Understanding U.S. Healthcare Costs and Access as a Right

The True Cost Behind a Hospital Bill

The costs associated with receiving healthcare are not as straightforward as they generally appear to the average patient. What may seem like a dramatic expense for something as routine as a 15-minute doctor consultation, a brief emergency room visit, a small-dosage prescription, or a material item used in treating a mild health condition is actually rooted in the much larger expenses that underpin the medical industry as a whole. Therefore, a seemingly expensive box of tissues can, in fact, be explained as a more reasonably priced investment when one accounts for the research, development, acquisition, and service costs associated with a hospital stay.

If working for a healthcare facility and placed in the position of having to justify the frequently high individual costs of healthcare resources, a CEO might make a point of identifying the many stakeholders who have played a role in — and must therefore be compensated for — ensuring that those tissues reached the patient's bedside. In this regard, it is not misleading to label the box a "Mucous Collection System," given how many parties are networked together to ensure its availability. The simple complexity of resource administration in the current American healthcare system carries significant labor costs that must be borne, in some part, by the consumer.

Administrative Complexity and the Multi-Payer System

Research by Reinhardt (2008) found that "about 85% of this excess administrative overhead can be attributed to the highly complex private health insurance system in the United States. Product design, underwriting and marketing account for about two-thirds of that total" (p. 1). There are many players in the healthcare system, including managed health firms, health insurance companies, and government agencies. The participation of each of these parties must be compensated in proportion to the resources each contributes to facilitating the distribution and funding of consumer health needs.

Just as there are many players in the American healthcare system, each contributes to the collaborative effort by which a box of tissues is developed, refined, produced, and distributed. This point is supported by research demonstrating the relevance of these seemingly high expenses to the technology enabling each of these steps. As Matthews (2008) notes, "the bipartisan Congressional Budget Office (CBO), the federal agency that estimates the fiscal impact of proposed legislation, recently published a study estimating that 'about half of all growth in health care spending in the past several decades was associated with changes in medical care made possible by advances in technology'" (p. 1).

Although the costs of healthcare may appear excessively high, the result is one of the most robust sectors in the American economy. This dynamic has allowed private firms to invest more heavily in research and development, such that the tissues at a patient's bedside are among the most optimally functional products available on the open market. This is one benefit of a profit-driven healthcare system: it has prioritized consumer-oriented initiatives such as competitive product development, hospital-level research into the most effective supplies available, and staff training in best practices for patient care. These are the opportunities made possible by substantial private investment within a free-market context.

Healthcare as a Right: The American Perspective

Still, it would be incomplete to present only this perspective without also acknowledging a counterpoint on behalf of the patient. As a hospital facility, healthcare providers are beholden to insurance companies in many of the same ways their patients are. The complexity of the system as a whole has placed hospitals in the position of having to accept certain cost factors beyond their control. This is supported by the Bureau of Labor Education (BLE) (2001), which reports that "the reasons for the especially high cost of health care in the U.S. can be attributed to a number of factors, ranging from the rising costs of medical technology and prescription drugs to the high administrative costs resulting from the complex multiple payer system in the U.S. For example, it has been estimated that between 19.3 and 24.1% of the total dollars spent on health care in the U.S. is spent simply on administrative costs" (p. 2).

This makes the case that private health insurance expenses have burdened the healthcare system at the expense of system users such as a patient with a simple runny nose. An examination of the broader economy, the state of the healthcare industry, and consumer capacity together may not fully justify the outsized inflation of costs for a box of tissues, but they do place these matters somewhat beyond the control of the individual hospital. In closing on this scenario, an appropriate response would be to apologize to the patient and acknowledge that the specific pricing is largely beyond the hospital's control. The best accommodation that could be provided — one consistent with the general nature of the medical industry — is a fully itemized bill in which the various associated costs are used to justify the charge for the Mucous Collection System in question. Such a bill would reference the costs of research, development, staffing, hospital maintenance, and related expenses, with an explanation of how the patient's proportional share of these costs has been factored into the price of the tissues overall. This could also serve as a template for greater billing transparency as one means of helping end users understand the true cost structure of healthcare.

America is a nation founded on the principles of self-reliance, free-market competition, and the acquisition of power. These features have encouraged a fiscally driven healthcare industry rather than one shaped by humanitarian or social impulses. Today, the healthcare industry is largely guided by the interests of private firms rather than by service administration or public health priorities. The highly lucrative businesses of health insurance provision, medical technology development, managed care networking, and pharmaceutical research and development employ well-funded lobby groups to ensure their priorities remain at the forefront of policy design. The public — and particularly those Americans who cannot afford health insurance — cannot be said to have the same representation in the formation of American law. Therefore, the absence of regulation over costs such as health insurance premiums and the lack of oversight over insurance company denial practices tend to reflect a legal hierarchy with significant socioeconomic implications.

In a conversation with a citizen from a country where healthcare is socialized, the most candid response would be to express frank disapproval of the nature of America's healthcare industry while connecting it to the broader character of America's economy, political culture, and socioeconomic structure. The healthcare industry's monetarily based exclusivity is consistent with most other aspects of public life in America, including the distribution of public services, access to education, and infrastructural maintenance. The way Americans experience all of these things is highly dependent on socioeconomic status. In that light, this constitutes one of the single greatest flaws in American public governance.

The problem of uninsurance is directly related to the problem of healthcare costs. So confirms a report by Consumer Reports (2008), which finds that "health-insurance premiums have grown faster than inflation or workers' earnings over the past decade, in parallel with the equally rapid rise in overall health costs. Industry spending on administrative and marketing costs, plus profits, consumes 12% of private-insurance premiums" (p. 1). This reiterates the point raised earlier: the undue imposition of costs by the healthcare industry — a reflection of a largely unregulated free-market sector — has negatively impacted the accessibility and quality of healthcare for many of the poorest users.