The Second Opinion

Why does US healthcare cost so much? A Texas reporter takes a close look

April 22, 2015

With what will be a yearlong, 13-part series called “Cost of Care,” the Dallas Morning News is the latest news outlet to take a long, hard look at through-the-roof American healthcare costs. Staff writer and business columnist Jim Landers, who has published six pieces in the series to date, aims to probe “how and why US healthcare spending is the highest among developed nations.” People ask the wrong question, Landers told me. Instead of asking “why,” they want to know how “they can afford it.” Increasingly, Americans can’t, and another serious examination of the issue—now from a regional news outlet—makes a notable contribution to the growing body of recent work including Steven Brill’s and Elisabeth Rosenthal’s ongoing New York Times series, “Paying ‘Til It Hurts.”

The Dallas series is intended to delve into what Landers calls the “daunting mystery” of the price of American medicine. Landers set the tone in his first piece at the end of January writing, “We are getting a bad deal with American health care. And it’s unsustainable.” America’s system “is bleeding green,” as the headline of the piece puts it, because

There is no push-back from competing companies offering the same services for less. Hospitals compete with fancy amenities. Pharmaceutical companies use patents to maintain monopolies while charging whatever the market will bear. There is no push-back from patients. If insurance covers it, most are blasé about the cost. When it comes to drugs for cancer and other grave illnesses, many patients are frantic to get help no matter what the cost.

In another early piece, Landers tells the tale of the for-profit hospital Medical City Dallas and shows, as he writes, the “peculiarity of hospital economics where supply determines demand: Build it, and they will come.” Medical City Dallas, the city’s most expensive hospital, illustrates that principle to a T. Landers writes there was no need for a 668-bed hospital when it was founded in 1974, but officials “soon found ways to fill those beds” with a strategy of wooing expensive specialists who could bring in patients and offering the amenities and services of a “Five Star hotel,” as the hospital crows on its website and “every kind of art in the world” on the walls, as one hospital official told Landers.

As the piece unfolds, readers get the picture of a facility that’s become a money-making machine for its owners and one that seems to carry on business as usual even in the face of growing concern over the affordability of healthcare and pressure to move away from the traditional fee-for-service model of payment that many blame for the high cost of care. Between 2011-2012 (the last year there were data) Medical City increased prices by more than 13 percent for 100 procedures most commonly used by Medicare patients. Landers asked Scott Smith, the president of Medical City Dallas Management Ltd., why costs are so high at Medical City and Smith fingered malpractice lawsuits. Landers pushed back, noting that Texas had changed its malpractice laws years ago to limit the amount of settlements. The result: “Malpractice premiums fell. But the reforms didn’t lower the cost of care,” he reported. Between 2003 and 2009, the latest statewide data show that on a per-capita basis those costs rose by a third. Today, Landers reports, Texans pay 12.3 percent of their income for insurance premiums and deductibles—a higher percentage than any state but Florida. At the end of the Medical City piece, one doctor who practiced at the hospital and later was a patient there for a lower back procedure concludes, “I don’t think the market works. It does not work when it comes to delivering healthcare.”

In an exploration of the high cost of cancer drugs—headlined, “Your money or your life” —the failure of the market comes through again. Dr. Clifford Hudis, chief of breast cancer service at Memorial Sloan Kettering in New York City, told Landers, “Drug pricing isn’t tied to cost. We don’t have a functioning market as regards cancer and drugs. The automatic correcting effect of a marketplace isn’t there.”

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Earlier this year, I interviewed Dr. Peter Bach who directs the Center for Health Policy and Outcomes at Sloan Kettering. We talked about the high price of cancer drugs and the role of the media in exposing those costs. “We’ve got a pretty good history now that shows manufacturers can raise prices to whatever they want,” he told me. “The worst thing that happens is that a story gets written and then nothing happens and the practice continues.” That may be, but it means the media needs to continually raise the questions Landers asks and probe uncomfortable solutions. In a January New York Times op-ed, Bach discussed two possible paths: free insurers and government programs from rules to include all expensive drugs in their plans (a point Landers noted) and tell the public their effectiveness is not good enough to justify the price, or “demand that policy makers set drug prices equal to those of Western Europe.”

Landers told me at the end of the Dallas series he will address the long-term sustainability of the healthcare system, examining another set of questions: Do we ration? Do we use price controls? Do we use vouchers? Do we let the market decide? He told me he was a big believer in “value-based pricing,” one of the new, hyped remedies for controlling costs that bases prices on the perceived value to the customer rather than on the cost of the product or historical prices. This one needs to be thoroughly and critically examined and we hope Landers can do that with an open-minded exploration of possible cost controls as he brings his excellent project to a close.

Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for CJR's Covering the Health Care Fight. She also blogs for Health News Review and the Center for Health Journalism. Follow her on Twitter @Trudy_Lieberman.