How Can We Fix the US Health Care Problem?

Lali Sekhon, MD, delineates the scope of the problem, key players, tactics used to inflate health care costs, and potential solutions.

With the cost of prescription drugs and health insurance premiums increasing steadily, Americans cannot keep up with the rising cost of health care. SpineUniverse editorial board member Lali Sekhon, MD, PhD, FACS, recently published a 4-part series delineating the scope of the problem, who the key players are, tactics used by the key players to inflate health care costs, and potential solutions. SpineUniverse spoke with Dr. Sekhon about why he wrote the series and what he thinks spine surgeons should know about it. Dr. Sekhon is a neurosurgeon at Reno Orthopedic Clinic in Reno, NV.

rising health care costsIf the US healthcare system was a country, it would be the 5th largest country in the world. Photo Source:

What was your impetus for writing this series?

Dr. Sekhon: I’m completing my MBA and dove into healthcare economics. I wrote this series as a conscience piece. I think its egregious that the delivery of health care has become a corporate ATM. I see the average American getting taken advantage of and ‘bled’ financially as the main players make more and more profits. I tried to unravel what’s wrong with our current healthcare system, who the key players are, how the key players keep health care costs high, and potential solutions to the problem.

What is the scope of the problem with the US healthcare system?

Dr. Sekhon: The health care cost per capita in the US ($10,586) is twice that of other wealthy, developed countries, as described in Part 1 of the series.1 National health care expenditures have increased 818% since the 1960s, while wages on average have risen only 16%.2

We are starting to see that the average American can’t afford health insurance. We are at the tipping point.

If the US healthcare system was a country, it would be the 5th largest country in the world. Spine care is a component of the high health care costs, with rates rising as stakeholders are profiting from the aging population and increasing prevalence of back pain and degenerative spinal conditions.

Who are the key players in driving up the cost of health care in the United States?

Dr. Sekhon: There are 3 key players that are driving up health care costs: 1) pharmaceutical companies, 2) payers, and 3) hospitals. These big stakeholders are going to fight change tooth and nail using their lobbyists, because change effects their status quo and their bottom line. Part 3 of the series describes how these players drive up health care costs.

Pharmaceutical companies typically spend more on sales and marketing—50% of their total spending—than on research and development.3 The profit margins of some of the top drug companies (30% to 43%) are markedly higher than those of other successful companies such as Coca-Cola (21%), which sells a product that is inexpensive to produce.4 It’s crazy to think the profit margin on sugar, water, and flavor is less than a prescription medication.

Drug companies have very complicated delivery systems, with lots of middle managers that hike up the price of medications. As an example, what has happened to the cost of insulin in North America shows what occurs when drug companies evergreen original patents and delay the release of biosimilars. The price of insulin has skyrocketed, and patients cannot afford this lifesaving medication. Tragedy doesn’t even begin to describe the situation.

Unlike in other countries, drug companies in North America can set whatever price they want. The US government cannot negotiate drug prices. It’s not a free market. It’s not transparent.

We also know that payers are contributing to the rising cost of health care because we can see their gargantuan profits. As publicly traded companies, these companies have a fiduciary duty to create as much value/earnings per share as possible, to increase their value for shareholders. The conundrum I see is, why are patients paying more in premiums whilst payers’ profits are rising? Health insurance companies are making record profits and at the same time patients are foregoing care because of the cost.

The role of hospitals in the health care dilemma is complex. Administrative sector bloat has led to layers of managers, directors, vice presidents, and boards members, most of whom are well paid. When the CEO of your hospital is driving a Maserati and is paid more than a top practicing physician, there is a problem.

More than 50% of hospitals are not-for-profit, meaning that they receive enormous concessions in terms of local, county, state, and federal tax breaks in exchange for providing charitable care to the local community. Unfortunately, there are no checks and balances on whether that money is put back into the community. My series also includes examples of instances where not-for-profit hospitals are suing patients for unpaid bills in huge numbers. It is no surprise that unpaid medical bills are the leading cause of bankruptcy in America.5

These stakeholders are milking the system through lack of transparency. Why does a knee replacement cost $75,000 in one county and $115,000 in another? While there is a Hospital Price Transparency and Disclosure Act, the fines are relatively small if hospitals don’t comply.

Your findings show that physician salaries, in general, are not driving up the cost of care. Can you elaborate?

Dr. Sekhon: One of the common criticisms of the healthcare system is that physicians’ salaries are driving up health care costs. The reality is that physician salaries account for approximately 7% of the total amount spent on health care in the United States.6,7 In addition, whilst the average salary of an orthopaedic spine surgeon may be high, when you factor in the number of hours spent on education, the fact that most of the surgeons don’t actually start practicing until their 30s, and the high burden of medical school debt plus interest, becoming a physician is not nearly as attractive as people think it is.

Physicians are being driven out of the system. The projected shortfall of total physicians is 40,800 to 104,700 by 2030.8 One solution put forth has been to train more mid-level health care providers. Whilst mid-level clinicians are good at pattern recognition, they don't have the expertise to diagnose more unusual conditions and cannot perform surgery.

Burnout rates among physicians are high. Physicians often experience “moral injury” often in practice when the see things that they don’t agree with yet are disempowered to make a change at the hospital level. For example, the process of trying to obtain an MRI scan for a patient who really needs one, having the request denied, going through 3 levels of appeals, and finally speaking to someone at the health insurance company who is not a physician or not a specialist is a draining, demoralizing, and exhausting endeavor.

One point to note is that physicians do play a role in overordering of tests, which is partly related to meeting patient expectations, partly to the medicolegal climate, and partly to the American “I want it now” immediacy philosophy. This may add to the cost burden and needs to be recognized, but to combat this tort reform and consumer education are needed.

How can we fix the health care problem in the United States?

Dr. Sekhon: There are 3 criteria for an ideal health system:

  1. Affordable
  2. Reasonable access
  3. High quality

Most systems offer two of three, and few excel at all three. If you want access and quality, then the cost is high. If you want a cheaper system, expect less access and quality may be compromised, and so on.

The US has access to care and a quality health system, but we can’t afford the current system. To address this, first step is that we need to reduce costs, as described in Part 4 of my series.

If we bring the cost down, many healthcare systems that operate in other countries would probably work in the United States. Other countries with better healthcare systems include Australia, which currently offers a two-tiered Medicare-for-all system plus the option to buy additional private health insurance that is not linked or tied to your job. In Australia, if you have a car accident or a heart attack, you are covered. If you need a knee replacement and don’t want to wait for surgery under universal healthcare, you can purchase private health insurance and have the surgery sooner. That insurance purchase is cheaper than in the United States.

European countries offer a good example of how to cap pharmaceutical costs by making a single statin, for example, covered for all patients, with the option of paying extra for a different statin if the patient desires it, but putting the onus of the extra cost onto the patient. Those countries negotiate the prices of the base medications as volume customers.

Probably one of the biggest things that needs to happen in the US is that we need to enforce transparency, including transparency of pricing, transparency of channels, and transparency of processes. If there are four hospitals near me, I need to know what the costs of a particular surgery would be at each one. Even the cost of imaging scans can vary widely, with an MRI scan at my local hospital costing $1400 in out of pocket costs after insurance versus $500 without insurance at a physician-owned orthopaedic group in the same county. Hospitals also need to be transparent in how they reinvest in the local community in order to obtain tax credits, including forgiving bills for patients who cannot afford them. We need to know, as a community, what the not-for-profit hospital is doing in exchange for the tax benefits we bestow on them.

Ambulatory surgery centers will offer improved transparency, and some are already doing so. Hospitals are stakeholders that want to ensure their economic viability. It is one of the reasons for the recent push for physician-owned surgery centers.

Finally, I think bundled payments will help reduce costs. This payment model is being used in general orthopaedics where one payment covers the entire episode of care. Obviously, the question is, if there is one payment, who is going to control the purse strings? Is it the hospital? How is it divided, and is the physician then waiting for a check from his local hospital?

We cannot allow middlemen like pharmacy benefit managers to artificially inflate the price of pharmaceuticals, and we need to reduce the number of costly hospital administrators. Administration at every level needs to be reduced as this is contributing to enormous waste.

How has your clinical experience given you insight into the scope of the problem and potential solutions?

Dr. Sekhon: I have worked in different management situations at a variety of health systems in three different countries. I also have been a patient and have experienced surprise billing, facility fees, and lack of transparency from hospitals and payers. I’ve paid huge amounts for prescription medications.

A large proportion of Americans have no health insurance under the current system, which is sad, bad, and probably morally wrong. My conscience says that everybody has a right to health care. Maybe this is because I have worked in other countries, but I believe health care is a right and not a privilege.

Dr. Sekhon is a Consultant for Zimmer Biomet and receives payments for teach from AO Spine North America.

Updated on: 02/04/20
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