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1-Page Book Summary of An American Sickness

It’s commonly known that US healthcare costs 18% of the country’s GDP, or $3 trillion a year. Overall health outcomes are mediocre compared to other developed countries, which generally spend half of that amount per person.

Despite the high amounts we spend on healthcare, it’s never quite clear what we’re paying for, because the billing practices are incomprehensible. It’s especially bad when compared to other things we’re used to paying for.

And it’s not clear why things cost so much. Why does getting a few stitches in an ER cost $5,000? Why does a pill of Tylenol in the hospital cost $55?

In summary, US healthcare is a dysfunctional market. The normal economic laws of supply and demand, and of competition and pricing, are not operating here.

The author presents ten rules of this distorted market:

  1. Always opt for more treatment. Choose the most expensive option that’s available.
  2. Being treated for a disease over a lifetime is better than a one-time cure.
  3. For hospitals and providers, providing good care is less important than good amenities and marketing.
  4. Over time, as a technology ages, the treatment can get more expensive rather than cheaper.
  5. There is little competition in the market. Patients have little choice in what providers they can go to.
  6. Having more competitors doesn’t mean lower prices. In healthcare, more competitors can actually drive prices up.
  7. Large providers don’t use their economies of scale to lower costs and prices. Instead, they simply take advantage of their local monopoly to demand more.
  8. There are no fixed prices for medical procedures or tests.
  9. Billing practices are out of control. Providers will bill for anything they possibly can.
  10. Vendors will charge the maximum prices the market will bear.

The Basics of Healthcare and Incentives

The major blocs in healthcare are:

  • Providers/vendors: they provide medical care and get reimbursed by insurers.
    • Hospitals
    • Doctors
    • Pharmaceuticals
    • Medical devices
  • Insurers (eg Blue Cross): they receive premiums and pay vendors for healthcare
  • Employers: in the US, they are the major payers to insurers
  • Patients: people who receive medical care

Each bloc has opposing interests:

  • Providers want to get paid more for doing less work.
  • Insurers want to get paid more premiums and pay less in medical care.
  • Employers want to pay lower premiums and get happier employees.
  • Patients want to pay less and get more healthcare and flexibility.

No matter how the incentives are set, participants in healthcare will generally exploit the incentives to their maximum. And if the incentives don’t align with quality and cost-effectiveness, you don’t get quality and cost-effectiveness.

This profit-seeking behavior manifests across all stakeholders:

  • Hospitals and doctors bill for everything they can possibly get reimbursed for. They push for higher-cost care and the most expensive technology, despite lacking proof of better outcomes.
  • Doctors get paid according to procedure time and complication (RVUs), without consideration of cost efficiency or outcome. Furthermore, they lobby to protect their own responsibilities, such as limiting the prescription power of pharmacists, and to cap the number of medical residents trained per year.
  • Pharmaceutical companies extend patent lifespans through several strategies (discussed in the full summary). They restrict competition with generics by gaming prescribing law.
  • Insurers push higher costs into premiums, co-pays, and deductibles for employers and patients.
  • Patients don’t directly pay for care, so they often push for the higher-priced, more technologically advanced option.
  • Even non-profit disease foundations are funded by pharma and invest in startups. A diabetes foundation may own shares in a company that produces a diabetes treatment, thus complicating its incentives to push for more accessible, lower-cost treatments.
  • Even the FDA benefits from fees for each application for a drug, incentivizing more me-too drug applications.

A Dysfunctional Market

The maximization of incentives is true of any market, but several factors make healthcare an especially dysfunctional market.

  • Consolidation of healthcare providers has led to functional monopolies in certain geographies.
    • Massive health systems consolidate and become the only game in town. If you have the only maternity ward in the local region, all the local patients want access to you.
    • Patients want insurance that covers this big player, and they reject narrow-network insurance. Thus employers are pressured to get insurance with good coverage.
    • Therefore, large health systems with a local monopoly have massive leverage over insurers in setting prices and favorable policies.
  • Given the complexity of medicine, most patients cannot be fully informed about the tradeoffs of medical treatment. Thus they are swayed by pharma marketing and providers, who have their own competing incentives.
  • The recipients of healthcare (patients) are not paying directly for the service—insurers are. This leads to moral hazard problems, where patients tend to opt for the highest-priced care if they’re not paying for it.
  • Doctors are often ignorant of prices and thus can’t serve as effective advisors for the patient on cost-effectiveness.
  • Prices are opaque and often discovered only after treatment. Often this is because of confidentiality agreements between insurers and providers.
  • High regulatory barrier to entry for getting drugs/devices approved (FDA trials) limits open competition for generics.

By now, all the major blocs are so deeply entrenched that any zero-sum change is strongly opposed. For example, lowering compensation to doctors might mean cheaper costs for the system, but doctors will staunchly oppose this.

Fragmentation makes it difficult to change anything systemically.

  • Much of healthcare is regulated on a state-by-state basis instead of nationally.
  • Employers are fundamentally competing with each other for talent, impeding collaboration between employers.
  • Even within each bloc, there is further fragmentation.
    • Providers are divided into specialties, and they battle for a fixed pie of Medicare RVU reimbursements.
    • Different blocs of patients want different things (eg AARP vs millennials)
  • Other countries have a single payer (the government) that can negotiate prices and reject treatments not proven to be cost-effective. However, much of the US is philosophically opposed to the expansion of federal government and allergic to structures resembling “socialism.”

What You Can Do

Even if you can’t change the healthcare system yourself, what can you do to reduce your own price of care? The book recommends these actionables:

Question your doctor and hospital about fees before you get treatment.

  • How much will this treatment cost? Then compare with online prices for your local area.
  • How will this test/exam/surgery change my treatment? If there’s no reasonable justification, pass on treatment.
  • Are there cheaper alternatives that are equally good?
  • Can you send my testing to an in-network lab?

Wait before getting treatment.

  • Many symptoms resolve themselves.
  • Unnecessary scans and tests get insignificant findings that might prompt unnecessary care.

If admitted to the hospital:

  • When admitted to the hospital, you’ll be asked to accept financial responsibility for charges not covered by your insurer. Write in “as long as the providers are in my insurance network.”
  • If you’re put in a private room, ask “will insurance cover this private room, or will there be a supplement fee?” If there is a fee, ask how much it is, then consider asking for a shared room with no fee.
  • Ask to know the name...

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An American Sickness Summary Introduction

It’s commonly known that US healthcare costs 18% of the country’s GDP, or $3 trillion a year. Overall health outcomes are mediocre compared to other developed countries, which generally spend half of that amount per person.

Despite the high amounts we spend on healthcare, it’s never quite clear what we’re paying for, because the billing practices are incomprehensible. It’s especially bad when compared to other things we’re used to paying for.

For example, in healthcare, multiple doctors send separate bills with huge amounts, then insurance pays a fraction of the amounts. What if you took a flight and got separate bills from the airline, the pilot, and the flight attendants?

Further, the price for the same procedure costs different amounts depending on where it’s done, who’s doing it, and what insurer you have. What if you paid twice as much for a Toyota Camry in New Jersey as for one in California?

And it’s not clear why things cost so much. Why does getting a few stitches in an ER cost $5,000?

This book is an attempt to answer these questions. Over time, the healthcare market has become dysfunctional. The author presents ten rules of the distorted US healthcare market:

  1. Always opt for more treatment. Choose the most expensive option that’s available.
  2. Being treated for a disease over a lifetime is better than a one-time cure.
  3. Good care is secondary to good amenities and marketing.
  4. Over time, as a technology ages, the treatment can get more expensive rather than cheaper.
  5. There is little competition in the market. Patients have little choice in what providers they can buy.
  6. Having more competitors doesn’t mean lower prices. In healthcare, more competitors can actually drive prices up.
  7. Large providers don’t use their economies of scale to lower costs and prices. Instead, they simply take advantage of their local monopoly to demand more.
  8. There are no fixed prices for medical procedures or tests.
  9. Billing practices are out of control. Providers will bill for anything they possibly can.
  10. Vendors will...

An American Sickness Summary Part I: History | Chapter 1: Problems with Insurance

The first and major part of American Sickness covers the major segments and industries of healthcare. Each chapter contains a history of the industry and how well-meaning policies turned into current perverse incentives.

History of Health Insurance in the US

In the late 1800s, healthcare was unscientific and ineffective. Diseases took a long time to recover from, and people paid for their own healthcare. Health insurance as we know it today didn’t really exist.

The earliest health insurance policies compensated people for income lost while they were sick. Some employers also paid for doctors to be on retainer to care for employees, since long illness absences were a problem.

In the 1920s, Baylor University Medical Center offered a local teachers’ union a catastrophic health plan for $6 per year per person. This included a 21-day stay in the hospital after a deductible of a week. A day in the hospital cost just $5/day, or $105 in today’s dollars. This plan became popular, signing 3 million insured by 1939, and led to the non-profit Blue Cross Plans.

In the 1930s, medical technology improved. Anesthesia, penicillin, and ventilators were discovered. This enabled new effective standards of care. The new technology also increased the cost of care, and insurance had to adjust to cover the higher costs.

At this critical juncture, insurance could have been direct to consumer and private, as with auto and life insurance. But one historical event changed healthcare policy in a dramatic way that would last until today. During World War II, the National War Labor Board froze salaries. Normally, companies used higher salaries to compete for workers, but this was now forbidden. Instead, companies began offering health insurance, which wasn’t frozen. Furthermore, to make this more attractive, the federal government made employer spend on health benefits tax-deductible.

This historical artifact was the origination of employer-sponsored healthcare, the predominant way people are covered today. Population insurance rates exploded from 10%...

An American Sickness Summary Chapter 2: Problems with Hospitals

Hospital costs have grown faster than other segments of healthcare, growing 149% from 1997 to 2012, compared to 55% for physician services.

Today, 10-15% of hospital revenue goes to billing administrators and claims processing. In today’s system, it costs a lot to get paid.

A Brief History of Hospitals

Many hospitals began with religious roots (hence the many hospitals with the name Baptist or Presbyterian). They had general social good as their mission.

In the 20th century, health insurance coverage broadened. In the 1960s, Medicare arrived and covered hospital payments. In 1980, 80% of Americans under 65 were covered by insurance.

At this time, reimbursement was generally fee-for-service. Providers charged as much as they could, and insurers generally paid it out. From 1967 to 1983, Medicare payments to hospitals increased from $3 to $37 billion.

With more money rolling in, hospitals hired administrators, who helped steer the organization toward financial performance. Physicians were influenced to focus on more profitable care, told what procedures to perform, given bonuses scaling with revenue they brought in, compared publicly to other doctors on revenue, and even told to attend charm school to make more revenue. Likewise, nurses became “clinical nurse-managers” armed with statistics on billing.

Healthcare costs were getting out of control, so to clamp down on charges, Medicare revised payments to a “diagnosis-related group”—essentially, a fixed bundled amount based on the diagnosis. Medicare would pay a fixed amount for an appendix removal.

Similarly, HMOs had a heyday in the 1990s, where the PCP would be a gatekeeper for followup care and provider access was limited. The author says that patients hated them because they were poorly designed and managed. (Shortform note: however, patients also disliked being unable to get access to any doctor they wanted on demand.)

Hospital Reimbursement

Hospitals provide the medical service to the patient, then are reimbursed by the payers (insurers) for the service. This...

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An American Sickness Summary Chapter 3: Problems with Physicians

Physicians take care of patients, but they’re no less concerned with boosting their own pay as the other members of the ecosystem. As we’ll learn, doctors bill in ways to maximize their pay.

Primary care physicians in the United States make 40% more than Germans; orthopedic surgeons make 100% more.

An Aggrieved Profession

Part of the problem may be medical school debt. In the United States, medical school costs between $120k to $220k (with state schools at the lower range and private schools at the higher range), while it’s free or cheap in many other countries. Medical students graduate with a mean debt of $170k, some of it from undergrad.

The author argues that this debt burden pushes some students into more lucrative specialties, like dermatology and ophthalmology, rather than what they would naturally prefer to practice.

But all this pay may not be enough. One medical student comments that doctors feel a “bizarre martyr complex” where they feel they’re working harder for less money than the rest of America. The author argues this is a symptom of the corporatization of healthcare—doctors are getting less satisfaction from patient care, so they’re looking for dollars to compensate for it.

Brief History of Doctor Pay

Before the 1950s, American patients were uninsured, paid doctors out of pocket, and were on an informal sliding scale in proportion to income. Doctors were comfortably middle class, but not wealthy.

In the middle of the 20th century, World War II and the ensuing employer-sponsored insurance, and Medicare Part B (with its essentially unconstrained reimbursements) led to large physician payments and a golden era of compensation. Why did Medicare pay so liberally? Since the medical profession was opposed to Medicare, this was part of a handshake deal to get Medicare passed—the government vowed not to interfere with the practice of medicine, if doctors could avoid opposing Medicare.

The reimbursement structure was based on retrospective “usual and customary” fees. “Usual” was defined as the average price...

An American Sickness Summary Chapter 4: Problems with Pharmaceuticals

History of Pharma

Here’s an abbreviated history of pharmaceutical companies in the US:

  • 1906: The Wiley Act gave the US Bureau of Chemistry regulation power over drug safety. Since few medicines did anything of note, the focus was on preventing harm.
  • 1937: Sulfanilamide (an antibiotic for strep throat) was mixed with diethylene glycol and killed 100+ people. This prompted...
  • 1938: The Food Drug and Cosmetic Act required testing before drugs could be marketed, and it prohibited false therapeutic claims.
  • 1960: The anti-nausea medication thalidomide was given to pregnant women, but it caused birth defects in over 10,000 children in Europe with only 50% surviving. This tragedy led to...
  • 1962: The FDA now enforced methods for clinical testing and required medicines to be proven “safe and effective” beyond placebo.
    • Importantly, concerns about relative value were not addressed here—there was no need to be “safe and effective beyond existing drugs” or to be cost-effective.
  • 1984: Drug companies complain that the drug approval process takes time away from the 20-year patent protection period. Drug prices are also rising. In response, the Hatch-Waxman Act was passed:
    • Generic drugs got an easier path to approval. They didn’t need to fresh clinical trials, but rather just show chemical equivalence, and equivalence of bioavailability. This created the ANDA, or abbreviated new drug application.
    • Manufacturers were given ways to extend patents, including:
      • A 3-year extension to support a change in dose form
      • 7-year exclusivity for orphan drugs (those treating rare conditions)
      • 6-month extension for pediatric trials
      • 5-year extension for claims of “time lost in regulatory review,” during which generic markers couldn’t submit applications
  • 1980s: HIV concern led to rapid approval of AZT (1 human trial that lasted 19 weeks was sufficient for approval) and other antivirals. At the time, these became the most expensive drugs in history.
    • What was...

An American Sickness Summary Chapter 5: Problems with Medical Devices

The medical device industry is dominated by a few major players: Medtronic, St. Jude Medical, Boston Scientific, Stryker, and Zimmer Biomet. Like other segments of healthcare, they have consolidated over time.

Brief History of Medical Devices

Many device makers began in hardware or consumer electronics. Medtronic started in 1949 as a medical equipment repair shop

In 1969, surgeon Denton Cooley implanted the first artificial heart in a patient for 3 days without FDA approval.

In 1976, the FDA defined three classes of devices that need different levels of approval.

  • Class 1: These cause little risk and deserve little scrutiny, like tongue depressors.
  • Class 3: These are life-sustaining or potentially life-threatening, thus requiring extensive testing. This includes pacemakers.
  • Class 2 is in between, and it’s governed by a program called 510(k)

The scrutiny in class 2 is so much lower that most devices are submitted under this designation, including devices you might consider to be potentially life-threatening such as joint replacements and surgery clips. Class 2 applications outnumber class 3 by 60 times.

Class 2 Regulation

The bar for class 2 is relatively low. You need only claim that your device is “substantially equivalent” to a product already sold and used for the same purpose.

Class 2 requires far less testing than class 3. Only 10% of FDA class 2 applications contain clinical data—many devices aren’t even tested in animals before placing into humans, and most offer no clinical trials at all. Class 2 devices aren’t required to be proven “safe and effective” like drugs are.

As a result, the FDA has little issue approving the devices. FDA cleared 85% of devices under the “substantially equivalent” criterion. The FDA spends 1200 hours reviewing class 3 devices, compared to only 20 hours for 510(k) requests.

Some manufacturers don’t even seek FDA approval for new models, since they don’t consider the new version “substantially different” from older models. However, patients don’t always...

An American Sickness Summary Chapter 6: Problems with Testing and Ancillary Services

As payers tightened up their spending, providers looked for other ways to increase billing. One opportunity came in testing and ancillary services, where they restructured the business models to better profit. The doctor, hospital, and staff all benefit from increased testing.

Medical Testing

Tests done in hospitals are more expensive than those at third-party labs (eg Quest). However, as a patient, you often don’t get the choice of where to send your tests, and the options aren’t often clear.

Testing in general in the United States has inflated pricing. An MRI costs $160 in Japan. It costs $3500 in a US hospital.

The incentives to increase billing for testing trickle down to doctors, who get rewarded through bonuses for billing. Hospitals are complicit. One doctor ordered EEGs for kids to detect undiagnosed seizures, until most patients turned out not to have seizures at all.

Increasing Testing Count

The more tests a doctor orders, the more she can bill. This has changed medical practice to heighten the testing done:

  • Physician extenders can order tests before the patients see doctors. They are also more likely to order tests than doctors are.
  • Some offices refuse treatment or surgery before getting a particular test (such as an echocardiogram).
  • Electronic medical records automatically show medical staff a list of options for workups and testing based on the patient complaint.

Billing Tactics

The game to increase billing is to unbundle them and charge the maximum per individual test.

For example, a hospital overnight stay is billed at an all-inclusive rate. However, pre-operative tests are done on an outpatient basis, so they can be billed separately from the bundled rate.

Another example is to unbundle a test into as many separate components as possible. The standard CHEM-7 test can be split into seven separate tests, increasing billing significantly.

Other Reasons for Unnecessary Testing

It’s too much to suggest that doctors and hospitals only order tests to increase...

An American Sickness Summary Chapter 7: Problems with Contractors

Billing codes have gotten so complex that both insurers and providers have outsourced claims to third-party contractors. They help handle billing, coding, and collections, and they often get paid a percentage of the billing they obtain.

Brief History of Billing

Disease codes were first used for epidemiological purposes. The WHO created the ICD to formalize the classification of conditions.

In 1979, the US used ICD codes for Medicare/Medicaid claims, creating their own version of ICD, the ICD-CM.

Getting a code for a condition is a big deal, because it becomes classified as a formal disease, and it obligates insurers to pay for it. Obesity got its code in 2013.

Three types of billing codes are now prevalent: CPT, HCPCS, and ICD.

Because medicine advances quickly, codes often change. This has spawned an industry dedicated to billing codes, with contractors arising both to help providers bill for more and to help insurers pay less.

How Codes Help Billing

The key to maximizing billing is to understand that different billing codes have different prices.

  • The code for “acute systolic heart failure” pays thousands more than “heart failure” because it is more severe and has defined conditions (such as less than 25% of blood pumped with each beat, undergoing an echocardiogram, and taking a water pill).
  • A finger fracture (99282) gets higher pay if a narcotic painkiller is prescribed (99283). Even better, you can bill separately for the painkiller!

Perversely, this can cause overtreatment to fit the higher-paying, more complicated code.

To put some limitations on prices, insurance companies have negotiated rates with hospitals for billing codes. Unfortunately, hospitals have been shown to charge the uninsured 2.5x more than those covered by insurance.

Tug of War

Billing is essentially a tug of war between providers and insurers.

Providers will bill for whatever they can. Not only does this mean billing for the most expensive treatments allowable, sometimes third-party coders will inappropriately...

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An American Sickness Summary Chapter 8: Problems with Research and Non-Profits

According to American Sickness, medicine’s history began with more moral ambitions and less profit motive.

  • In the early 1920s, scientist Frederick Banting isolated insulin and licensed the patent for only $1 “as a gift to humanity.”
  • In the mid-1900s, the March of Dimes raised money for polio vaccines without trying to profit from each inoculation.
  • Blue Cross Blue Shield began as a nonprofit.

A massive change happened when the Cystic Fibrosis Foundation (CFF) sold its rights to drug royalties for $3.3 billion. In 2000, the CFF invested in Aurora Biosciences, which was then acquired by Vertex Pharmaceuticals. The company released a new drug Kalydeco, which was FDA approved in 2012 and cost $300,000 per year. Two years later, the CFF cashed in its rights to drug royalties and received over $3 billion.

This provoked non-profit organizations to embrace a new business model: “venture philanthropy.” They now invest in pharma and device companies expecting to earn a financial profit. For example, the Juvenile Diabetes Research Fund invested $17 million in Medtronic for a glucose sensor, invested another $4.3 million in BD, and formed a new investment fund with PureTech Ventures.

As another shift, disease-centered nonprofits and charitable foundations are now often funded directly by pharma companies, leading to some confounding of interests. Pharma participates in foundation events to recruit patients and talk about new treatments.

The close relationship between nonprofits and healthcare vendors now complicates the incentives of nonprofits.

  • If a drug costs hundreds of thousands of dollars a year, but the non-profit earns more if the drug is sold at a higher price, will the non-profit lobby as hard to make the drug more affordable for the patients they’re supposed to represent?
  • If there are promising treatments that can’t be patented, and so the non-profits can’t profit, will they promote these as much as they should?
  • In the extreme, might non-profits even shift toward pharma incentives of seeking...

An American Sickness Summary Chapter 9: Problems with Conglomerates

Healthcare systems in local regions have consolidated to provide negotiating power against employers and insurers.

Say you’re the only major medical provider in town—you might have literally the only maternity ward in the region. The local patient population needs access to you. Therefore, employers have to buy insurance that provides you in-network. Therefore, insurers have to meet your demands, especially around pricing, to sign you.

The pricing effect is real—studies show that hospital mergers in concentrated markets cause prices to increase by over 20%. Low-competition areas show symptoms of higher premiums, higher medical prices, and possibly suboptimal care and overtreatment

Counter-intuitively, the prices may not be lowered with competition. The large players might set a high price, which emboldens smaller players to raise the prices as well. This is just one way that the healthcare market is dysfunctional, compared to the idealized economics free market.

The Advantages of Large

Large health systems span a huge range of services and consist of hospitals, ambulatory care clinics, nursing facilities, and large physician networks.

Being part of a health system opens up opportunities for more aggressive billing. For example, say a health system purchases a primary care office. Now a visit to a primary care doctor can tack on facility fees to the charges; doctors can also bill visits and tests as hospital charges, which earn higher rates. All this is allowed despite the fact that the doctor visit hasn’t changed or gotten more effective.

The patient can suffer under these changes. Some insurers require a higher deductible for hospital fees, and so the higher costs get pushed onto patients.

With their size, hospitals also demand other terms favorable to them, like forcing certain procedures (e.g. drug infusions) to be done in hospitals.

The Large Keep Getting Larger

Size begets size. Large healthcare systems can pressure smaller players into being acquired in order to access the system’s services. It can also pressure insurers...

An American Sickness Summary Chapter 11: Problems with the Affordable Care Act

(Shortform note: If you’ve noticed we’ve skipped Chapter 10, that’s because it’s about healthcare as a business, and we’ve integrated its points into previous chapters.)

One of Obama’s hallmark achievements was passing the Affordable Care Act. While it made good progress in some areas, it ultimately fell very far from its original sweeping vision. Here’s a discussion of its achievements and its pitfalls.

Achievements of the Affordable Care Act

Here’s how the Affordable Care Act succeeded:

  • It barred insurers from denying coverage to people with preexisting conditions.
  • It banned lifetime limits on insurance payouts.
  • It defined essential health benefits that insurers had to cover, like maternity care and screening procedures
  • It allowed adult children to stay on family health insurance until age 26.
  • It capped annual out-of-pocket spending per person (to around $7,000) as long as the patient stayed in-network. The aim was to limit bankruptcy caused by healthcare.
    • (Shortform note: this doesn’t directly constrain costs. Even if patients can only pay a certain maximum, the extra cost just gets pushed onto higher premiums.)

Pitfalls of the Affordable Care Act

Here’s how the Affordable Care Act failed:

  • It didn’t directly control rising costs. Its measures tried to achieve this in roundabout ways, with unclear efficacy.
  • As healthcare costs rise, insurers can push expenses to the patient through higher co-pays and deductibles.
    • Higher prices for drugs meant patients avoided getting any medicine, which raises the cost of later care once complications result.
    • Insurers also narrowed networks, often to less experienced doctors and second-tier hospitals.
  • It did not create a “public option” that allowed anyone to choose a national health insurance plan or get on Medicare. This would have created a large payer with large negotiating power over providers and pharmaceutical companies....

Shortform Exercise: Reflect On Your Healthcare

Now that you understand the healthcare system more, reflect on problems you’ve personally encountered.

What are some grievances or complaints you’ve had about the healthcare you’ve received?

An American Sickness Summary Part II: Treatment | Chapter 12: Healthcare Systems

Now that you understand why and how American healthcare is so dysfunctional, what can you do about it?

Part II of American Sickness discusses steps you can take to improve your personal healthcare and possibly make a dent in the American healthcare system. Each following chapter contains 1) practical tips on how to make medicine personally better for you, and 2) legal reforms that, if passed, would lead to more systemic change.

Healthcare Systems in Other Countries

This chapter describes healthcare systems in other developed countries, ranging in the degree of government intervention. Generally, they show better quality for lower cost compared to the US healthcare system.

National fee schedules and price negotiations

What it is: National governments set fees for health services and negotiate prices with vendors.

Where: In Germany, Japan, Belgium


  • This lower prices through large national negotiating leverage. As an example, a heart sonogram costs between $1000 and $8000 in the US. It costs $150 in Japan and Belgium.
  • It reduces inefficiencies in haggling for billing. US doctors spend 1/6 of their time on administration.
  • The system doesn’t preclude private insurance. Japan and Germany have hundreds of insurers, and the Netherlands requires citizens to buy private insurance.

Single payer

What it is: A single authority, usually the central government, pays most of the money to providers.

Where: In Canada, Australia, Great Britain, Taiwan


  • The large single payer provides powerful negotiating leverage against providers, hospitals, pharmaceutical companies, and other vendors.
  • In Denmark and Great Britain, the state goes further and owns the hospitals and infrastructure. This provides true nationalized or socialized healthcare. Specialists and some general doctors are government employees
  • Doctors and hospitals practice independently of the government.
  • ...

An American Sickness Summary Chapter 13: What to Do About Doctors’ Bills

What You Can Start Doing Now

  • Ask questions about what the care will cost you, before you make your decision.
  • Questions to ask a new doctor
    • Is the practice a surgery center or owned by a hospital? Will facility fees be charged?
    • Will you refer me only to providers in my insurance network?
    • Can you send my testing to an in-network lab?
    • What extra fees are there? Phone calls, annual fees?
    • Will you see me in the hospital if I’m hospitalized? Can I reach you on weekends?
  • Questions to ask during a visit
    • How much will this treatment cost? Then when you get home, search online for a ballpark range for your local area.
    • How will this test/exam/surgery change my treatment?
      • If there’s no reasonable justification, pass on treatment.
    • Where will this test/exam/surgery be performed, and how does that affect the price?
      • Are you an owner of the place you’re referring me to?
    • Are there cheaper alternatives that are equally good?
    • Who else will be involved in treatment? Will I get a separate bill from another provider?
    • If you find a surprisingly high price in your research, tell your doctor. She may not have known.
  • Wait before getting treatment.
    • Many symptoms resolve themselves.
    • Unnecessary scans and tests get insignificant findings that might prompt unnecessary care.
      • MRIs of middle-aged people can show bulging disks even if the patient feels no back pain. These don’t require treatment, but many get worried and do opt for unnecessary treatment.

Systemic Changes to Demand

  • Demand more transparent pricing before care
    • When given the choice between two differently priced treatments, most patients choose the cheaper one, even if insurance covers both.
    • Doctors need to see prices when placing orders—this will make them avoid unnecessary tests and find alternatives for overpriced...

An American Sickness Summary Chapter 14: What to Do About Hospital Bills

What You Can Start Doing Now

  • Vet the hospital. Use these sources of information:
    • US News & World Report
    • Leapfrog Group on patient safety
    • Medicare’s Hospital Compare program
    • The New York Times’ Medicare payment database
    • Look at the hospital’s IRS Form 990, the required financial reporting form for non-profits. See if they’re a hospital that compensates executives highly or earns large profits.
  • As a patient in the hospital
    • When admitted, you’ll be asked to accept financial responsibility for charges not covered by your insurer. Write in “as long as the providers are in my insurance network.”
    • If you’re put in a private room, ask “will insurance cover this private room, or will there be a supplement fee?” If there is a fee, ask how much it is, then consider asking for a shared room with no fee.
    • If staying in the hospital, ask if you are being admitted or held under observation.
      • If you’re under observation, you’ll be classified as an outpatient, which means higher co-pays and deductibles.
    • Ask to know the name and role of every person appearing at your bedside, as well as what they’re doing. Write all this information down.
      • You can refuse care from any provider. This includes less useful interactions, like the physical therapist who helps you out of bed and the dermatologist examining a harmless rash.
    • Refuse equipment you don’t need.
  • Dealing with bills
    • Negotiate large bills. Hospitals more or less expect you to do this, which is why they have high sticker prices.
    • Request complete itemization of hospital bills to see what the breakdown of costs is.
      • Hospitals may insist that HIPAA or internal policy prevents this, but this is false. It’s your right to access your own healthcare information.
      • If itemization takes a while and your bill goes into collection, tell the...

An American Sickness Summary Chapter 15: What to Do About Insurance Costs

What You Can Start Doing Now

  • Look at all the costs of insurance.
    • Premiums
      • Figure out what % you have to cover. If it’s deducted automatically from your paycheck, you don’t feel the full extent of the cost.
    • Deductibles
      • Are these calculated per person or for the whole family?
      • Are there separate deductibles for in-network vs out-of-network care?
    • Co-pays
      • These are now often a % of the bill.
      • For doctors, are the copays different for generalists vs specialists?
      • For medicine, does the co-pay differ depending on whether it’s in the formulary or not?
    • Out-of-pocket maximum
      • Does this include drug costs?
      • Will you be asked for co-pays even after meeting this number?
    • Find the insurance with the lowest total cost for your typical needs.
  • Choose between networks.
    • Work backwards from your goals to choose the best option.
      • Which doctors do you currently see and want to keep?
      • Will your child go to college out of state - and will your insurance cover her?
      • Which conditions are you most afraid of, and does your plan care cover it? For example, look for neonatal ICU or cancer treatment if those are what you’re concerned about.
    • Be wary of dozens of doctors listed at a single address—often it’s a clinic affiliated with a hospital, and you may not be able to keep the same doctor each visit.
    • If your network is small, consider untraditional doctors, like male OB/GYNs.
    • HMOs now offer good comprehensive care with incentives for quality.
      • Traits to look for: system-wide integration, salaried physicians with no productivity bonuses, meaningful use of technology, and a clear process for referral outside the HMO for rare conditions.
      • If you see poor performance data from HMOs, this might be OK, depending on the context. HMOs are the rare medical systems that actually track standards and release data.
  • **Don’t trust...

An American Sickness Summary Chapter 16: What to Do About Drug and Device Costs

According to American Sickness, many Americans don’t fill prescriptions because of cost. Why? It’s difficult to do price comparisons, prices can change from month to month, and, depending on your insurance, it’s unclear what things will cost.

What You Can Start Doing Now

  • Find good substitutes for your medicines.
    • Avoid fancy formulations without clear benefit. This includes combinations of two generic medicines (like Duexis), extended-release tablets, and creams.
    • Get different doses that are cheaper, then change the number of pills you take. For example, you can get a double dose pill and cut pills in half.
  • Shop at for out-of-pocket cash prices of medicine. It may actually be cheaper than your copay.
    • You are not required to use your insurance to buy medicine, despite what they tell you.
    • GoodRx also has a Medicare drug pricing tool. Unfortunately, it has no private insurance cost data, because commercial insurers consider pricing data to be proprietary information.
  • Consider buying medicine outside the US. This is technically against the law, but rarely prosecuted.
    • Refill prescribed medicines when traveling abroad.
    • Buy drugs that are over the counter abroad but not in the US.
    • Buy from overseas mail-order pharmacies, especially for long-term medicines whose effects can be clearly measured (such as cholesterol or T2 diabetes drugs). If there’s anything wrong with the drug, it’ll show up quickly in lab testing. Check to check for fakes. Source from English-speaking countries.
  • Be skeptical of drug advertising.
    • The drug ad does not convey efficacy or cost. More cost-effective generics may be available that don’t do marketing.
    • Check for cheaper and potentially equivalent options.

Systemic Changes to Demand

  • Allow drug importation from vetted international pharmacies.
    • Maine tried to allow mail-order drugs from pharmacies in English-speaking countries, with the...