Eight Reasons US Healthcare Costs 96% More Than Cuba's--With the Same Results

When Americans spend $100 on health care, is it possible that only $4 goes to keeping them well and $96 goes somewhere else? Single payer health care advocates compare American health care to that in Western Europe or Canada and come up with figures of 20–30% waste in the US.

But there is one country with very low level of economic activity yet with a level of health care equal to the West: Cuba.

Life expectancy of about 78 years of age in Cuba is equivalent to the US. Yet, in 2005, Cuba was spending $193 per person on health care, only 4% of the $4540 being spent in the US. Where could the other 96% of US health care dollars be going?

1. A fragmented system

Explaining why health care is 16% of the US gross domestic product while it is less than half that in the UK, a 2008 article in Dollars and Sense pointed out that

…the US has the most bureaucratic health care system in the world, including over 1500 different companies, each offering multiple plans, each with its own marketing program and enrollment procedures, its own paperwork and policies, its CEO salaries, sales commissions, and other non-clinical costs—and, of course, if it is a for-profit company, its profits.

An article widely cited during the debate on single-payer calculated that administration eats up 31% of health care costs. Insurance companies that compete in the market have duplicative claims-processing facilities and must keep track of a variety of approval and co-payment requirements.

Several Canadian physicians who peeked at US hospitals found that for-profit ones paid executive bonuses that were up to 20% higher, were more likely to upcode diagnoses in order to receive more reimbursement, and overwhelmingly had more lawsuits against them for performing unnecessary surgeries and billing for services not provided.

2. Over-treatment

One of the most readable accounts of profit-motivated over-treatment is Stan Cox’s Sick Planet (2008). He describes how the Parker Hughes Cancer Center in Roseville, Minnesota went bankrupt after the Minneapolis Star Tribune reported that it “had been subjecting cancer patients to excessive testing and treating.”

When doctors install magnetic resonance imaging (MRI) machines in their office, they tend to use them 23% more than if they refer out for a scan. After the purchase price is covered by the first 2000–3000 scans, additional ones generate almost pure profit.

Are these a few bad apples, or do they reflect a broader trend? A study in Australia reported that if “100 patients are each subjected to 10 random diagnostic tests, around 40 of them will be ‘found’ to have a problem that really isn’t there.”

3. Expansion of illness

The pharmaceutical industry has become especially adept at transforming what can be a serious problem into an artificial sickness. It has redefined and expanded “a host of medical conditions—erectile dysfunction, female sexual dysfunction, restless legs, sleeplessness, bipolar disorder, attention deficit disorder, social anxiety disorder, and irritable bowel syndrome.”

Take the osteoporosis hype. It is a genuine medical issue. But the industry pressures women to have bone scans and take anti-osteoporosis drugs even though the scans do a poor job of predicting hip fracture, the major threat of fragile bones

Between 1987 and 2007, the rate of problems classified as mental illness in the US more than doubled (from 1/184 to 1/76). In the same time period, the use of drugs like Ritalin for attention deficit hyperactivity disorder (ADHD) in children (mostly boys) shot up 30 fold.

4. Sickness looping

According to the Center for Disease Control (CDC), each year 2 million Americans get infectious diseases in hospitals. The massive over-treatment endemic to health care in America increases costs in two ways: (1) the cost of the unnecessary treatment itself; and, (2) the cost of treating the sickness which results from the original treatment. We could say that “sickness looping” is when treatment loops back on itself and requires yet more treatment.