near the top of the world. When it comes to survival rates after a heart attack or after a colon cancer diagnosis, it is not the USA that have the best results, but Australia, Denmark, Canada and New Zealand.

One in ten insured

In addition, the United States is unique because, by comparison, an extremely large number of people are not insured at all: according to the OECD, it is only one in ten. With the Affordable Care Act, ex-President Barack Obama tackled healthcare reform in 2010.

This has reduced the number of those who are not insured, and since then insurance companies are no longer allowed to reject patients because they have previous illnesses. Nevertheless: Many young and healthy people prefer to save their money and not be insured. This increases the cost pressure on insurance companies, which are currently lacking healthy people. In addition, many Americans simply cannot afford insurance, according to a survey by the Kaiser Family Foundation.

Competition is expensive

Medium quality, many uninsured, high social expenditure: that is not the entire list of problems. "Health care in the US is so much more expensive because doctors cost much more," says health economist Thomas Czypionka from the Institute for Advanced Studies in Vienna. Studying medicine is expensive. Many doctors are in debt and demand a correspondingly higher salary when they start their careers.

Hospitals are in tough competition with one another and often pay doctors huge sums to retain them. Your reputation is meant to attract paying customers. "Competition doesn't always mean that prices go down," says Czypionka.

The US system is also so expensive because the drugs are expensive. In Austria, as in other European countries, drug prices are negotiated centrally. The remedy evaluation commission at the Main Association of Social Insurance Institutions in Vienna assesses the benefits of a drug and how much it can cost.

Pharmaceutical companies at an advantage

If the price is too high in the eyes of the Commission, it will ask for a discount. If no agreement is reached, the drug will not be included in the reimbursement code for health insurers. That means: The preparation is de facto excluded from the domestic market.

In the US, pharmaceutical companies have an advantage in this regard. Prices are negotiated on a decentralized basis. If a private insurer rejects an offer, there are alternatives. The result: the price dynamics work against the patients.

The US market research institute IHS Markit recently compared drug prices for 50 drugs in the EU and the USA. "On average, the funds in the US are two-thirds more expensive than in Europe," the study says. "In the USA there is more freedom of choice, but fewer controls on the costs incurred," write OECD experts in the specialist magazine "The Lancet". These costs are costs to the patient.

The result is that Americans regularly go into debt when they get sick. The Kaiser Foundation has determined that an average of one fifth of Americans cannot pay their medical bills. The personal dramas can be read regularly in the newspapers, such as that of Miss Cota, who lost her house to the diagnosis of lupus erythematosus.

"Improved Health"

It is such reports that experts from Imperial College London, in a 2015 study, conclude that universal health insurance "leads to better public health, especially for poorer people" compared to market-based systems.

The institute immediately answers why little is changing in the USA: Numerous interest groups benefit from the status quo. Pharmaceutical companies and hospitals spent $ 580 million on lobbying last year, according to Open Secrets, a Washington think tank. The banking industry spent 520 million.

The Democrat Kara Eastman has not been deterred so far. A few weeks ago, she knocked out a more experienced rival in the internal party primaries in Nebraska, despite the fact that he had the support of the party leadership. The competitor Eastmans, however, was against universal health insurance. (AndrĂ¡s Szigetvari, CURE, August 30, 2018)