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According to journalist Steven Brill, the Affordable Care Act changes some of the rules about who pays for what in health care, but a basic problem remains: the cost. In a lengthy cover story for Time Magazine, he explains why labs, drug companies, hospital administrators and the purveyors of medical equipment make so much money. He also explores why doctors who don’t game the system are getting squeezed and why patients, especially those under 65, are left holding the bag. Join us to talk with Steven Brill about why we pay so much for health care in the U.S. and what we can do about it.
- Steven Brill Journalist and author of "Bitter Pill: How outrageous pricing and egregious profits are destroying our health care," a special report for Time Magazine's March 4, 2013, edition.
Bitter Pill: The Exorbitant Prices Of Health Care
Steven Brill talks to TIME about his cover story on the outrageous pricing and egregious profits that are destroying our health care.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Health care costs are bankrupting personal finances and soaking up an ever larger percentage of government revenues. But most of us really don't have any idea why medical bills are so high. Journalist Steven Brill decided to try to find out. In a detailed cover story for TIME magazine, he describes the rules, business practices and market distortions that allow some players in the industry to rake in huge profits, often on the backs of those least able to pay.
MS. DIANE REHMHe joins me from a studio at Time-Life in New York. Steven Brill on what's destroying health care. I hope you'll join us, 800-433-8850. Send your email to firstname.lastname@example.org. Follow us on Facebook or Twitter. Good morning to you. I'm glad to have you with us.
MR. STEVEN BRILLGood morning. Nice to be back.
REHMThank you. I know you're a journalist. You're an author. But you're not a health care expert. So why did you decide to take this on?
BRILLWell, for -- that's exactly the reason I decided to take it on, which is I'm not a health care expert. I'm not embroiled in all the policy wonk, debates over health care and single-payer systems and all that stuff. I was just curious. And I've been curious for a long time why everything costs so much. I remember during all the debate over Obamacare, there was all those talk about, you know, health, you know, health care bills are bankrupting people. There was debate over what we should do about end-of-life care.
BRILLShould we spend, you know, $250,000 to prolong someone's life for six months who's terminally ill? And I remember thinking to myself, well, why does it cost $250,000 to do that? Instead of having a debate over whether we should, you know, prolong someone's life, why don't we find out why it costs so much? And so I embarked on this long project where I just decided to follow the money. I just...
REHMHow long did it take you?
BRILLI started doing this really during the summer, and the first hard part was getting people to give me bills in many cases. I promised I wouldn't use their names in some cases. The patients were so angry that they wanted their names used, but I wanted to look at a cross-section, different types of bills, ranging from a slip and fall that, you know, where someone ends up in the emergency room for a few hours to, you know, a terminally ill patient who had lung cancer.
BRILLAnd I just got the bills -- the hospital bills, the doctor's bills, the lab bills -- and examined them line by line and then tried to follow the money. If something costs, you know, if a cancer drug costs $13,000, as it did in one case, you know, one dose -- well, that's what the hospital was charging -- how much was the hospital paying for that drug?
BRILLAnd if the hospital was paying the drug company, in this case, about $4,000 and turning around and marking it up at $9,000 and selling it to the cancer patient for $13,000, well, how much did it cost the drug company to make and sell it to the hospital for $4,000? It turns out, you know, probably just a few hundred dollars. So I followed the money. I looked at salaries of, you know, everyone involved, the drug company CEOs, the hospital CEOs, lab companies.
BRILLAnd basically, what I concluded was that there are two economies in this country. There's the economy that you and I and all your listeners live in, which is the regular economy. And in case you haven't noticed, things haven't been so great with that economy in the last half decade. There's been an unemployment problem. Earnings are under pressure. Everybody has felt the squeeze in that economy. And then there's the second economy, and that's the health care economy.
BRILLAnd through the last half decade, as with every other decade before, that economy is booming. You know, unemployment is nil. All the salaries keep going up. All the profits keep going up, and everybody's having a great time.
REHMSo what you've said is that the prices charged depend on who is paying.
BRILLIn the large part, it depends on who's paying, but the overall theme of the pieces that you cannot do anything about prices if the buyer has no power. And except in the case of Medicare, the buyers pretty much have no power.
REHMAnd explain why it is that Medicare has power, nobody else has power.
BRILLBecause Medicare is the big buyer. Medicare, you know, outstrips all the insurance companies combined. So when Medicare negotiates with the hospital or with a drug -- or with a lab company, it can demand that a nonprofit hospital actually be, guess what, nonprofit and not make a killing off of all its charges. The rest of the payers, insurance companies and you and me if we don't have insurance, don't have that leverage with the hospital. If you or I show up in an emergency room, we don't have any power at all.
BRILLYou know, the example I like to use is, you know, suppose you want to go out and buy a pair of shoes today. You go into a shoe store. You see a pair of shoes, and you say, boy, those look like really nice shoes. I'm guessing it's going to cost me $200 to buy those shoes. And you go into the shoe store, and the person behind the counter says, well, actually, those shoes are $6,000. You can then, you know, turn around and walk out of the shoe store if you don't want to pay $6,000.
BRILLBetter yet, when you walk out of the shoe store, you can go up the block and go to another shoe store and see how the prices compare. On the other hand, you can't wake up -- or you wouldn't likely, you know, wake up this morning and say, gee, I think I'll go down to the emergency room and see what they have for sale today and see if I want to buy it. You're an unwilling participant in that market.
REHMSteven Brill, he's a journalist and author of "Bitter Pill: How outrageous pricing and egregious profits are destroying our health care." It's a special report for TIME magazine, the issue -- the cover story of March 4. And if you'd like to join us, call us on 800-433-8850. You start with the story of an elderly man -- no, he's 42. He's treated for non-Hodgkin's lymphoma at Anderson in Houston. Talk about that case.
BRILLWell, here's a case -- as you say, this man, who owns a small business in Ohio, is diagnosed with cancer, and his wife immediately wants to get him to MD Anderson in Houston for very good reason. It's a great hospital, has a great record. And in her case, her father, who had had cancer, had had his life prolonged, she estimated, by something like 10 years because of the good treatment he had had at MD Anderson. So she makes an appointment. He goes down there. And she has health insurance.
BRILLThe family has health insurance. But it turns out they had -- because they owned a small business, they had a very limited kind of health insurance. And when they get to MD Anderson, in fact, even before they get there, they're told over the phone that Anderson won't accept that insurance because it's just not enough. So they're told that for him simply to be diagnosed and get a treatment plan, they have to come up with $45,000 in advance.
BRILLAnd she doesn't know what to do. She borrows it from her mother. She shows up. By the time she gets there a few days later, his condition has deteriorated, and they say he has to begin treatment immediately. And that's going to be -- just for his first dose of treatment, that's going to be another $35,000 or $40,000.
REHMAll right. Let me stop you right there and ask what the situation would have been had this gentleman been under Medicare.
BRILLThat $85,000 in charges probably would have been, I'm guessing, 10- or $11,000. And Medicare would have paid, you know, would have paid all of it because it was in-hospital treatment. The $85,000 included, you know, $77 for a box of gauze pads, included the $13,000 for that one transfusion, which cost the hospital $4,000. It included a charge, which is what the cover of TIME magazine shows, a charge for $1.50 for a generic version of a Tylenol pill. And you can buy a hundred of them on Amazon right now, if you act quickly, for $1.49. It is rampant profiteering.
BRILLAnd in this case, they had to pay all of that in advance. And in fact, he was held in a holding room before he could get his first transfusion, and he was panicking because the check hadn't cleared. And he had to whip out his credit card and give them another $7,500 because they couldn't get in touch with the bank to make sure his check was good.
REHMSo, in fact, his insurance had limits on it whereas had he been older and under Medicare, Medicare would have put the limits on what the hospital could actually charge.
BRILLMedicare would, you know, Medicare has set rates it'll pay for certain things based on actual cost, based on gathering data, based on actual cost. Now, hospital administrators, the people who I identified in the article, is making, you know, millions of dollars a year in salaries for these nonprofit hospitals. In fact, in the case of MD Anderson, which is part of the University of Texas, the president -- the chancellor of the University of Texas makes $750,000 a year, and the head of the hospital makes 2 1/2 times more than that.
REHMSteven Brill, he's a journalist and author of "Bitter Pill." That's the cover story of TIME magazine's special report for March 4. Stay with us.
REHMAnd welcome back. If you've just joined us, Steven Brill is on with me. He's just written a major cover story piece for piece for TIME magazine's March 4 issue, probably the longest cover story I have ever seen. Perhaps there have been others. It's titled "Bitter Pill: How outrageous pricing and egregious profits are destroying our health care." We've been talking thus far about an example he uses in the article. Steven, I want to ask you about the chargemaster, what it is and the role it plays in our nation's medical cost crisis.
BRILLThe chargemaster, I found out, is one of those things -- you know how I said, you know, we live in an alternate universe, we live in one economy, and the health care people live in another economy?
BRILLWell, in the health care industry, everybody knows what the chargemaster is, and none of us do. It is this massive price list of everything that a hospital dispenses and sells, ranging from the Tylenol pill or the paper cup that they put the water in which they'll charge you $1 for to drink the water so you can have the Tylenol pill, ranging from that to the $13,000 drug or the $1,200 CAT scan or the, you know, the $3,000 charge for your hospital bed or hospital room every night.
REHMSo they're pricing everything.
BRILLIt's six, 7,000 items. And every hospital's chargemaster is different. None of them are consistent. And most important, nobody involved can or will explain how the prices are set. They're not based on anything anybody can explain, except, well, you know, we, you know, we started doing this in the 1960s or '70s or '80s, whenever it was, and we just raised the prices X percent every year. We add new services as they're invented or as we think up new things to charge for.
BRILLAnd it doesn't really matter to most people because most people who have insurance, the insurance companies get big discounts off of the chargemaster. So when you get what's called your explanation of benefits from your insurance company after you've had some medical procedure or treatment, you know, it might say that the bill was $11,000 and the insurance company then might say, however, we negotiated a discount and it's now only $4,000 and your co-pay on the $4,000, you know, might be $400 or $800.
BRILLSo you actually feel pretty good because what looked like $11,000 just got, you know, whittled down to $4,000 or $5,000. But, in fact, if they're charging you, you know, $77 dollars for a box of gauze pads, which you can buy for $1.50 somewhere, the fact that they cut the $77 price down to, you know, to $37 isn't such a good deal.
BRILLAnd that's why hospitals make so much money and have such high profit margins and CEOs of hospitals are making millions of dollars here.
REHMNow, you know, it's interesting. My husband was in the hospital for a major operation about a year and a half ago. And a few months later, I received a 10-page bill documenting each aspirin, each Tylenol, everything, and I was shocked because it was a mighty big bill. So I called the hospital, and I said, excuse me, what happened to insurance? And she said, oh, we made a mistake by sending you that bill.
BRILLYeah, don't worry about it.
REHMThat should've gone to the insurance company.
BRILLYep. That happens all the time. I mean, the whole thing is just so incoherent and chaotic. I mean, I talk to patients who got, you know, three copies of the bill. I talk to patients who had bill collectors coming after them before they even got their bills, who had insurance.
BRILLThere is nothing rational about the system. And you know what? There doesn't have to be anything rational about the system because -- let's come back to what I said at the beginning -- it's a completely unaccountable system. You have no leverage over that hospital. You have no choice.
REHMOK. But here's what I'd like to understand. You say that Medicare does a very good job of paying hospitals a fair price for services rendered. If Medicare can do that, how come the insurance companies cannot do the same thing?
BRILLWell, first of all, the insurance companies don't have much of an incentive to do it because they just, you know, pass on their cost to you in premiums, and the insurance industry, region by region, town by town, is not terribly competitive. That's the first thing. The second thing is, to the extent they do have an incentive to do it, they don't have very much power to do it because in most places the hospitals are the dominant player in the market.
BRILLSo, for example, if you're in, you know, Stamford, Conn., which is one of the patients' whose bills I traced -- you're the major hospital in and around Stamford, Conn. If your doctor -- if your doctor's in Stamford, he probably not only practices in Stamford, Conn. His practice might even be owned by the hospital. And if it's not owned by the hospital, he may have an agreement with the hospital that he'll only send patients to that hospital.
BRILLSo in the case of your husband, if the doctor says, well, you know, you need to go to this hospital, your husband trusts the doctor, as he should, and he goes to that hospital. The insurance company, therefore, has to have that hospital in its network. So when the insurance company is negotiating with the hospital, how much of a discount are we going to get off of the chargemaster?
BRILLThe negotiation is a game of, you know, chicken, which is does the hospital need the insurance company more than the insurance company needs the hospital? So if you were trying to sell insurance in Stamford, Conn., if you didn't have the Stamford hospital in your network, you'd be out of luck.
REHMNow, the question becomes -- you talked earlier about nonprofit hospitals. Are -- what is a nonprofit hospital? Do they charge less than for-profit hospitals? Are they making...
BRILLNo. Not at all.
REHM...more than they claim to be making? How did they get this category of nonprofit? What does that mean?
BRILLThat's a great question. Let's sort of take a couple of factors one by one. A nonprofit entity, whether it's, you know, you're radio station or a hospital, applies to the IRS and says we're doing some community service. We're not for-profit. If you donate to the hospital, you get a tax deduction for it. It doesn't mean you can't make profit. You just can't call it profit. You can take in more money than you spend. You just can't give it away to shareholders in dividends because there aren't any shareholders. So what do you do with it? You build more buildings. You expand more services.
BRILLYou raise everybody's, you know, salaries. And that -- what happens is the nonprofit hospitals in this country in -- whether it's in Washington or in a small town, are typically some of the most-profitable, best businesses in that city or town. They just don't have shareholders, so they just keep plowing it back into salaries, into new buildings, into perks and everything else. In fact, nonprofit hospitals, if you factor in the fact that they don't have to pay taxes, actually do better as businesses in this country than the for-profit hospitals.
BRILLAnd one of the things I found, just to take an example if you want to compare to nonprofit institutions, in almost every city in the country, if you look at a -- the local university, the big, you know, the big local university -- let's say Georgetown, let's say Yale, let's say Stamford -- the hospital president invariably makes a lot more money than the president of the university that he's affiliated with. It's just -- it's this alternate universe that has just grown over the years where everybody makes money and nobody's accountable.
REHMSo why not put everybody into Medicare at an early age?
BRILLWell, there's a good argument for it. For example, if you paid -- you could probably erase the deficit in the federal budget if you enrolled people in Medicare at, let's say, a 20 percent discount off of the premiums they pay to private insurance companies. Medicare would make money on that because that's a much higher premium than you pay if you're 65 or older entering real Medicare, and Medicare buys much more efficiently and processes claims much more efficiently.
BRILLThe reason that won't happen is that we've created this giant economy that is one-fifth of our country's economy that consists of hospitals -- the American Hospital Association is one of the biggest lobbyists in Washington -- consists of drug companies, consists of insurance companies, consists of medical device makers, and all of those people have a stake in keeping this alternate universe economy that I'm talking about where everybody makes a high profit.
BRILLIf suddenly they were dealing, you know, with Medicare for, you know, the health care for someone who's 18 or 40 years old, all those profits would go away. They'd still make a little bit of money or they'd break even, which is what -- nonprofit institutions are supposed to break even, but they wouldn't make money. And one of the things I point out in the article is that the health care industry spends more than three times as much lobbying as the much-feared military industrial complex in Washington. So they really have a stranglehold, and that's why Obamacare really didn't touch any of this stuff.
REHMAll right. So the question becomes since the article came out, have you heard from or talked with any members of Congress or the executive branch about what you have discovered?
BRILLI haven't, you know, and it's obviously not my role. I'm not an advocate. I'm just, you know, I'm just a guy who looked at the bills and followed the money. I've heard from -- Time got a letter from the American Hospital Association stressing their devotion to great health care and to working on the problem of high medical costs.
BRILLBut I'll tell you what I have gotten, which is more emails and letters than I've ever gotten for anything I've ever written in my life. And a lot of them -- I'd say 15 or 20 percent of them are from doctors who themselves are disgusted about the system, you know, some of whom, you know, told me stories that outstrip, if they're true, even the horror stories in my article, the same thing from, you know, people who work in hospitals.
REHMSteven Brill, his article is in the March 4 issue of Time magazine. It's titled "Bitter Pill." And you're listening to "The Diane Rehm Show." On that very point, here's an email from Jeff, who says, "A former neighbor of mine was a young doctor with a new practice. He explained how insurance companies would never pay the full amount he billed. If he inflated his prices, he could get enough from insurance to make a profit.
REHM"It seems this is prevalent. The problem is that someone who doesn't have insurance will be charged an artificially high amount. I believe this goes back to the Clinton administration and was not addressed by President Obama's new plan." What's your view, Steven?
BRILLWell, it's certainly not addressed by the new plan, but let me just stress again that I think most listeners would agree with me. You know, you're not in the clear anymore if you have insurance because the insurance has high deductibles and high co-pays, and your employer is paying an increasing amount of money in premiums, you know, for that protection.
BRILLAnd that just illustrates the point that while the insurance companies get a discount off of the inflated, you know, chargemaster prices, whatever discounts they're getting still produce gigantic profits for hospitals, for labs and, most of all, for the pharmaceutical industry.
BRILLYou know, we pay, in America, an average of 50 percent -- 50 percent -- more for the same prescription drug as people in every other developed country pay. And why is that? It's because we alone don't have any kind of effective price controls on prescription drugs, which are, you know, often a -- their own monopoly. You know...
REHMAnd why is that?
BRILLWell, the patent system. You know, you patent a cancer wonder drug. Well, it's great that someone has developed that drug, but a patent basically is a legal grant of a monopoly. People can't copy your product. So the way most other countries, all other developed countries react to that when it comes to a cancer wonder drug -- because the person buying it has to have it. They don't have any choice. They have to have it.
BRILLSo the way they react to it is they limit the profit margins on those drugs. We don't do that. And even in countries in Europe where they limit the profit margins, the pharmaceutical companies, you know, sell those products very happily and make a lot of money. But here, they make much, much more money.
REHMAll right. Now let me ask you the question I'm sure is on many people's minds, and that is do you or do you not believe that President Obama's Affordable Care Act is going to help to improve the system or will it make it worse?
BRILLWell, one of the reasons I wrote this article, again, is my observation was that most of the debate around the Affordable Care Act was around insurance and who would pay the high prices.
BRILLIt wasn't about the high prices. Therefore, while the Affordable Care Act has a lot of really good and important things in it -- for example, it does sort of -- it does limit the egregious bill collecting activities of hospitals. It does require insurance companies to provide a plain English explanation of what their policies are before you buy them.
BRILLIt has a lot of pro-consumer pieces like that, but those really just sort of, you know, work at the edges of the big problem. The big problem is the prices are too high, and Obamacare does nothing, zero, to do that. For example, we're debating the federal deficit right now. Medicare probably spends 150 to $200 billion over the next 10 years more than it needs to because it can't bargain for medical devices for equipment.
REHMSteven Brill, he's journalist and author of "Bitter Pill," the cover story for Time magazine's March 4 issue. Short break. When we come back, your calls.
REHMAnd it's time to open the phones, 800-433-8850. First, to Miami, Fl., and to Scott. Scott, your question for Steven Brill.
SCOTTHi, Diane. I love your show. Thanks so much for taking my call.
SCOTTI'm so interested that Medicare is able to negotiate rates that are so much lower than what the insurance companies can get. And it makes me wonder why in the world we're having a debate in this country over whether or not we should be raising the Medicare eligibility age. It seems to me that having less people in Medicare will only exacerbate the problem. Shouldn't we be talking instead about lowering the Medicare eligibility age?
REHMSuppose it were...
REHM...lowered to 60, Steven? Why do you think that would not be a good idea?
BRILLWell, in fact, if you can make your way all the way through my article, when you get near the end, I present exactly that argument, that the country would save money. And God knows the people involved -- the patients would be better off if we actually lower the Medicare age. Now, the reason the country would save money is that under Obamacare, everybody has to buy health insurance.
BRILLBut if you buy health insurance from a private insurer, the premiums, if you're 63 or 64 years old, are going to be very high. If you can't afford those premiums, the government will subsidize them for you. So the taxpayers are on the hook for that. On the other hand, if you charge someone who's 62 or 63 or 64 to be in Medicare, that person would pay less because Medicare, again, buys all this treatment for so much less money. So I make exactly the argument you're talking about.
BRILLYou know, just going through it very slowly, I take you through all the math, and I find it, you know, hilarious or sad that the debate right now is about how we could save money by raising the Medicare age, which completely ignores the fact that all those people, if you raise the age, would have to buy health insurance. And the government would have to subsidize them, only they'd be writing checks to Aetna or Cigna instead of having those people in Medicare where everyone would save money.
REHMBut, Steven, wasn't that exactly the political argument, in other words, that the Obama administration and Hillary Clinton -- if you want to go back that far -- believe that an overall single-payer would be the way it ought to work. And if you did lower that Medicare eligibility age, wouldn't that be pretty much the same thing?
BRILLWell, I don't remember and wasn't paying enough careful attention to the debate over Hillarycare. But I do remember the debate over Obamacare, and it was a political debate about, should the government be doing this or should the private sector...
BRILL...be doing this? And the reason I wrote this article was I wanted to inject some actual facts since the debate. I don't remember the White House making the argument I'm making, which is that we'd save money if we did this. Now, having said that, the reason it's not going to happen goes back to something I said a little while ago, which is that the strongest lobby by far -- I mean, the health care industry makes the oil and gas industry look like homeless people.
BRILLBy far, the most powerful moneyed lobby in the United States is the health care industry. And not only does it have a lot of money, but it has a broad political constituency. In every town in America, the hospital is seen as the favorite charity. In fact, when people go to a hospital's charity dinner, they might end up contributing one-tenth of 1 percent of the revenue the hospital gets.
BRILLThe hospital has those charity dinners extensively for public relations. The real money, you know, comes when you're -- when you get to charge, you know, $77 for a gauze pad. So the political constituency is so strong, the money is so strong and Obamacare happened because it didn't cut into, dare I say it, the profits of the drug companies and the hospitals and all the people who are playing in that alternate universe health care economy.
REHMAll right. I want to read to you an email from Tom, who says, "Due to rampant greed and exorbitant and even criminal profit levels, I've already told my wife I will refuse treatment. If I get something expensive, just let me die. Is there a guidance in your article to foresee when something expensive is coming?"
BRILLWell, it's pretty easy to foresee if you ask about it, but pretty much anything that happens to you is going to be expensive. But let me just comment on some of the language that the gentleman used. And that is that I don't think it's criminality. I don't think it's rampant greed. I think it is what you can naturally expect when there's a lot of money involved, and people are held completely unaccountable.
BRILLI started my journalism career writing about the legal profession. And what I found was when it came to the legal profession, if lawyers were unaccountable, that sooner or later, there were going to be all kinds of abuses in the profession. This just sort of is a natural outgrowth of setting up, in the case of hospitals, these nonprofit institutions that are revered as they should be revered because after all, they do cure the sick. They do a good thing.
BRILLSo I think it's more a matter of they're just -- they could just charge more because they could and everybody started liking it. And if you ask the administrator of the hospital in some small town who's making, you know a million or $2 million a year, how dare you do that, he would cite rightfully the complicated enterprise that he runs and all the good that he does for sick people in that community.
REHMAll right. Let's go to Boston, Mass. Good morning, Darren.
DARRENHi. Good morning.
REHMGood morning to you, sir. Go right ahead.
DARRENOK. My question is -- I realized that your guest -- that he doesn't have experience in the health care industry. And it really kind of shows in some of the comments that he's making because I can see that it's kind of an act he's drawing as far as the topic is...
REHMSir, let me ask you, are you on a speakerphone? I'm having a hard time understanding you.
DARRENNo, ma'am. I'm not.
REHMOK. If you could speak a little more loudly and clearly.
DARRENOK. I've worked in a hospital setting for about 20 years now as an ER nurse and as an ICU nurse. And I realize that some of the cost that you see on a bill look inflated than -- and I don't think that anybody can deny that they are inflated. But when you see how much money a hospital will hemorrhage on unpaid bills, they're basically taking from Peter to pay for what Paul received. And it sounds like the profitability of hospitals or drug companies -- everybody wants wonder drugs, everybody wants miraculous treatment, and yet nobody wants to pay for it.
DARRENAnd in a free economy, I just think that drug companies, I mean, for better or for worse, they spend billions of dollars in research and development. And I think that, you know, the profit motive is what drives them. I don't think there's a lot of cutting-edge drugs coming out of North Korea or Cuba these days, so if your guest could explain why drug companies and hospitals shouldn't make money for what it is they do, I'd be really interested in hearing that.
BRILLSure. Well, you're saying actually two or three things at once. First, you're saying -- you're using the old myth that, well, you know, some of the charges may be inflated but the hospital has, you know, so many other costs and has, you know, so much bad debt that that's why they do it. Well, what I'm saying to you is that all the inflated charges with all the bad debt, with all the other costs end up with hospitals, nonprofits having profit margins of 11 and 12 percent a year, which is humongous for a service-intensive business.
BRILLThe drug companies you mentioned -- I don't think the alternative is Cuba or North Korea. The alternative is Spain, which is where the cancer drug I'm talking to you about was developed. It could be England. It could be Germany. It could be the U.K. And those companies make a lot of money in those places.
BRILLThey have a profit motive. No one's trying to take away their profit motive. But there's a difference between having a profit motive and an incentive and making a 90-percent profit on a drug that someone absolutely positively has to have for this cancer and then having the hospital take that drug and mark it up by 100 or 200 or 300 percent. That's what I'm talking about.
REHMAll right. To Dallas, Texas. Hi, Bruce. You're on the air.
BRUCEHi, you guys. This is something that I'm totally confused about. Just last week, I had to have an MRI. So I called my insurance company, and I asked how much this procedure, if I got the codes, how much this would cost. They said, well, our negotiated contract for this MRI is $1,950. So then I called the provider directly and said, guys, if I just pay cash for this, what am I looking at here?
BRUCEAnd they said $450. Now, I thought that -- and, by the way, if I paid that $450 in cash, circumventing my insurance company, I was not allowed to submit that $450 that I paid towards my deductible. Now, I thought that insurance companies save money by the premiums that we pay and hopefully they never have to pay anything else.
BRUCESo how does it make sense that this insurance company wants to charge four or five times the amount -- or that's their deal they've negotiated for something that only cost $450, which would -- if they'd let me put that towards my deductible, would keep me from reaching my deductible.
BRILLWell, there are couple possibilities. The first is the simple incompetence of one or both of the people you called on the phone. I mean, I found, you know, a lot of patients -- if you would call that same insurance company back and gotten a different person on the phone, you know, in Bangalore or wherever they were, they might have given you a completely different answer. That happens all the time.
BRILLSecond, it could be they were telling you what the list price is, not what they would actually pay, let alone what your co-pay would be. And the third answer is that -- sort of goes back to the first answer -- there is nothing that makes sense about this system. You cannot make sense of it. If you -- you know, I have a friend who had an issue with a drug, and he made five different calls to this insurance company and got five different answers that varied by a factor of five, you know?
BRILLThis will cost $10 versus $500.
REHMLet's take a caller in Miami, Fla. Justin, you're on the air.
JUSTINOK. My question is I wanted to know if you have investigated medical tourism at all, where people can go to South America and get reasonably good care for fraction of the cost. You mentioned the economies earlier. I mean, the most of the economies in South America cannot support such egregious price gouging.
BRILLWell, no, I didn't specifically in the piece, with one exception. While I was writing the piece, I developed an ear infection, and the drug that my doctor prescribed for me was a tiny little vile of eardrops that was $580 or something. So I look at the profit margin of the company and blah, blah, blah.
BRILLLong story short, I went online and found that I could have bought it in Canada for $180.
BRILLThe same drug, you know, the same prescription drug, you know, non-generic. And that happens all the time. The simple fact is the, you know, the American economy, the health care economy exists on the myth that this is a free market and we should treat it that way when, again, the buyers in this market have no power. And you can't have a free market if one side has no power.
REHMAnd you're listening to "The Diane Rehm Show." Let's go to Charlestown, W.Va. Hi there, David. You're on the air.
DAVID BALTIERRAHello. My name is David Baltierra. I'm a program director with the Family Medicine Residency Program here actually in Harpers Ferry in -- with West Virginia University. And my initial point was to call and point out how Mr. Brill had missed some points on things. But the more I listened to him, I think he's actually got it right. One, this article, although I haven't read it yet, is a great expose of what the truth is behind health care costs.
DAVID BALTIERRAAnd to tell you the truth, I've been a physician, now going on my 28th year, and I just found out what a chargemaster was last week. If you ask me what it cost to get a wart removed, we can't tell you. We don't know. We, you know, we don't know what it costs. I take care of patients in the hospital, out of the hospital, deliver babies, all those things. So I just want to make a few points. I think we designed a system that we get exactly what we want. There is profit all over the place, and the physicians used to be the bad guys.
DAVID BALTIERRAThat ended probably 10, 20 years ago. But now, everybody has a piece. But it's not that they're all bad or evil, it's the system that we've designed. And the parts that were, you know, Mr. Brill has addressed this cost. We haven't address complexity, but it's all tied up into the cost and the multiple insurances, equity. We have 50 million Americans that are not covered. And to final one is access. We don't have enough primary care physicians to cover the United States. But what he's brought us is data.
DAVID BALTIERRAAnd by looking at his data at the end of his article, it sound like he's coming up with a solution, which is really if we have one system that we're all in because it's not a market system, you can't go shopping, when you get him by a car, am I going to go to emergency room A or B, we can negotiate with individual hospitals that can remain private -- profit, nonprofit, that's a different issue -- and get the best health care for our nation as a group and group by that. And that really is. We've designed the best already.
DAVID BALTIERRAIt's Medicare. We just need to extend it to everybody. And, by the way, we already spend enough money in the United States to cover every American. We spend over $8,000 per American. With that money, we could cover every uninsured patient, best quality care in the world. We just need to negotiate those prices and...
BRILLThank you. No. Actually, I think it's now creeping closer to $9,000 a person. But you're absolutely right. And, you know, I don't want to oversell the prescriptions I have at the end of the piece because I am sort of light-handed about that because I wanted the, you know, the data and the reporting to stand out more than my policy arguments. But the fact is we -- it's not that we don't spend a lot of money, and God knows it's not that we don't have a lot of really good people.
BRILLBut we don't spend the money on the people who actually provide the care. Doctors and nurses are missing out on the gravy train. If you want to make a lot of money, you should be, you know, a star salesman for GE, you know, selling, you know, CAT scans in, you know, in New England. You'll make more money than a doctor.
REHMWell, Steven Brill, I want to thank you so much for being with us on the program and for writing your article, which appears in the March 4 issue of TIME magazine. It's titled "Bitter Pill: How outrageous pricing, egregious profits are destroying our health care." Steven Brill, the author. Thanks for listening, all. I'm Diane Rehm.
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