An American Sickness
reviewed by Jon Duelfer
American healthcare is in disarray. Pharmaceuticals are at astronomical prices, hospital bills can send people plummeting into bankruptcy, millions of Americans go without health insurance every year, and to add icing to the cake, America outpaces the world in both total cases and deaths related to the COVID-19 pandemic.
Immediate rebuttals to these statements might be that per capita, the U.S. is not leading the world in COVID-19 cases. We might say that cases are not reported in other countries as accurately as they are in the United States. We might say that pharmaceuticals or hospital bills cost so much simply because they are the best, here, in America.
All of these counterclaims hide behind a facade of American exceptionalism, and they are difficult to invalidate because this ideology is so ingrained in our nation’s rhetoric. Straightforward facts are often ignored.
Examples from other countries are often discarded because they might have populations that are too small, their economies or scientific communities aren’t as advanced as the U.S., or simply because their governments have a different political ideology. These factors lead many Americans to believe international facts either cannot be trusted or relied upon for accuracy.
In An American Sickness, Elizabeth Rosenthal looks to provide a definitive analysis and critique of American healthcare. She takes the following stance: the twentieth century brought along unprecedented advancements in science and medicine, vastly improving the lives of millions of Americans and the nation as a whole, but there is another side to the story.
Our decentralized system was prey to shrewd money makers, and since the 1950s, healthcare has turned into a profit-making machine that has successfully lobbied against regulation and scrutiny and has traded its bottom-line for the well-being of American citizens.
Rosenthal breaks the book into two parts. The first, titled History of the Present Illness and Review of Systems, takes a historical perspective of the evolution of American healthcare. It presents specific cases of individuals struggling with each category of problems, including insurance costs, hospital bills, pharmaceutic costs, etc.
The second part, titled Diagnosis and Treatment: Prescriptions for Taking Back Our Healthcare, takes each section from the first half and provides both specific actions that we can take as individuals and policies we should push our government to implement.
Although Rosenthal provides an almost never-ending list of suggestions to fix the healthcare system, it’s clear that the most sweeping changes that we can make will be through government regulation. These changes, which she takes from other countries that have successfully implemented them, include fee schedules and national price negations, a single payer healthcare system, and market-based tools of transparency and competition.
Rosenthal is well-aware of the common arguments made against “socialized medicine.” She refutes them by saying these policies are really a blend of “government intervention and free market forces.”
She attributes much of the improvements in recent years to the Affordable Care Act, but argues that there were too many compromises in its drafting and says that it made only “baby steps” in the right direction.
The United States will find its own particular healthcare solution. As you read on, you’ll see that a wide array of tools is available for reforming and reclaiming our healthcare system for patients, building on the foundation of the ACA or its replacement. But we can’t continue to choose “none of above” – that’s not a plan. It’s a $3 trillion cop-out.
Issues and how to fix them
Rosenthal frames the issues Americans face today as results of a “dysfunctional medical market.” Unlike a true free market, that according to capitalist theory should fix itself when imbalances arise, the medical market has, instead, developed its own economic rules over time. These rules are both counter-intuitive and destructive to our healthcare system.
- More treatment is always better. Default to the most expensive option.
- A lifetime of treatment is preferable to a cure.
- Amenities and marketing matter more than good care.
- As technologies age, prices can rise rather than fall.
- There is no free choice. Patients are suck. And they’re stuck buying American.
- More competitors vying for business doesn’t mean better prices; it can drive prices up, not down.
- Economies of scale don’t translate to lower prices. With their market power, big providers can simply demand more.
- There is no such thing as a fixed price for a procedure or test. And the uninsured pay the highest price of all.
- There are no standards for billing. There’s money to be made in billing for anything and everything.
- Prices will rise to whatever the market will bear.
For each problem that Rosenthal identifies, through either statistic or accounts of American citizens, she tries to connect it back to one of these basic principles. Although there a lot of rules to remember, we do get the overwhelming sense that this faux, free market economy needs to be regulated appropriately.
Health insurance began in the early twentieth century with a very different mission than we see today. “The earliest health insurance policies were designed primarily to compensate for income lost while workers were ill” and soon developed into a form of “catastrophic care insurance” that covered the “full costs of hospitalization, $5 a day, which is about $105 in 2016 dollars.
Within a decade, the model spread across the country. Three million people had signed up by 1939 and the concept had been given a name: Blue Cross Plans. The goal was not to make money, but to protect patient savings and keep hospitals – and the charitable religious groups that funded them – afloat. Blue Cross Plans were then not-for-profit.
We must acknowledge that the total cost of care has increased because care has simply gotten better. Medicine has advanced significantly since the 1930s, but Rosenthal argues that the price has not grown proportionally with advancements. Where the Blue Cross/Blue Shield logo was once “ubiquitous as a force of good across America,” money makers realized that there was a lot of money to be made in this budding market.
But the new demand for health insurance presented a business opportunity and spawned an emerging market with other motivations. Suddenly, at a time when medicine had more of value to offer, tens of millions of people were interested in gaining access and expected their employers to provide insurance so they could do so. For-profit insurance companies moved in, unencumbered by the Blue’s charitable mission. They accepted only younger, healthier patients on whom they could make a profit…Aetna and Cigna were both offering medical coverage by 1951. With aggressive marketing and closer ties to business than to healthcare, these for-profit plans slowly gained market share through the 1970s and 1980s. It was difficult for the Blues to compete.
Blue Cross/Blue Shield was stuck with the people who were actually sick – unsurprisingly since that was their mission – while the for-profit companies didn’t accept anybody with preexisting conditions. The for-profits charged much lower prices, but they also paid out little because the bulk of their customers were young and healthy.
The Blue Cross/Blue Shield model, then, lost healthy customers to these competitors. It started to lose money because the care of its remaining customers was more costly than their premiums. They decided to go public on the stock exchange to try and raise money for a dying healthcare model that couldn’t find a place in an increasingly ruthless, capitalist market.
Today, Blue Cross/Blue Shield is a for-profit like all the others, but they still try to maintain some of the allure of the old days – and are successful marketing their brand that way for lots of older folks who remember what it used to mean.
Before the Affordable Care Act, millions of Americans went without health insurance because they had preexisting conditions and were denied by providers. Young, healthy office workers were the new targets of the industry. They could rake in profits and not have to pay out much at all.
The ACA now requires providers to accept all preexisting conditions, which is a huge win for the people. The number of uninsured Americans dropped from 18% to 11.9%. It’s a statistic that might not seem like much at first sight, but number includes millions of living, breathing Americans that now live safer, better lives.
Rosenthal says that insurance, though, is still one of the main causes of our enormous healthcare budget. Even though it’s not calculated into the enormous $3 trillion dollar amount, it’s a huge factor. The price of healthcare is negotiated behind closed doors between the insurers and health providers.
Rosenthal compares this to going into a store, and we don’t know the prices until after we have agreed to buy the good. We would never accept this transaction in any other “market economy.”
To fix this issue, which causes the cost of healthcare, pharmaceuticals, etc. to inflate without our knowledge or approval, we must implement a system of reference pricing.
Simply by designing CalPERS, a centralized system to study and estimate the actual cost of high-quality care instead of vague prices determined behind closed doors and after care has been performed – California saved taxpayers “$2.8 million for joint replacement surgery, $1.3 million for cataract surgery, $7 million for colonoscopy, and $2.3 million for arthroscopy, with no change in success rates or patient satisfaction.”
This example fits three of Rosenthal’s dysfunctional market rules: economies of scale don’t translate to lower prices, there is no such thing as a fixed price for a procedure or test, and prices will rise to whatever the market will bear.
Hospital bills represent 40-50% of Rosenthal’s estimated $3 trillion healthcare budget per year. On the surface, that kind of makes sense. Hospitals are the primary point of care for emergencies. They have the most cutting-edge technology. The employ hundreds of thousands to potentially millions of people.
Criticizing hospitals is difficult. They are a feat of modern science and innovation. They save the lives of millions of Americans every year. Are they really something that we want to skimp and save on for a few extra bucks?
These are probably some of the reasons that pharmaceuticals are targeted much more often than hospitals in public discourse. What politician in their right mind would go after a non-profit organization that saves lives instead of for-profit companies that make billions in profits distributing pills?
But Rosenthal is taking a critical stance of the healthcare system in its entirely. It turns out that hospitals have a lot to criticize.
This criticism does not stem from how hospitals necessarily implement care. It’s more about how they price care. Rosenthal argues that most doctors and nurses really have no idea what the costs of things are that they are working with, they simply use medicines or devices that either they have learned to use through schooling or practice, or that their hospital has available.
As insurers started as non-profits and soon morphed into businesses, Rosenthal says that hospitals underwent a similar change. Although many remain not-for-profit technically, their revenues are astronomical and many state governments are realizing that the “profits” made are not going back to care, but to CEO salaries, executive bonuses, luxurious buildings, and amenities that are not needed.
Rosenthal cites the case of California Pacific Medical Center being denied non-profit status by the San Francisco city government until it changed the way it interacted with the community.
Before California Pacific Medical Center could break ground on a new flagship hospital on Cathedral Hill a few years ago, Sutter health, its parent company, had to negotiate for months about what it would contribute to San Francisco in return. Sutter agreed to continue to operate S. Luke’s, an old hospital in its system that served mostly the poor and uninsured. It agreed to spend at least $86 million per year on charity care, Medicaid, and services for the poor. It would spend $20 million to create a Healthcare Innovation Fund to help the city’s community clinics and $60 million for various programs in affordable housing. It would also spend tens of millions on transit upgrades and pedestrian safety programs. The final package even included a bone that was probably particularly tasty for city budget planners: it agreed to not raise rates charged to health insurers that covered city employees by more than 5 percent annually.
All in all, California Pacific Medical Center was willing to spend $1.1 billion to hang on to its tax-exempt status.
It’s important to note that Rosenthal is not implying that there is something wrong with hospitals or the way they get tax-exempt status. Rather, she is arguing that hospitals are enormously influential in many communities. Local governments may not have the resources for investigations or fighting back like the city government of San Francisco, but we should all be critical and ensure the tax-exempt status is being used appropriately.
Where would this money have gone without the negotiation on tax-exempt status? Some would argue that it would go into healthcare and innovation, but Rosenthal suggests that large portions are actually going to executive salaries, bonuses, and unnecessary amenities.
There are many reasons for the excess that hospitals generate. The first is, as mentioned earlier in the Insurance section, the “billed price of an item could be completely decoupled from its actual cost.”
The second are facility fees – varying fees that hospitals apply to care based upon what they consider the “cost” of the procedure.
Facility fees are a unique construct of American healthcare and its business model. Hospitals in Europe don’t have them. Nor do other types of businesses in the United States. As Yevgeniy Feyman, currently of the Harvard T. H. Chan School of Public Health, observed in “Health Affairs Blog,” “When you buy anything – a watch, a car, even groceries – you pay a single price for the goods. The Walgreens down the street doesn’t add a separate charge to cover its rent, utilities, or the cost of refrigeration units.”
Again, that fact that hospitals really do have different costs to perform the same service is not the problem. The problem is that there is this incessant belief that the healthcare industry acts as a free market and we shouldn’t touch or questions it.
The hospital market does not operate under the same principle as consumer goods, and this is apparent in their tax-exempt status. My interpretation is that Rosenthal is breaking down this false idea of medicine as a free market and trying to get us to say, hey, look at all these crazy things that we need to regulate better.
Rosenthal says that hospitals have became more-and-more business-like over time. Hospitals that used to be run by doctors are now run by businessmen and businesswomen. Their goals are to increase profits – even though they are, paradoxically, – and are awarded as if it was the business world.
More than two-thirds of the country’s hospitals are not-for-profit, and IRS rules state that nonprofit CEOs should receive only “reasonable compensation”…In 2012 Jeffrey Romoff of the University of Pittsburgh Medical Center earned almost $6.1 million…Delos Cosgrove at the Cleveland Clinic earned $3.17 million. Thomas Priselac at Cedars-Sinai earned $3.85 million. Steven Corwin at NewYork-Presbyterian earned $3.08 million…Total cash compensation for hospital CEOs grew an a average of 24.2 percent from 2011 to 2012 alone, which increasingly includes bonuses as well. No surprise. These bonuses are typically linked to criteria such as “finance,” “quality,” “profit,” “admissions growth,” and “increase in net funds,” not medical goalposts like reducing blood infections or bedsores and avoiding unneeded procedures.
Lastly, hospitals form conglomerates and crush competition. When this happens, they get to establish their own prices and push around insurers, local doctors, and other hospitals.
Being the only hospital system in an area generally means they also have a monopoly on emergency services. This affects working-class and poorer people more, who generally do not participate in “preventative” medicine and almost only receive care related to emergencies (which can often be caused by waiting and waiting for care until it becomes an emergency).
To stand up to these big hospital conglomerates, insurers made their own conglomerates. And visa versa: to stand up to the big insurance conglomerates, traditionally smaller, local hospitals have banded together or been swallowed by larger conglomerates.
This spells disaster for the ordinary person. Once they both have full control of a region, as long as both insurers and hospitals are profiting, prices will go up as far as the “market” will allow. There is effectively no more competition, only what these two parties agree on, leaving many patients with “no choice.”
Although Rosenthal dives deeply into the many, many problems with the pharmaceutical industry, I am leaving it out of this review. In recent years, the public has become well-aware of its issues, and there are many movements and political candidates spearheading its reform.
But to sum up some of Rosenthal’s main points: these are for-profit companies that form monopolies to squash competition and raise prices, are often run by ruthless business people with questionable morals, pursue lawsuits circumventing the FDA’s regulation to prevent generics that would reduce their own prices, spend absorbent amounts of money on advertisements for medicines that perform no better than cheaper alternatives, and have been caught in uncountable cases of straight-forward criminal dealings from forcing opiods into the hands of poorer communities to misleading public officials, and lying to increase their stock prices.
If you are interested in any of this, Rosenthal gets into the weeds of everything mentioned. She especially criticizes the FDA patent process and how it protects businesses far more than getting good, cost-effective medicine into people’s hands.
This U.S. healthcare system gradually evolved sector by sector, hospital by hospital, doctor by doctor. What the players are doing is, technically speaking, perfectly legal. Participants in the marketplace respond to the incentives and opportunities a market allows. That’s what they are supposed to do. Each component of the system is genuinely convinced that it’s not so bad, not responsible for our $3 trillion medical bill…But put all the little excesses together and you get healthcare that is much worse and much costlier than the sum of its parts. We, the patients, are stuck in the middle, and it seems we’ve reached critical condition.
At times, An American Sickness was overwhelming. There are so many facts, figures, policies, acts, laws, services, bills, and almost anything else that you could possibly imagine. The entire system appears to be bursting at the seams.
This feeling is much less the fault of Rosenthal’s writing than it is the complete absurdity of American healthcare. But even though the system is horribly unjust to those without money, isn’t it astronomically better than what we had less than a century ago?
Rosenthal would answer that, yes, the system is working, but it was founded on a set of principles that have eroded over time. We are no longer in the days of nonprofit insurers and hospitals that put community before profit. American capitalism, under the guise of free market competition, has overtaken a system that is not inherently a free market.
Rosenthal suggests a number of changes that we can make to our system – too many, in fact, that the book does not present a cohesive argument. I had the feeling that I was being bombarded with problems and suggestions that I could never formulate into what needs to be done.
That being said, I did find a number of good suggestions for strong government: a single-payer system, national price regulation, and pushing states to enact regulatory legislation on a more local level.
As for more personal suggestions for the individual, Rosenthal filled the appendixes at the end of the book with lists of cost checking websites, hospital review websites, and example letters for contesting outrageous medical bills.
And while there were plenty good suggestions, there were also bad ones in my opinion. For example, the idea of “internationalizing” healthcare to reduce costs reeks horribly of NAFTA, APEC and other liberal, capitalist policies that destroyed American manufacturing and agriculture. Please, please, let’s not go down that road again and learn our lessons.
Another subject that I found questionable was the blame directed at doctors and doctors’ offices. Sure, they can make a lot of money and there are some people in it for the profits, but the percentage who do this is only a small fraction of the whole and negligent when compared with big pharma and insurance. Let’s focus our efforts on the big fish before we point figures at local doctors.
An American Sickness was certainly an enormous undertaking. It is probably one of the most relevant, comprehensive books on the American healthcare system going into 2021.
Although I found it difficult to find a cohesive argument that I could latch onto, I think An American Sickness is an invaluable introduction to the subject and can be used as a resource for anybody interested in reform or simply understanding how the American healthcare system got to where it is today.