Health care costs burden the country

Central Illinois is familiar with St. Jude Children’s Research Hospital, which for decades has treated children with leukemia. But few realize the cost associated with one of the most effective medicines used to treat chronic myelogenous leukemia (CML): Gleevec.

Manufactured by Novartis, Gleevec (imatinib mesylate) was introduced in 2001, when its list price was $26,000 a year. After its exclusive patent expired in 2016, its price was $108,000 a year (about $9,000 per month). Generic alternatives weren’t much better, at about $98,000 a year ($8,000 monthly).

The drug is hardly an option for families dealing with leukemia.

“People taking Gleevec for chronic myeloid leukemia have had their lives extended considerably,” wrote independent health-care analyst Joshua Cohen in Forbes magazine in September. “For some, it’s akin to a maintenance medication that allows them to reach their natural lifespan.”

St. Jude’s young patients famously “never receive a bill,” but costs are covered somewhere by someone, whether generous public donations or adults who aren’t treated at St. Jude.

Someone pays, one way or another.

The typical American spends an average of about $11,000 for health care a year, according to the most recent data from the federal Centers for Medicare and Medicaid Services (CMS). That’s compared to $7,700 as recently as 2007. National Health Expenditure figures increased 3.9 percent to $3.5 trillion in 2017, CMS reported, or 17.9 percent of the nation’s Gross Domestic Product (GDP), which is the total value of goods produced and services provided in the country in one year.

Ten comparable economies (Australia, Canada, Denmark, France, Germany, the Netherlands, Japan, Sweden, Switzerland and United Kingdom) showed expenditures of 11.5 percent; almost all of them have some form of Universal Health Coverage, according to the Journal of the American Medical Association.

“National health spending is projected to grow to an average rate of 5.5 percent per year,” CMS says, “to reach $5.7 trillion by 2026.”

According to between 1960 and 2016, health-care spending in the United States increased:

  • from an average of $151 per person per year to $10,320 (69 times),
  • from an inflation-adjusted average of $1,248/person per year to $10,539 (8 times), and
  • from 5.0 percent of GDP to 17.9 percent (3.6 times).

Obviously, health-care costs are rising much faster than the rate of inflation (while wages are stagnating, by the way).

Big Pharma is regulated by the Food & Drug Administration on developing drugs, but drug manufacturers (and hospitals) can raise prices almost at will (remember Martin Shkreli, who increased the price of Daraprim from $13.50 to $750 per pill). Insurers also are technically regulated, but they have more clout than patients do, so “the market” – what consumers need for their health – determines prices.

Elsewhere, residents of the UK annually spend less than $4,000 and have a life expectancy of 71.4 (20th in the world) while Americans spend almost three times as much and have a life expectancy of 69.1 (ranking 31st), according to the World Health Organization. Narrowing the life-expectancy comparison to the 12 wealthiest industrialized nations, the United States is at the bottom: 12th, according to the nonpartisan, nonprofit Kaiser Family Foundation.

The International Federation of Health Plans (IFHP) shows other disparities of health expenditures:

  • a normal childbirth/delivery cost $10,000 in the United States, according to the most recent data (2013) from the IFHP; in Australia, families cost $6,600,
  • a CT scan in the United States cost more than $900; in Canada, it’s $97.
  • an MRI in the United States costs more than $1,100, but the same test is $138 in Switzerland.

While the status quo is expensive, Medicare for All would be cost effective – despite the fear-mongering of opponents who stress tax increases but usually neglect out-of-pocket expenses, co-pays, deductibles, etc.

Two recent studies – one by an academic group, the other by a think tank tied to the conservative Koch brothers – both showed savings if the United States adopts a Medicare for All plan as proposed in separate measures in the House (H.R. 676) and Senate (S. 1804).

University of Massachusetts/Amherst economist Robert Pollin reported in a cost analysis of S.1804, introduced by U.S. Sen. Bernie Sanders (I-Vt.), that it would cut U.S. medical costs from 17.9 percent of GDP to between 9-11 percent, mainly by targeting non-medical costs in the system (administrative overhead and corporate profits).

“This study is the most comprehensive, detailed, authoritative study ever undertaken of Medicare for All, and it points powerfully and unassailably in support of MFA,” said Columbia University economist and public-policy expert Jeffrey Sachs, who reviewed the analysis. “Medicare for All promises a system that is fairer, more efficient, and vastly less expensive than America’s bloated, monopolized, over-priced and under-performing private health insurance system. America spends far more on health care and gets far less for its money than any other high-income country. This study explains why and shows how Medicare for All offers a proven and wholly workable way forward.”

Meanwhile, a report issued this summer by the libertarian Mercatus Center found that Sanders’ plan would cost the federal government an additional $32.6 trillion over 10 years, but it also found that the National Health Expenditure would come in below current projections. Therefore, Mercatus conceded, although the price tag for the federal government would increase, the total cost of health care would go down, and more than 30 million uninsured Americans would get access to healthcare.

Bill Knight

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