August 19, 2025 • 30 mins
Why are U.S. health care costs so high—and what does that mean for you and your family? In this episode, I dive into the real reasons behind America’s staggering health care bills.
We start with a story that hits close to home—a $189,000 outpatient cancer surgery bill followed by $12,000-a-month immunotherapy—and I unpack how even with Medicare coverage, the pricing dynamics can feel shocking. Using my experience as a physician and health policy researcher, I explain why these massive charges happen and where the system is breaking down.
At the national level, we now spend over $5 trillion a year on health care—roughly 18% of our GDP—and this number is growing far faster than inflation. This growth threatens the solvency of key programs like Medicare, which is projected to run out of funds by 2033 (Health Affairs). Employers are also feeling the pinch, with average family coverage costs now topping $25,500 annually (WSJ). Individuals, especially those using ACA exchanges, face rising premiums—some increasing by 20–30% next year (Axios)—and deductibles between $3,000 and $5,000 are now typical.
Despite all this spending, our health outcomes are among the worst in the developed world. The U.S. ranks 33rd in infant mortality and 32nd in life expectancy out of 38 OECD countries, even though we spend about $12,000 per person annually—nearly three times the OECD average (America's Health Rankings).
So, what drives these costs? It boils down to three factors: high prices, high utilization, and high administrative overhead. Prices for common procedures are far above international norms—a CT scan in the U.S. costs around $900 compared to $279 in the Netherlands and just $97 in Canada (Health Imaging). U.S. physicians, nurses, and hospital executives also earn significantly more, contributing to overall spending (Medscape; JAMA).
On the utilization front, studies estimate that around 25% of all care may be unnecessary, driven by defensive medicine, patient expectations, and incentive structures that reward more procedures—not necessarily better outcomes (PGPF; Choosing Wisely).
Even administrative overhead plays a massive role: nearly 25% of U.S. health care spending goes to bureaucracy—four times what’s typical in simpler, single-payer systems (Health System Tracker; Health Affairs%20of%20US%20GDP)).
If you’re wondering why your doctor spends just 17 minutes with you or why your premiums feel like a second mortgage, this episode offers the context—and data—to help you understand what’s really going on.
Takeaways:
Start asking about cash prices—especially if you're still in your deductible phase. Preventive steps like regular exercise may offer the highest return on investment when compared to costly downstream care. And above all, consider your plan carefully during open enrollment.
For deeper insights, links to all the studies mentioned, and access to my newslet
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Health care is expensive, both nationally and
for us as individuals $5,000deductibles, $189,000 outpatient
surgery bill.
We also spend a lot more thanother countries and our health
outcomes are just average orbelow average.
(00:24):
What's going on?
Let's find out.
Hi, I'm Dr Bobby Du Bois andwelcome.
To Live Long and Well, apodcast where we will talk about
what you can do to live as longas possible and with as much
(00:49):
energy and vigor that you wish.
Together, we will explore whatpractical and evidence-supported
steps you can take.
Come join me on this veryimportant journey and I hope
that you feel empowered alongthe way.
I'm a physician, ironmantriathlete and have published
(01:10):
several hundred scientificstudies.
I'm honored to be your guide.
Welcome everyone to episode 46,why the US spends so much on
health care.
Well, I always begin with whynow?
Well, friends, family, you, mylisteners, have shared with me
(01:37):
how expensive health insurancehas become and how much it costs
when you go to see a specialistor you get tests done.
Well, I've had a personalexperience with this with a
family member who had outpatientcancer surgery and got a bill
for $189,000 from the hospitaland their monthly therapy for
(02:04):
cancer one of the drugs alone is$12,000 per month.
Well, it turns out for thispatient.
They have Medicare, the doctorturns out, gets paid quite
little and the patientfortunately didn't have to pay
very much, but there was stickershock nonetheless.
(02:25):
How do costs like this occur?
Well, let's walk through thisin today's episode.
But before we dive in, just alittle bit about me.
My career and my skill set isexactly in this area, and my
(02:48):
skill set is exactly in thisarea.
I focused for decades on theevidence for what works, what
doesn't work, what does it cost,is it worth the cost?
And, as I've shared with you,I've published 180 or so
peer-reviewed papers on topicslike this, on the
appropriateness of care, thevalue of care, and so I have
wrestled with this for a longtime.
Well, we can't discuss allaspects of healthcare
(03:12):
expenditures today.
I'm going to touch on a fewtopics Specifically.
I want to dive into what arethe drivers of spending, and
we'll talk about a simpleequation, which is it's price,
times, volume.
And then we consideradministrative overhead, and
I'll explain this a lot more.
(03:33):
We'll return to another episodeand talk about drugs,
pharmaceuticals, and why theyseem to be so expensive and
whether there's justificationfor that.
Also, let me know if there areareas that are of interest to
you.
In the cost realm, I got acomment from a listener recently
(03:54):
who made the point that hisYMCA membership, jerry said,
seems like a great value toavoid these costly expenses.
You know, at $800 a year forYMCA and tenfold more for that
for health care in general inthe United States, it does seem
(04:15):
like prevention, like gettingexercise through a YMCA, may be
a good value.
Imca may be a good value.
Well, I know why I'm interestedin this topic.
It's just been an importantpart of my career.
But why should you care aboutthis topic?
And I'll give you sort of threeperspectives of why it's
(04:36):
important.
On a national level, we spendabout $5 trillion on health care
and that amounts to about 18%of our GDP.
So almost one in five dollarsof everything we do or spend in
the United States goes to healthcare.
(04:59):
And what's perhaps moreworrisome than this number is
that that amount of expendituresis growing rapidly, at about 5%
to 8% per year, so far fasterthan our GDP is growing and far
faster than inflation.
Now, obviously, you can'tcontinue to spend more and more
(05:21):
and more forever.
Now some would argue well, yeah, it's a lot of money to spend
on health care, but that's whatwealthy countries do.
They've solved the food problem.
They've solved other thingsrelated to the cost of clothes
or other things.
So of course, we spend more onhealth care because we're a
(05:46):
richer country.
Well, I don't think that is acomplete way out.
Here we are spending a lot ofmoney and one of the reasons on
a national level, it's reallycritical that we think about
this is that the Medicare trustfund, which will pay for health,
healthcare for most of us whenwe get to be 65 or older, that
(06:08):
trust fund is proposed to gobankrupt in less than 10 years,
in about 2033.
What does that mean?
Well, if there's no more moneyin the Medicare trust fund, we
either have to stop paying forMedicare or paying less benefits
, or we have to raise taxes, andI'm not sure that's necessarily
(06:32):
something we want to do.
So, on a national level,spending this amount of money
can be and will be problematic.
Okay, let's bring this a littlecloser to home for your employer
, for a typical family coverageby an employer.
So what the employer pays, whatthe employee pays, is about
(06:54):
$25,000.
As always, I'll give you thelinks to some of these key
studies in the show notes.
Some of these key studies inthe show notes and why that
$25,000 amount by your employerand yourself is so important?
Because it's a big chunk ofyour compensation.
(07:15):
If healthcare costs continue togo up, your compensation won't
go up as much.
If we didn't have to pay quiteso much on healthcare costs,
then maybe your compensationwould be more Okay on an
individual level.
Our health insurance costs forus as individuals is going up.
(07:41):
If you're on Obamacare orexchanges, in this upcoming year
they're planning on the risingcost of insurance by 15% to 20%.
So 15% to 20% more than theyear before.
For some this may be as high as30%.
(08:02):
Well, as many of you know, yourdeductibles the amount you have
to pay before insurance startsto pay anything has grown over
the years and now typically is$3,000 to $5,000 before any
(08:22):
payments by the insurancecompany.
It also turns out that thenumber one cause of bankruptcy
in the United States, personalbankruptcy, is healthcare and
healthcare expenditures.
So we spend a lot.
We spend a lot at the nationallevel, we spend a lot at the
(08:43):
employer level and we spend alot at the individual level.
Well, let's put this spendingin perspective.
We in the United States spendmore on healthcare per person
than any country in the world.
On average, we spend about$12,000 per person on the US and
(09:05):
this is about three timeshigher than the OECD average,
which is about $4,700.
Well, oecd is 38 developedcountries, big democratic
countries around the world, soit's a good average for what
others spend in the world.
(09:26):
Our number two competitor, sowe spend the most, at $12,000
per person.
The number two here isSwitzerland.
They're at about $7,500.
So we spend three times as muchas these average in these other
countries and our healthoutcomes aren't so good.
(09:49):
Our infant mortality we'renumber 33 out of 38.
The lower the number, the worseyou are.
Of course you want to be numberone.
We're number 33.
Life expectancy in the US is32nd out of 38.
Is 32nd out of 38.
(10:13):
Our overall life expectancy isabout 76 years.
In other countries it's 80.
So we are spending a lot moreand our health outcomes are not
so good for some of these areas.
All right.
Well, this is the end of partone.
I hope I've convinced you.
We do spend an awful lot onhealth care.
Well, part two why is healthcare so expensive in the United
(10:34):
States?
As I mentioned earlier, there'san equation price times volume.
So prices may be too high orwe're doing too much, meaning
too much volume, or acombination of our prices are
high in the United Statesrelative to elsewhere and our
(10:55):
volume is high.
But there's one more piece ofthe puzzle and that's the
administrative overhead to runour really complicated,
convoluted healthcare system.
So I want to walk through eachof these three, give you some
insights there.
(11:16):
All right, so let's just firsttalk about is it a price problem
?
So do we spend so much onhealthcare because our prices
are high?
Well, let me walk through a fewexamples.
The first, ct scans, or MRIscans, cost a lot more here than
in other major countries.
(11:37):
One study showed that in the USa CT scan typically is about
$900.
In comparison, in theNetherlands it's $279.
And in Canada it's $97.
So unbelievable differences inwhat we spend on some of these
(12:00):
imaging studies than elsewhere.
And MRI scans typically costtwo to three times in the US
what it is elsewhere.
All right, second piece of thispuzzle we pay our healthcare
professionals a lot more thanother countries, and it's not
(12:21):
just doctors, it's doctors andnurses and health executives,
primary care doctors,specialists.
Let me give you some databecause I really believe the
price issue is really importantto what's going on.
Well, in the United States aprimary care doctor on average
makes about $240,000.
(12:42):
In the UK?
In the UK it's half that122,000.
In Italy it's 70,000.
In Spain it's 55,000, almostone-fifth of what primary care
doctors make in the UnitedStates.
Mexico it's even lower thanthat.
Not just primary care doctors.
(13:02):
Take a cardiologist,cardiologists.
In the US earnings are about$500,000 per year.
In the UK it's about $140,000.
So it's threefold difference.
But it isn't just doctors.
We pay our nurses twice as muchin the US as in the UK.
(13:23):
In the UK they're paid onaverage about $38,000.
In the US it's $75,000.
But it's not just healthcareprofessionals that are caring
for you, it's also the hospitalCEOs, the insurance company
executives, everybody throughoutthe healthcare system.
As an example, hospital CEOs inthe US make about $470,000 a
(13:49):
year.
In the UK it's about $130,000.
So prices are high in the US.
I've given you a couple ofreasons why that might be the
case.
What are the solutions?
Well, let me just walk througha couple of them, and they may
(14:09):
not necessarily be the solutionsyou think are the best.
Okay, there in the US is theMedicare-Medicaid solution to
this problem, and that is theypay less.
The government essentially setsprices that are paid to doctors
and hospitals as part of theMedicare and Medicaid programs.
(14:33):
Let me give you some exampleshere.
Medicare typically pays doctorsabout 30% less than your Blue
Cross commercial insurance.
Medicaid pays 30% less thanMedicare.
So if you compare Medicaid tocommercial insurance, it's a
(14:56):
huge reduction.
Not just doctors, hospitalsMedicare pays hospitals about
half of what insurance companieswould typically get in the
commercial market for employersor the type of insurance you
might have.
Well, that's how the governmentdoes it.
(15:22):
Well, the saying goes, if youpush in a balloon in one area,
it's going to pop out in another.
Part of the reason why privateinsurance is so expensive is
that the prices and the privateinsurance side kind of have to
make up for the fact that thegovernment Medicare, medicaid
(15:42):
pays doctors and hospitals somuch less pays doctors and
hospitals so much less.
Now you may have wondered whyit is.
Your doctor doesn't have enoughtime to see you in the office
for a visit.
On average it's about 17minutes per office visit.
In part, this is because theprice paid, the amount paid to
(16:05):
the doctor for an office visit,is really constrained.
As I showed you, medicare andMedicaid pay a lot less and
there are limits to how much adoctor can charge for regular
private insurance for an officevisit.
Now, in years past, primarycare doctors wouldn't just get
(16:26):
paid based on office visits.
They would also do EKGs, bloodtests, maybe x-rays, and they
would get money from each ofthese services that were done in
the office.
But nowadays, the doctor reallypretty much gets paid based
upon the number of patients heor she sees paid based upon the
(16:51):
number of patients he or shesees, and that's limited based
on how many minutes they have tosee you, and so our system has
been created in such a fashionthat oftentimes doctors have to
have a lot of visits per daybecause that's how they're paid
and you don't have as much timewith your doctor as you might.
Okay, so our price is high foreach service and, as I mentioned
(17:16):
earlier, we pay our doctors andnurses and our healthcare
executives more here than othercountries.
Now you might say that's badnews.
If we only paid half of what wedid to nurses or a third of
what we do to doctors, we wouldspend less.
But maybe it isn't bad news onthat front, because we want the
(17:40):
best people to go intohealthcare and paying them more
is a way of recognizing value.
So maybe paying higher amounts,although it leads to higher
expenditures overall, may not beall bad news.
Okay, so that's the price sideof the equation.
So the way you spend a lot ofmoney is the Unit price is high
(18:04):
for your MRI scan, your officevisit, your surgery, or you're
doing too much.
So maybe part of our problem isthat we do too much.
We're doing too many MRIs, toomany people end up in the
hospital, too much surgery, toomany specialist visits.
(18:24):
Well, when researchers havelooked at this, the number of
hospitalizations in the US isnot more than other countries.
Yeah, we may have somewhat moreMRI scanners than other
countries, but those differencesare not huge.
So we can't explain why we inthe US spend so much simply by
(18:47):
we do so much more than othercountries.
But there is a piece of thepuzzle about doing too much, and
a lot of my papers, a lot of myresearch focused on this, and
that is the issue of overuse.
It's been estimated that 25% ormore of a test or procedures
(19:10):
that we have done on us aspatients may be unnecessary.
Well, it turns out that numberis also true in other countries.
So, yes, overuse is animportant issue of spending too
much in the US, but it doesn'texplain the comparison between
us and elsewhere.
(19:31):
Well, why is there overuse?
Why are there perhaps moretests, more procedures, more
visits than are needed?
Well, there are a number ofimportant reasons.
This has been studied a lot byresearchers.
First is what's called defensivemedicine.
We, as doctors, worry aboutmalpractice.
(19:52):
We are really concerned aboutmissing something, and so if you
come in with a headache or lowback pain, we might be tending
to order that scan because wedon't want to miss something.
Or if you have chest pain andI'm a primary care doctor we
might feel more comfortable froma malpractice standpoint by
(20:16):
having you see the cardiologist.
Secondly, we do too much oftenbecause patients expect it.
Patients expect it.
Oh doctor, I've had thisheadache.
Oh doctor, I've had this backpain.
Can we do a CT or MRI scan?
(20:41):
In episode 12, I talked about totest or not to test, and I get
into some of the reasons why wewant these tests and why that
leads to more of them.
We want these tests and whythat leads to more of them.
As I said, patients demand thisNow, and maybe 20, 30 years ago
, the doctor would sit back andsay yeah, I know you would like
(21:01):
that, but it's not needed so wewill not order it.
Nowadays, yelp ratings matter.
Other types of ratings ofdoctors matter.
Their bonuses are often partlydependent upon these ratings, so
we don't want to upset patients.
So if it seems somewhatreasonable to order some of
these tests or do a referral toa specialist, we'll do that
(21:25):
Rather than say no to thepatient and potentially get
ratings that aren't good.
The last piece of why we oftendo too much is there's a saying
if you walk around with a hammer, a whole lot of things begin to
look like nails.
So if you're somebody that doesbypass surgery or does knee
(21:51):
arthroscopy, we tend to believethis is a really good thing for
patients oftentimes.
And so because we get paid todo more of these, all of a
sudden, when opportunities arise, all of a sudden, when
opportunities arise, we mightsuggest that to the patient.
All right, so we do a lot.
(22:11):
Is there any way to solve theproblem, the volume problem?
The challenge here is there'sno easy way.
What do other countries do?
Well, some other countries,they have queues.
You wait In the US if you wantto see your doctor or see a
specialist or get an MRI scan orelective surgery.
(22:32):
Yes, you might have a bit of await, but it's not a huge wait.
In Canada's example, it maytake three, four, five, six
months to have cataract removed,to have knee or hip replacement
.
It's much less of a weight inthe US.
So that's one solution.
(22:53):
Have weights cues so you don'tdo quite as much as might be
needed or desired, whereas inthe US that weight is much less.
Secondly, we ask our patients topay more.
I mentioned earlier about thedeductibles $1,000, $3,000,
(23:16):
$5,000, which means every timeyou go to the doctor, get that
test, get a procedure, you'repaying that first amount of
money before the insurancebegins to kick in.
Well, back in the 1970s theRand Corporation did a huge
study, probably the largestsocial experiment ever done,
(23:40):
called the Health InsuranceExperiment.
What they asked was if we havedifferent types of insurance.
In some cases care is free forthe patient.
In some cases they have to paya little bit more or a lot more.
And they asked the questionwhat happens when patients have
(24:01):
to pay more?
Well, what do they find?
They found, not surprisingly,when patients had to pay more
for each time they went to thedoctor or got a drug or got a
service that led to lower use,they had to pay more.
They chose not to pay more bynot having as much care from
(24:24):
their doctor or the healthcaresystem much care from their
doctor or the healthcare system.
The wrinkle here is whenpatients reduce what they got.
They reduce both things thatwere unnecessary so that's the
good news but also things thatwere appropriate for them.
So it was a very blunt way tosolve the problem.
(24:47):
It was a very blunt way tosolve the problem.
Well, another way that thehealthcare system attempts to
reduce the utilization, reducethe volume, is what HMOs
sometimes do.
When you go to the doctor, youpay a certain amount.
The doctor gets paid for theoffice visit.
That's the typical system.
(25:08):
Hmos sometimes do itdifferently.
Rather than paying the doctoreach time you go to see him or
her, they pay the doctor a fixedamount per month.
So for you as a patient, thedoctor might get $15 to $20 a
month.
Whether you see the doctor ornot, they get the $15 to $20 a
month.
Whether you see the doctor ornot, they get the $15 to $20 a
(25:31):
month.
If you see the doctor threetimes during the month, they
still get that same monthlyamount.
So it changes the incentivefrom doing more, more, more to
perhaps doing less, less, less,which can lead to a problem of
not enough.
So this is another way thatinsurance companies, in this
(25:54):
case the HMOs, may reduce thevolume of services.
Fourth one prior authorization.
For those of you who wanted toget an MRI scan or wanted to get
surgery, often your doctor ordoctor's office has to get prior
authorization, get approvalfrom the insurance company,
(26:16):
which takes time.
It's a hassle for lots ofdifferent people.
Okay, summing up this section,there are many reasons why
utilization is higher, but theredoesn't appear to be an easy
solution.
So we've talked about price,we've talked about volume.
The other piece of the puzzleand this is really important and
(26:40):
helps to explain why we spendmore than other countries that's
the administrative cost.
The administrative cost is whatis the cost to run our system?
So, yes, I've talked about theprice of an MRI, I've talked
about the price that's paid whenyou go to the doctor or have
surgery, but there's also thefriction, the amount that we
(27:05):
spend to pull everythingtogether, and I'll explain to
you in just a moment what thatentails.
So we spend an estimated maybe25% of all healthcare dollars on
administrative costs.
That's probably four times whatother countries spend on
(27:26):
administrative.
Four times what other countriesspend on administrative.
As you may know, in othercountries there's one set of
doctors, one set of hospitals.
Those are the only doctors andhospitals that you can see.
They predetermine what thepayments are, they determine how
much drugs are.
It's all done without a lot ofnegotiation.
(27:46):
Maybe there's some negotiation,but the governments in these
other countries define mosteverything.
Well, in the US that's not whathappens.
We have choice, so we get tochoose what doctors we want to
see.
Some of them are within thenetwork, some are not within the
(28:09):
network.
We have a broad array ofmedications to choose from and a
broad array of hospitals.
So part of the administrativecost is to set up these networks
which doctors and hospitals arein network and not network.
And then the ones that haveagreed to be part of the network
means that they've accepted theprices that the insurance
(28:32):
company will pay them.
In the US we have a lot ofquality assessment and assurance
requirements, so there's a lotof paperwork for hospitals and
others to monitor aspects ofcare.
There's the prior authorizationI mentioned.
There's claims payment.
There's marketing.
(28:53):
It is the cost of having choicein our system.
Am I saying that the 25% is theright number?
No, but if we want to havechoice, be able to choose this
insurance company versus another, this plan versus another that
comes with an administrativecost.
(29:17):
Okay, time to wrap up.
Another day we will talk aboutdrugs and if you have some
questions or examples, by allmeans let me know.
Healthcare is expensive in theUS.
(29:37):
We spend more here because wepay our healthcare folks more
and we do more than might benecessary.
It's also expensive herebecause we pay to have choice
rather than sort of aone-size-fits-all situation and
system.
Action item for you.
Do you have any spending topicsor any topics in general?
(29:59):
Action item next Do tell yourfriends about the podcast.
I love it when I hear newpeople joining us in the family.
Until next time, I hope we alllive long and well and I hope we
can find a way perhaps not tospend quite so much.
(30:20):
Thanks so much for listening toLive Long and Well with Dr
Bobby.
Thanks so much for listening toLive Long and Well with Dr
Bobby.
If you liked this episode,please provide a review on Apple
or Spotify or wherever youlisten.
If you want to continue thisjourney or want to receive my
(30:41):
newsletter on practical andscientific ways to improve your
health and longevity, pleasevisit me at
drbobblivelongandwellcom.
That's doctor, as in D-R.
Bobby.
Live long and wellcom.
Health care is expensive, both nationally and
for us as individuals $5,000deductibles, $189,000 outpatient
surgery bill.
We also spend a lot more thanother countries and our health
outcomes are just average orbelow average.
(00:24):
What's going on?
Let's find out.
Hi, I'm Dr Bobby Du Bois andwelcome.
To Live Long and Well, apodcast where we will talk about
what you can do to live as longas possible and with as much
(00:49):
energy and vigor that you wish.
Together, we will explore whatpractical and evidence-supported
steps you can take.
Come join me on this veryimportant journey and I hope
that you feel empowered alongthe way.
I'm a physician, ironmantriathlete and have published
(01:10):
several hundred scientificstudies.
I'm honored to be your guide.
Welcome everyone to episode 46,why the US spends so much on
health care.
Well, I always begin with whynow?
Well, friends, family, you, mylisteners, have shared with me
(01:37):
how expensive health insurancehas become and how much it costs
when you go to see a specialistor you get tests done.
Well, I've had a personalexperience with this with a
family member who had outpatientcancer surgery and got a bill
for $189,000 from the hospitaland their monthly therapy for
(02:04):
cancer one of the drugs alone is$12,000 per month.
Well, it turns out for thispatient.
They have Medicare, the doctorturns out, gets paid quite
little and the patientfortunately didn't have to pay
very much, but there was stickershock nonetheless.
(02:25):
How do costs like this occur?
Well, let's walk through thisin today's episode.
But before we dive in, just alittle bit about me.
My career and my skill set isexactly in this area, and my
(02:48):
skill set is exactly in thisarea.
I focused for decades on theevidence for what works, what
doesn't work, what does it cost,is it worth the cost?
And, as I've shared with you,I've published 180 or so
peer-reviewed papers on topicslike this, on the
appropriateness of care, thevalue of care, and so I have
wrestled with this for a longtime.
Well, we can't discuss allaspects of healthcare
(03:12):
expenditures today.
I'm going to touch on a fewtopics Specifically.
I want to dive into what arethe drivers of spending, and
we'll talk about a simpleequation, which is it's price,
times, volume.
And then we consideradministrative overhead, and
I'll explain this a lot more.
(03:33):
We'll return to another episodeand talk about drugs,
pharmaceuticals, and why theyseem to be so expensive and
whether there's justificationfor that.
Also, let me know if there areareas that are of interest to
you.
In the cost realm, I got acomment from a listener recently
(03:54):
who made the point that hisYMCA membership, jerry said,
seems like a great value toavoid these costly expenses.
You know, at $800 a year forYMCA and tenfold more for that
for health care in general inthe United States, it does seem
(04:15):
like prevention, like gettingexercise through a YMCA, may be
a good value.
Imca may be a good value.
Well, I know why I'm interestedin this topic.
It's just been an importantpart of my career.
But why should you care aboutthis topic?
And I'll give you sort of threeperspectives of why it's
(04:36):
important.
On a national level, we spendabout $5 trillion on health care
and that amounts to about 18%of our GDP.
So almost one in five dollarsof everything we do or spend in
the United States goes to healthcare.
(04:59):
And what's perhaps moreworrisome than this number is
that that amount of expendituresis growing rapidly, at about 5%
to 8% per year, so far fasterthan our GDP is growing and far
faster than inflation.
Now, obviously, you can'tcontinue to spend more and more
(05:21):
and more forever.
Now some would argue well, yeah, it's a lot of money to spend
on health care, but that's whatwealthy countries do.
They've solved the food problem.
They've solved other thingsrelated to the cost of clothes
or other things.
So of course, we spend more onhealth care because we're a
(05:46):
richer country.
Well, I don't think that is acomplete way out.
Here we are spending a lot ofmoney and one of the reasons on
a national level, it's reallycritical that we think about
this is that the Medicare trustfund, which will pay for health,
healthcare for most of us whenwe get to be 65 or older, that
(06:08):
trust fund is proposed to gobankrupt in less than 10 years,
in about 2033.
What does that mean?
Well, if there's no more moneyin the Medicare trust fund, we
either have to stop paying forMedicare or paying less benefits
, or we have to raise taxes, andI'm not sure that's necessarily
(06:32):
something we want to do.
So, on a national level,spending this amount of money
can be and will be problematic.
Okay, let's bring this a littlecloser to home for your employer
, for a typical family coverageby an employer.
So what the employer pays, whatthe employee pays, is about
(06:54):
$25,000.
As always, I'll give you thelinks to some of these key
studies in the show notes.
Some of these key studies inthe show notes and why that
$25,000 amount by your employerand yourself is so important?
Because it's a big chunk ofyour compensation.
(07:15):
If healthcare costs continue togo up, your compensation won't
go up as much.
If we didn't have to pay quiteso much on healthcare costs,
then maybe your compensationwould be more Okay on an
individual level.
Our health insurance costs forus as individuals is going up.
(07:41):
If you're on Obamacare orexchanges, in this upcoming year
they're planning on the risingcost of insurance by 15% to 20%.
So 15% to 20% more than theyear before.
For some this may be as high as30%.
(08:02):
Well, as many of you know, yourdeductibles the amount you have
to pay before insurance startsto pay anything has grown over
the years and now typically is$3,000 to $5,000 before any
(08:22):
payments by the insurancecompany.
It also turns out that thenumber one cause of bankruptcy
in the United States, personalbankruptcy, is healthcare and
healthcare expenditures.
So we spend a lot.
We spend a lot at the nationallevel, we spend a lot at the
(08:43):
employer level and we spend alot at the individual level.
Well, let's put this spendingin perspective.
We in the United States spendmore on healthcare per person
than any country in the world.
On average, we spend about$12,000 per person on the US and
(09:05):
this is about three timeshigher than the OECD average,
which is about $4,700.
Well, oecd is 38 developedcountries, big democratic
countries around the world, soit's a good average for what
others spend in the world.
(09:26):
Our number two competitor, sowe spend the most, at $12,000
per person.
The number two here isSwitzerland.
They're at about $7,500.
So we spend three times as muchas these average in these other
countries and our healthoutcomes aren't so good.
(09:49):
Our infant mortality we'renumber 33 out of 38.
The lower the number, the worseyou are.
Of course you want to be numberone.
We're number 33.
Life expectancy in the US is32nd out of 38.
Is 32nd out of 38.
(10:13):
Our overall life expectancy isabout 76 years.
In other countries it's 80.
So we are spending a lot moreand our health outcomes are not
so good for some of these areas.
All right.
Well, this is the end of partone.
I hope I've convinced you.
We do spend an awful lot onhealth care.
Well, part two why is healthcare so expensive in the United
(10:34):
States?
As I mentioned earlier, there'san equation price times volume.
So prices may be too high orwe're doing too much, meaning
too much volume, or acombination of our prices are
high in the United Statesrelative to elsewhere and our
(10:55):
volume is high.
But there's one more piece ofthe puzzle and that's the
administrative overhead to runour really complicated,
convoluted healthcare system.
So I want to walk through eachof these three, give you some
insights there.
(11:16):
All right, so let's just firsttalk about is it a price problem
?
So do we spend so much onhealthcare because our prices
are high?
Well, let me walk through a fewexamples.
The first, ct scans, or MRIscans, cost a lot more here than
in other major countries.
(11:37):
One study showed that in the USa CT scan typically is about
$900.
In comparison, in theNetherlands it's $279.
And in Canada it's $97.
So unbelievable differences inwhat we spend on some of these
(12:00):
imaging studies than elsewhere.
And MRI scans typically costtwo to three times in the US
what it is elsewhere.
All right, second piece of thispuzzle we pay our healthcare
professionals a lot more thanother countries, and it's not
(12:21):
just doctors, it's doctors andnurses and health executives,
primary care doctors,specialists.
Let me give you some databecause I really believe the
price issue is really importantto what's going on.
Well, in the United States aprimary care doctor on average
makes about $240,000.
(12:42):
In the UK?
In the UK it's half that122,000.
In Italy it's 70,000.
In Spain it's 55,000, almostone-fifth of what primary care
doctors make in the UnitedStates.
Mexico it's even lower thanthat.
Not just primary care doctors.
(13:02):
Take a cardiologist,cardiologists.
In the US earnings are about$500,000 per year.
In the UK it's about $140,000.
So it's threefold difference.
But it isn't just doctors.
We pay our nurses twice as muchin the US as in the UK.
(13:23):
In the UK they're paid onaverage about $38,000.
In the US it's $75,000.
But it's not just healthcareprofessionals that are caring
for you, it's also the hospitalCEOs, the insurance company
executives, everybody throughoutthe healthcare system.
As an example, hospital CEOs inthe US make about $470,000 a
(13:49):
year.
In the UK it's about $130,000.
So prices are high in the US.
I've given you a couple ofreasons why that might be the
case.
What are the solutions?
Well, let me just walk througha couple of them, and they may
(14:09):
not necessarily be the solutionsyou think are the best.
Okay, there in the US is theMedicare-Medicaid solution to
this problem, and that is theypay less.
The government essentially setsprices that are paid to doctors
and hospitals as part of theMedicare and Medicaid programs.
(14:33):
Let me give you some exampleshere.
Medicare typically pays doctorsabout 30% less than your Blue
Cross commercial insurance.
Medicaid pays 30% less thanMedicare.
So if you compare Medicaid tocommercial insurance, it's a
(14:56):
huge reduction.
Not just doctors, hospitalsMedicare pays hospitals about
half of what insurance companieswould typically get in the
commercial market for employersor the type of insurance you
might have.
Well, that's how the governmentdoes it.
(15:22):
Well, the saying goes, if youpush in a balloon in one area,
it's going to pop out in another.
Part of the reason why privateinsurance is so expensive is
that the prices and the privateinsurance side kind of have to
make up for the fact that thegovernment Medicare, medicaid
(15:42):
pays doctors and hospitals somuch less pays doctors and
hospitals so much less.
Now you may have wondered whyit is.
Your doctor doesn't have enoughtime to see you in the office
for a visit.
On average it's about 17minutes per office visit.
In part, this is because theprice paid, the amount paid to
(16:05):
the doctor for an office visit,is really constrained.
As I showed you, medicare andMedicaid pay a lot less and
there are limits to how much adoctor can charge for regular
private insurance for an officevisit.
Now, in years past, primarycare doctors wouldn't just get
(16:26):
paid based on office visits.
They would also do EKGs, bloodtests, maybe x-rays, and they
would get money from each ofthese services that were done in
the office.
But nowadays, the doctor reallypretty much gets paid based
upon the number of patients heor she sees paid based upon the
(16:51):
number of patients he or shesees, and that's limited based
on how many minutes they have tosee you, and so our system has
been created in such a fashionthat oftentimes doctors have to
have a lot of visits per daybecause that's how they're paid
and you don't have as much timewith your doctor as you might.
Okay, so our price is high foreach service and, as I mentioned
(17:16):
earlier, we pay our doctors andnurses and our healthcare
executives more here than othercountries.
Now you might say that's badnews.
If we only paid half of what wedid to nurses or a third of
what we do to doctors, we wouldspend less.
But maybe it isn't bad news onthat front, because we want the
(17:40):
best people to go intohealthcare and paying them more
is a way of recognizing value.
So maybe paying higher amounts,although it leads to higher
expenditures overall, may not beall bad news.
Okay, so that's the price sideof the equation.
So the way you spend a lot ofmoney is the Unit price is high
(18:04):
for your MRI scan, your officevisit, your surgery, or you're
doing too much.
So maybe part of our problem isthat we do too much.
We're doing too many MRIs, toomany people end up in the
hospital, too much surgery, toomany specialist visits.
(18:24):
Well, when researchers havelooked at this, the number of
hospitalizations in the US isnot more than other countries.
Yeah, we may have somewhat moreMRI scanners than other
countries, but those differencesare not huge.
So we can't explain why we inthe US spend so much simply by
(18:47):
we do so much more than othercountries.
But there is a piece of thepuzzle about doing too much, and
a lot of my papers, a lot of myresearch focused on this, and
that is the issue of overuse.
It's been estimated that 25% ormore of a test or procedures
(19:10):
that we have done on us aspatients may be unnecessary.
Well, it turns out that numberis also true in other countries.
So, yes, overuse is animportant issue of spending too
much in the US, but it doesn'texplain the comparison between
us and elsewhere.
(19:31):
Well, why is there overuse?
Why are there perhaps moretests, more procedures, more
visits than are needed?
Well, there are a number ofimportant reasons.
This has been studied a lot byresearchers.
First is what's called defensivemedicine.
We, as doctors, worry aboutmalpractice.
(19:52):
We are really concerned aboutmissing something, and so if you
come in with a headache or lowback pain, we might be tending
to order that scan because wedon't want to miss something.
Or if you have chest pain andI'm a primary care doctor we
might feel more comfortable froma malpractice standpoint by
(20:16):
having you see the cardiologist.
Secondly, we do too much oftenbecause patients expect it.
Patients expect it.
Oh doctor, I've had thisheadache.
Oh doctor, I've had this backpain.
Can we do a CT or MRI scan?
(20:41):
In episode 12, I talked about totest or not to test, and I get
into some of the reasons why wewant these tests and why that
leads to more of them.
We want these tests and whythat leads to more of them.
As I said, patients demand thisNow, and maybe 20, 30 years ago
, the doctor would sit back andsay yeah, I know you would like
(21:01):
that, but it's not needed so wewill not order it.
Nowadays, yelp ratings matter.
Other types of ratings ofdoctors matter.
Their bonuses are often partlydependent upon these ratings, so
we don't want to upset patients.
So if it seems somewhatreasonable to order some of
these tests or do a referral toa specialist, we'll do that
(21:25):
Rather than say no to thepatient and potentially get
ratings that aren't good.
The last piece of why we oftendo too much is there's a saying
if you walk around with a hammer, a whole lot of things begin to
look like nails.
So if you're somebody that doesbypass surgery or does knee
(21:51):
arthroscopy, we tend to believethis is a really good thing for
patients oftentimes.
And so because we get paid todo more of these, all of a
sudden, when opportunities arise, all of a sudden, when
opportunities arise, we mightsuggest that to the patient.
All right, so we do a lot.
(22:11):
Is there any way to solve theproblem, the volume problem?
The challenge here is there'sno easy way.
What do other countries do?
Well, some other countries,they have queues.
You wait In the US if you wantto see your doctor or see a
specialist or get an MRI scan orelective surgery.
(22:32):
Yes, you might have a bit of await, but it's not a huge wait.
In Canada's example, it maytake three, four, five, six
months to have cataract removed,to have knee or hip replacement
.
It's much less of a weight inthe US.
So that's one solution.
(22:53):
Have weights cues so you don'tdo quite as much as might be
needed or desired, whereas inthe US that weight is much less.
Secondly, we ask our patients topay more.
I mentioned earlier about thedeductibles $1,000, $3,000,
(23:16):
$5,000, which means every timeyou go to the doctor, get that
test, get a procedure, you'repaying that first amount of
money before the insurancebegins to kick in.
Well, back in the 1970s theRand Corporation did a huge
study, probably the largestsocial experiment ever done,
(23:40):
called the Health InsuranceExperiment.
What they asked was if we havedifferent types of insurance.
In some cases care is free forthe patient.
In some cases they have to paya little bit more or a lot more.
And they asked the questionwhat happens when patients have
(24:01):
to pay more?
Well, what do they find?
They found, not surprisingly,when patients had to pay more
for each time they went to thedoctor or got a drug or got a
service that led to lower use,they had to pay more.
They chose not to pay more bynot having as much care from
(24:24):
their doctor or the healthcaresystem much care from their
doctor or the healthcare system.
The wrinkle here is whenpatients reduce what they got.
They reduce both things thatwere unnecessary so that's the
good news but also things thatwere appropriate for them.
So it was a very blunt way tosolve the problem.
(24:47):
It was a very blunt way tosolve the problem.
Well, another way that thehealthcare system attempts to
reduce the utilization, reducethe volume, is what HMOs
sometimes do.
When you go to the doctor, youpay a certain amount.
The doctor gets paid for theoffice visit.
That's the typical system.
(25:08):
Hmos sometimes do itdifferently.
Rather than paying the doctoreach time you go to see him or
her, they pay the doctor a fixedamount per month.
So for you as a patient, thedoctor might get $15 to $20 a
month.
Whether you see the doctor ornot, they get the $15 to $20 a
month.
Whether you see the doctor ornot, they get the $15 to $20 a
(25:31):
month.
If you see the doctor threetimes during the month, they
still get that same monthlyamount.
So it changes the incentivefrom doing more, more, more to
perhaps doing less, less, less,which can lead to a problem of
not enough.
So this is another way thatinsurance companies, in this
(25:54):
case the HMOs, may reduce thevolume of services.
Fourth one prior authorization.
For those of you who wanted toget an MRI scan or wanted to get
surgery, often your doctor ordoctor's office has to get prior
authorization, get approvalfrom the insurance company,
(26:16):
which takes time.
It's a hassle for lots ofdifferent people.
Okay, summing up this section,there are many reasons why
utilization is higher, but theredoesn't appear to be an easy
solution.
So we've talked about price,we've talked about volume.
The other piece of the puzzleand this is really important and
(26:40):
helps to explain why we spendmore than other countries that's
the administrative cost.
The administrative cost is whatis the cost to run our system?
So, yes, I've talked about theprice of an MRI, I've talked
about the price that's paid whenyou go to the doctor or have
surgery, but there's also thefriction, the amount that we
(27:05):
spend to pull everythingtogether, and I'll explain to
you in just a moment what thatentails.
So we spend an estimated maybe25% of all healthcare dollars on
administrative costs.
That's probably four times whatother countries spend on
(27:26):
administrative.
Four times what other countriesspend on administrative.
As you may know, in othercountries there's one set of
doctors, one set of hospitals.
Those are the only doctors andhospitals that you can see.
They predetermine what thepayments are, they determine how
much drugs are.
It's all done without a lot ofnegotiation.
(27:46):
Maybe there's some negotiation,but the governments in these
other countries define mosteverything.
Well, in the US that's not whathappens.
We have choice, so we get tochoose what doctors we want to
see.
Some of them are within thenetwork, some are not within the
(28:09):
network.
We have a broad array ofmedications to choose from and a
broad array of hospitals.
So part of the administrativecost is to set up these networks
which doctors and hospitals arein network and not network.
And then the ones that haveagreed to be part of the network
means that they've accepted theprices that the insurance
(28:32):
company will pay them.
In the US we have a lot ofquality assessment and assurance
requirements, so there's a lotof paperwork for hospitals and
others to monitor aspects ofcare.
There's the prior authorizationI mentioned.
There's claims payment.
There's marketing.
(28:53):
It is the cost of having choicein our system.
Am I saying that the 25% is theright number?
No, but if we want to havechoice, be able to choose this
insurance company versus another, this plan versus another that
comes with an administrativecost.
(29:17):
Okay, time to wrap up.
Another day we will talk aboutdrugs and if you have some
questions or examples, by allmeans let me know.
Healthcare is expensive in theUS.
(29:37):
We spend more here because wepay our healthcare folks more
and we do more than might benecessary.
It's also expensive herebecause we pay to have choice
rather than sort of aone-size-fits-all situation and
system.
Action item for you.
Do you have any spending topicsor any topics in general?
(29:59):
Action item next Do tell yourfriends about the podcast.
I love it when I hear newpeople joining us in the family.
Until next time, I hope we alllive long and well and I hope we
can find a way perhaps not tospend quite so much.
(30:20):
Thanks so much for listening toLive Long and Well with Dr
Bobby.
Thanks so much for listening toLive Long and Well with Dr
Bobby.
If you liked this episode,please provide a review on Apple
or Spotify or wherever youlisten.
If you want to continue thisjourney or want to receive my
(30:41):
newsletter on practical andscientific ways to improve your
health and longevity, pleasevisit me at
drbobblivelongandwellcom.
That's doctor, as in D-R.
Bobby.
Live long and wellcom.
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