I have been hearing a lot about the cost of healthcare in the US, so I decided to look up some facts and figures.
Compared to 17 other industrialized nations (OECD nations that are developed, free market countries), the US consistently spends twice as much per person for the same level or even poorer healthcare. These other countries all have nearly universal coverage, but they manage to give healthcare equal to or better that the US while spending only 40-60% as much per person. US average annual cost $7920. Average of OECD developed nations: $2964
If we’re paying twice as much, where does our money go? Nobody is telling us that.
Try these numbers for size.
Industry estimates are that 20 to 25% of health insurance costs are for filing and paying insurance claims. Outside estimates place that as high as 35%. Estimates are that overhead for management and marketing for private insurance companies is more than seven times greater than for Medicare and Medicaid, arguably at 2 to 5%.
It is well known that Medicare pays out millions in fraudulent claims, but more stringent accounting can cut these losses. Healthcare providers defraud Medicare, but in the case of private insurance, the insurance companies themselves commit the fraud on the public.
Profits for 10 of the country’s largest publicly traded health insurance companies rose 428% from 2000 – 2007, while consumers kept suffering cuts in coverage. For the top five, that comes to $11.77 billion for 2007 alone. Insurance company profits are more than 5 times the average of Fortune 500 industries, and 5 times the rate of inflation.
Health insurance lobbies paid politicians $2.79 billion in 2007, and in the first half of this year they have paid out nearly $35 million, and that’s what they admit to. Going by the news stories about Congress, it looks like money well spent.
In addition, drug industry profits for the top 10 companies were in excess of $50 billion in 2006.
What happens to the money? Well, we all know how top executives reward each other. I won’t go there. Shareholders get an estimated 6%, as do shareholders in insurance companies.
But what about expenses such as merchandising and advertising?
In 2006, the top five companies spent $48.2 billion. (And money spent on ads aimed directly at consumers is tax deductible, hitting the public with a double whammy.)
Some of this tax-deductible money was used to promote non-approved use of drugs in a clear violation of FDA regulations. Drug companies have had fines of more than $11 billion levied over the past decade for these violations. Pfizer was just fined $2.3 billion in such a case. Drug companies continue paying these fines because their profits are so vast that these fines are merely one of the costs of doing business.
The top ten spent $187 million on lobbying in 2006. Yes, lobbying. That’s why Medicare can’t bargain with drug companies, but the VA can. Lobbying gets the most bang for the buck by far. Pharmaceutical industry profits increased by over $8 billion in the first six months after the Medicare drug plan went into effect (2006). No other investment could possibly beat those returns.
It’s too bad Americans can’t get as good deal from our elected officials as the insurance and drug industries get.
We spent $2.24 trillion on healthcare in 2007, $2.38 trillion in 2008 (HHS data). 2010 estimates hover around $3.1 trillion.
What would our healthcare and drug company executives be willing to do to get their hands on that, and what are our elected official willing to do the stop them?
11/03/2009
