An American Sickness Summary

"Why are medical bills so high in the United States, and what can we do to fix it?" Elisabeth Rosenthal unpacks these pressing questions in An American Sickness with an investigative look at the for-profit health-care industry.

1. Health Insurance: From Pro-Bono to Profit

Health insurance in the United States began as a nonprofit initiative in the early 1900s, designed to help both patients and hospitals cover medical costs. However, by the mid-twentieth century, it became apparent that this could be a lucrative business opportunity. Companies shifted from nonprofit to for-profit models, fundamentally changing the nature of health care.

The post-1950s boom in for-profit insurance set the stage for astronomical health-care costs. Historically, insurers like Blue Cross allocated 95% of their premiums to patient care. However, over the years, as insurers started prioritizing profits, care costs spiraled while insurance companies reaped larger margins. The Affordable Care Act (ACA) placed a spending requirement, mandating that insurers allocate at least 80-85% of premiums towards patient care, but even this adjustment hasn’t stemmed the tide of excessive billing.

The story of Jeffrey Kivi, a chemistry teacher with psoriatic arthritis, highlights how profit motives influence coverage decisions. When his treatment costs inexplicably jumped overnight from $19,000 to $130,000 for Remicade infusions, his insurance company approved the inflated bill to meet ACA's patient-care spending ratio.

Examples

• Early health insurance was largely nonprofit, designed to aid hospitals and reduce medical costs.
• Blue Cross shifted from spending 95% of premiums on care in 1993 to increasingly prioritizing profits.
• Jeffrey Kivi’s health insurer accepted a $130,000 claim, unintentionally inflating costs to adhere to ACA rules.

2. Hospitals Operate Like Corporations

Originally established by religious or charitable groups, hospitals functioned to serve the sick and provide affordable care. By the 1970s, however, corporate consulting firms began advising hospitals to adopt business strategies, from “strategic pricing” to maximizing profit across departments.

This shift turned facilities into profit-driven entities where patient care was secondary to economic gain. Patients today face hefty bills laden with unexpected “miscellaneous” charges. For instance, attorney Heather Pearce Campbell’s ectopic pregnancy treatment at a Seattle-based hospital came with a shocking $44,000 bill, categorized vaguely, with no justification for such inflated fees.

Adding to this dynamic, hospitals prioritize the expansion of high-profit services like orthopedics and cardiology at the expense of less-lucrative operations such as dialysis units. Between 1997 and 2012, hospital service fees jumped by 149%, making care increasingly unaffordable for the average American.

Examples

• Hospitals began adopting corporate pricing strategies in the mid-20th century.
• Heather Pearce Campbell’s $44,000 procedure reflects opaque and inflated hospital billing.
• Costlier departments thrive while low-profit ones like dialysis are frequently outsourced.

3. Doctors Emerge as Entrepreneurs

Doctors were once strictly professionals bound by ethical guidelines about fair fees. This landscape transformed as doctors increasingly became entrepreneurs, seeking additional revenue streams through facility fees, private contracts, and other profit-driven strategies.

Ambulatory surgery centers (ASCs) exemplify this trend; initially marketed as affordable alternatives to hospitals, they are now expensive facilities that charge patients like luxury hotels. Meanwhile, “no patient contact” specialists such as anesthesiologists found lucrative opportunities by starting private practices and charging sky-high fees through hospital contracts.

This entrepreneurial shift isn’t limited to niche fields. Radiologists and other NPC specialists, for example, transitioned from earning fixed hospital salaries to negotiating high-priced contracts that patients ultimately bear the cost of.

Examples

• ASCs charge facility fees of $5,000–$10,000 despite being marketed as cost-effective.
• NPC specialists transitioned to private practices, increasing medical bills for patients.
• Doctors removed pledges about fair fees from their code of ethics by 2004, reflecting a new profit focus.

4. Drug Prices Soar Due to Patent Manipulation

US pharmaceutical companies continue to raise drug prices far beyond those in other Western countries. One underlying reason is the manipulation of patent laws, which allows corporations to renew patents by making marginal changes to existing drugs rather than innovating.

A glaring example is Mesalamine, which costs $12 in the UK but sells for $700–$1,200 in the US. Similarly, Horizon pharmaceuticals patented a combination drug, Duexis, mixing cheap ibuprofen and famotidine, producing it for $9 while charging $1,600.

Meanwhile, Martin Shkreli, a hedge fund manager, became infamous for acquiring old drugs like Daraprim and raising prices astronomically—from $13.50 to $750 per pill—with no mechanism in place to control such behavior.

Examples

• Mesalamine’s inflated US cost demonstrates unrestricted pharmaceutical pricing.
• Horizon Pharmaceuticals created Duexis by combining two generic drugs to charge $1,600.
• Martin Shkreli’s Daraprim price hike exemplifies predatory pricing tactics.

5. Medical Devices: Monopolies With High Costs

The medical device market suffers from both a lack of competition and regulatory oversight. Dominated by a handful of companies dubbed “the cartel,” devices such as defibrillators and implants are marked up exorbitantly.

Pricing becomes even murkier due to multiple middlemen—sales reps, distributors, hospitals—all taking their cuts before billing patients. Robin Miller’s brother, for instance, required a defibrillator after bypass surgery. Without insurance, it cost them $30,000, thanks to hidden markups along the pricing chain.

Faulty devices also slip through insufficient safety testing. For instance, surgical clips failed during procedures, causing life-threatening complications that could’ve been avoided with stricter oversight.

Examples

• Medical devices, like defibrillators, are sold by a few monopoly companies.
• Robin Miller paid $30,000 for his brother’s defibrillator due to nontransparent pricing.
• Faulty surgical clips reveal lax safety requirements for medical devices.

6. Testing Drives Up Hospital Bills

Testing and ancillary services, like physical therapy, have become hospitals’ “cocktails,” generating hefty revenues. Hospitals now often prescribe tests or services before a doctor examines a patient—more for profit than genuine necessity.

Björn Kemper’s son experienced this firsthand when a stomachache led to an unnecessary $7,000 CAT scan at a Florida hospital. Moreover, conglomerates like California-based Sutter Health exacerbate the problem by driving out competition and inflating regional prices by 40–50%.

Examples

• Physical therapy is often required post-surgery regardless of benefits.
• Florida Celebration Health Hospital imposed a $7,000 fee for Björn Kemper’s son’s CAT scan.
• Sutter Health conglomerate leads to outrageous health-care costs in California.

7. The Affordable Care Act Addressed Coverage But Not Costs

While “Obamacare” reduced the number of uninsured Americans, it did little to tackle the overall expense problem. Structural issues such as inflated treatment and medication prices remain unsolved.

As of 2016, ACA reduced the uninsured population from 18% to 11.9%. However, its impact on high-value research remained limited. Dr. Denise Faustman’s type-1 diabetes research remained underfunded since her work didn’t promise profitable treatments.

Examples

• ACA reduced uninsured rates by 6% over three years.
• ACA introduced reforms like banning insurance denials for preexisting conditions.
• Type-1 diabetes research faced challenges due to lack of profitability incentives.

8. Practical Methods to Reduce Personal Bills

Patients can take proactive steps to manage health-care costs. Speaking up and asking questions about procedures, costs, and cheaper alternatives empowers informed decision-making.

For instance, patients can insist on “in-network” referrals to reduce rates. Similarly, skipping hospital-based lab tests and opting for commercial ones can lead to significant savings. Shopping for lower drug prices online or internationally also combats inflated costs.

Examples

• Clear communication with doctors about alternatives can reduce unnecessary costs.
• GoodRx.com helps compare pharmacy drug prices.
• Commercial labs offer service pricing lower than hospitals.

9. Fighting Back Against Overcharges

Many hospital bills allow for negotiation. By requesting itemized lists and querying vague charges, patients can challenge inflated prices. Some hospitals offer steep discounts if asked, aiming to avoid sending bills to collections.

Tools like Medicare’s Hospital Compare help patients choose better service facilities. And, when admitted, modifying consent clauses to specify “in-network” coverage prevents unexpected billing surprises.

Examples

• Negotiate high hospital bills for quick discounts.
• Yelp and Medicare’s Compare tool reveal hospital reputations and costs.
• Itemized billing provides transparency and room for negotiation.

Takeaways

1. Explore nonprofit health insurers, which prioritize patient care over profits and reduce billing discrepancies.
2. Use tools like GoodRx.com or overseas options for better medication pricing.
3. Speak up: Always clarify your treatment costs, question tests, and negotiate your medical bills or fees.