The shocking world of US health costs

Hello and thanks for downloading the More or Less podcast. With a program that looks at the numbers in the news, in life and in the itemized bills of US hospitals. I'm Tim Harford. Loyal listener Betony wrote into More or Less, questioning this absurd-sounding claim that they heard on our fellow BBC programme, Inside Science. Dr Daniel Levitin, a neuroscientist, was discussing his research into how music can act as a form of medical therapy, negating the need for expensive drugs. Here in the US, that volume might be $3. In a US hospital, that same volume is $750. Betony was shocked at the idea that one pill can cost 250 times more in a hospital setting than in a pharmacy. If true, that is indeed shocking, but is it true? Let us dive into the frankly bonkers world of US hospital bills. Buckle up, it's wild. So I knew something really bad was happening in our health system. That's Elizabeth Rosenthal, a healthcare journalist who reported for the New York Times for 22 years before becoming editor-in-chief at KFF Health News. KFF, by the way, is a non-profit foundation working on healthcare policy. She also wrote the book An American's Sickness, How Healthcare Became Big Business and How You Can Take It Back. Oh, and casually she has a medical degree from Harvard University. Oh, I forgot yes, and I worked in an emergency room and then converted journalism to tackle health policy. First things first, hospitals do charge more for medicines than pharmacists. The price is whatever the market will be there. What happened in the early 2000s was hospitals were running on pretty thin margins and they brought in business consultants. The consultants basically said, why are you just giving away that title and all? Why are you giving away that time in the recovery room? You could be billing that separately and billing in 15-minute intervals. So now you look at an American hospital bill and it's pages and pages long because every IV bag, every pill, every blood draw, everything is charged separately. So that Valium pill wouldn't just be charged as a pill. The pill itself would likely be six times the cost of the pharmacy version. But then added onto that, you'd be charged for the paperwork that comes with prescribing the Valium. The little pot the Valium comes in, the person giving you the Valium, the sky is the limit. But why do hospitals jack up the price so much? Most of our hospital systems are not for profit and they don't pay taxes because in theory they're supposed to do charity care and community benefit. In 1992, the 340B Hospital Markup Program was implemented. This was a government program that allowed 340B hospitals, which include non-profit hospitals, to buy medications for manufacturers at a so-called ceiling price, which is generally about 50% below the regular retail price. These hospitals can buy medications at incredibly reduced rates and then mark up the prices to make a profit. The idea was that they'd then channel the money saved back into the community. There's a lot of discussion about do they give back to the community what they should for their tax breaks and the answer is almost always no. One of the issues is that politicians are often loathed to challenge them as health is big business in the US. They are huge political donors. Politicians are afraid to go after them. University of Pittsburgh Medical Center is the second largest employer in the state of Pennsylvania. So it's very hard to tackle them. Elizabeth and the KFF help tackle hospital costs by helping people to break down and make sense of hospital bills so they can challenge them. They work with NPR to air some of these bills on a program called Bill of the Month. The charges are shocking. A woman needed screws put into her foot for a broken foot and each one was billed at $4,000. She was like what are they made of like moon rock or something. You know they were just little screws. A room in a hospital maybe $2,000 a night. I have someone who had a $99,000 bill for the removal of an ectopic pregnancy. But they charged for two surgeries because they had scraped off a little bit of endometrial tissue. Everything is disaggregated. Doesn't include the recovery room. Doesn't include the IV polls. And this is an outpatient procedure by the way. $99,000. Yikes. Unsurprisingly, people in the US need medical insurance to be able to afford these extortionate costs. And this is where it gets even crazier. Each insurer has a network of doctors, hospitals, labs, pharmaceutical brands it has agreements with. If you don't use one of the medical institutions they have an agreement with, they won't cover the cost. It's scary. I'm always on the lookout. Okay, I need this procedure. If it's done in a hospital, I'm going to have a huge facility fee. So where else can I have it done with a low facility fee? My doctor draws labs. Okay, where's he going to send that blood to? Because it better be an in-network lab. Otherwise, my insurer won't cover it. All governments have attempted to control some of these costs. For example, until 2014 insurers could refuse to cover people with pre-existing health conditions such as diabetes, asthma, even pregnancy. And maybe you take a pill for depression so you have pre-existing conditions. We're not going to cover you. And Obamacare forbid that from happening. Insurers will only help cover costs after a certain threshold has been met by the claimant. So you pay a certain amount out of pocket before the insurance company starts to pay. And those deductibles, you know, which at first were like $500, now they can be $7,000. So even if you're insured, you're vulnerable for a lot of money. Insurance also doesn't cover the whole cost of procedures and pharmaceuticals. Insurance companies charge something called co-insurance. This means that the claimant is liable for the cost of a percentage of the bill. Each can be 10 or 20 percent. I have someone who I'm reporting on who had just little finger injections that cost $25,000 each. And so the co-insurance on that is $4,000. Even if you have insurance, the out-of-pocket costs can be overwhelming for most Americans. If you don't have insurance, you'll be liable for the whole cost. About 8 percent of the US population is uninsured. And often those who do have insurance can't afford to meet their co-insurance costs. We did an investigation. A hundred million Americans that's almost a third of the population have medical debt. And nearly 20 percent of them do not expect to be able to pay it off in their lifetime. It's very likely that this number will grow. Right now we're having a debate here about extending some subsidies that were passed during the Biden administration, which basically said, if you are low income, you can have your insurance premiums subsidized, probably paid by the government. As a result of those, tens of millions of people got insurance who wouldn't have otherwise. Those subsidies are set to expire in 15 days. If the subsidies go away, many of the premiums will double or triple. And many people say, I can't afford insurance and go without. And that's a really risky proposition when a trip to the emergency room in the US routinely costs $10,000 and that's with very little done. So yes, it is perfectly possible that being administered a pill that should cost $3 could cost you $750 and much worse besides. Thanks to Elizabeth Rosenthal. And that's all we have time for this week. But if you see any stats you want us to take a dive into, please let us know at more or less at bbc.co.uk. We'll be back next week. And until then, goodbye.