MANUFACTURED THEFT: The $1.5 trillion question!


Part 3—Amazingly, Rosenthal asks:
Right at the start of her widely-ignored new book, Elisabeth Rosenthal asks the question which virtually never gets asked.

She starts by describing the crazy way Americans get billed for medical procedures. "In no other industry do prices for a product vary by a factor of ten depending on where it is purchased, as is the case for bills I’ve seen for echocardiograms, MRI scans, and blood tests to gauge thyroid function or vitamin D levels," Rosenthal writes.

The passage appears on page 2 of her new book, An American Sickness.

"The price of a Prius at a dealership in Princeton, New Jersey, is not five times higher than what you would pay for a Prius in Hackensack," Rosenthal writes as she continues. "The price of that car at the very same dealer doesn’t depend on your employer, or if you’re self-employed or unemployed. Why does it matter for health care?"

At this point, we're still on page 2 of this book. On page 3, Rosenthal starts to resort to the language of corporate crime as she describes these peculiar billing practices.

As she does, she asks a fundamental, foundational question. It's a question which never gets asked:
ROSENTHAL (page 3): We live in an age of medical wonders—transplants, gene therapy, lifesaving drugs and preventive strategies—but the health care system remains fantastically expensive, inefficient, bewildering, and inequitable. Faced with disease, we are all potential victims of medical extortion. The alarming statistics are incontrovertible and well known: the United States spends nearly one-fifth of its gross domestic product on health care, more than $3 trillion a year, about equivalent to the entire economy of France. For that, the U.S. health system generally delivers worse health outcomes than any other developed country, all of which spend on average about half what we do per person.

Who among us hasn’t opened a medical bill or an explanation of benefits statement and stared in disbelief at terrifying numbers? Who hasn’t puzzled over an insurance policy’s rules of co-payments, deductibles, “in-network” and “out-of-network” payments—only to surrender in frustration and write a check, perhaps under threat of collection? Who hasn’t wondered over, say, a $500 bill for a basic blood test, a $5,000 bill for three stitches in an emergency room, a $50,000 bill for minor outpatient foot surgery, or a $500,000 bill for three days in the hospital after a heart attack?

Where is all that money going?
"Where is all that money going?" At this site, we've been asking that foundational question for years.

Already, on page 3, Rosenthal has asked that foundational question. Truth to tell, it's the most basic question in all of American governance.

That question lies at the heart of the basic problems our federal government can't seem to resolve. It's a question which, by common agreement, essentially never gets asked.

Warning! We're not saying that Rosenthal asks this question in the most skillful way. For our money, she presents that foundational question in a way which is hopelessly murky.

Speaking the language of corporate crime, she has already suggested that our health care systems is built on a foundation of "medical extortion." But she offers a clumsy account of the vast sum which is disappearing into the maws of this system every year.

Is our health care system really based on acts of "extortion?" As a doctor's kid, as a doctor herself and as a health care reporter, has Rosenthal really "had a lifetime front-row seat to a slow-moving heist," as she declares on page 4?

Do American hospitals constitute "an extractive industry" (page 24), whose behavior can be compared to that of bank robbers?
According to Rosenthal, that's where all that money is going! But on page 3, she does a fairly lousy job establishing her basic foundational question.

Where is all that money going? In the following passage, Rosenthal describes the money to which she refers—the money which is being looted out of our health care system. In our view, this is very murky work:

"The alarming statistics are incontrovertible and well known: the United States spends nearly one-fifth of its gross domestic product on health care, more than $3 trillion a year, about equivalent to the entire economy of France."

It would be hard to establish her basic question in a less compelling way. Let's note a few problems:

First, those alarming statistics are not well known among the American public. Go ahead! Stop a hundred pedestrians today. Ask them what portion of our "gross domestic product" is spent on health care each year.

Ask them how many dollars our nation spends on health care each year. Ask them to compare that amount to the entire economy of France!

You're going to get a lot of stares if you start posing those questions. Rosenthal does a terrible job describing the amount of money which is getting looted in the course of the "slow-moving heist" she admirably describes.

Rosenthal asks the foundational question: "Where is all that money going?" It seems to us that this would be a much better way establish the size of the problem:
Per capita spending, health care, 2015
United States: $9451
Canada: $4608
France: $4407
Japan: $4150
United Kingdom: $4003
Good God! Five thousand dollars per person per year is disappearing into the maws of that slow-moving heist! That's the mountain of missing money to which Rosenthal's question refers.

Those numbers dramatize Rosenthal's rather bureaucratic claim (see above): other nations' health systems "all...spend on average about half what we do per person." In the course of a 400-page book, Rosenthal never presents them.

At any rate, those remarkable data help us see why our nation has so much trouble providing health care to all its citizens. Because of all that looting, a year of health care costs more than twice as much in this country as it does everywhere else!

In our view, Rosenthal does a very poor job establishing the size of this looting. On the other hand, she aggressively asks the foundational question, the question which never gets asked:

Where's all that money going?

That is our government's foundational question. That question underlies our endless health care debacle and our federal deficit problems.

Rachel and Lawrence know not to ask it. Rosenthal asks the question straight out, right on page 3 of her book!

Having asked the foundational question, Rosenthal proceeds to an anecdotal answer. Her story starts on page 11, at the start of her Chapter 1.

Her story involves Jeffrey Kivi, a high school chemistry teacher in New York City with a potentially disabling condition called psoriatic arthritis. Absent treatment, the condition could leave Kivi "unable to work and even walk."

Enter our "extractive" health care system! Rosenthal starts her story in the fairly recent past:
ROSENTHAL (page 11): About fifteen years ago, important new arthritis drugs hit the market. His rheumatologist, Dr. Paula Rackoff, said he was a good candidate. The medicine worked wonders: every six weeks, a drug called Remicade was infused into his veins in an outpatient clinic at Beth Israel Hospital, where Dr. Rackoff practiced. The treatment cost $19,000 each visit, but Mr. Kivi, as a New York City civil servant, has excellent insurance under EmblemHealth. He paid nothing himself.
"The results were transformative," Rosenthal writes. Kivi was able to continue his life and his career.

For ourselves, we were already wondering, at this point, why a one-day, outpatient treatment would cost anything like that much. As it turns out, that shows how clueless we are.

In 2013, Dr. Rackoff moved her practice about fifteen blocks to NYU Langone Medical Center. Kivi began going there for the exact same treatments. Only one thing had changed:
ROSENTHAL (page 12): At first, [Kivi] was impressed by the Langone Center for Musculoskeletal Care, where services were distinctly more upmarket...

But the charges that started posting on his insurance Web site, as submitted by NYU, shocked him: the first three-hour infusion at the new hospital, in may, was billed at $98,579.98, the second in June at $110,410.82, and from July on they were billed at $132,791.04. It was the same dose as always, in the same form, prescribed by the same doctor.
Where was all that money going? Rosenthal describes what happened when she and Kivi tried to find out.

Why was a $19,000 treatment now being billed at $132,000? According to Rosenthal, "When Mr. Kivi complained to the NYU billing office, a patient-care representative offered a range of nonexplanations." She quotes Kivi describing the curious things he was told, then reports her own experience:
ROSENTHAL (page 13): When I tried to pick up the investigation where Mr. Kivi left off, the explanations got even less convincing. The public affairs department told me Mr. Kivi was an "outlier" because he was getting aggressive treatment and he is large. Remicade is dosed according to weight and, at over six feet and nearly four hundred pounds, Mr. Kivi does get a relatively large dose. But even so, the wholesale price of Mr. Kivi's dose of Remicade should have been about $1,200, a drug researcher at another hospital told me.

As we slid down the rabbit hole of medical pricing, things only got darker and darker...
The treatment had cost $19,000 fifteen blocks down the street. Fifteen blocks to the north, the billing price jumped to $132,000. The insurance company ended up paying $99,593.27 for each treatment.

According to Rosenthal, these are the types of "heists" which occur within our own homegrown "extractive industry." Presumably, she featured this heist because it's especially dramatic.

That said, when heist is piled upon heist, $5000 per person per year disappears within our health care system. As a result, our nation, alone among its peers, becomes a pitiful helpless giant.

We become a clownish society locked in clownish "health care debates" of the type we're currently experiencing. Clownishly, we can't provide universal health care, and we can't seem to get control of our federal budgets!

Despite their fiercely progressive views, Rachel and Lawrence won't talk about this on their popular "cable news" programs. Instead, they entertain us with a succession of chases, for example against a governor who once said that he enjoyed touching his girl friend's breasts.

Our darling Rachel won't talk about this. Does anyone understand why?

Tomorrow: Rosenthal ignored, disappeared


  1. No, the insurance company didn't pay that $99K bill either. The amounts billed and the amounts on paper are not what is paid or received. The insurance company negotiated a lesser amount, the medical center charged off the remainder against taxes so that owners could keep more of their for-profit income. These are paper transactions in which no money actually changes hands. These are bookkeeping games.

    Mr. Kivi didn't pay any more at one place than the other. They just handled their accounting differently.

    Darling Rachel doesn't talk about this because it is very complicated and her audience would be lost in the weeds. Rosenthal doesn't appear to understand it either.

    Somerby definitely doesn't understand health care costs. He thinks the inflated numbers that represent what companies carry on their books are the same as what people (or insurance) actually pay. That isn't necessarily true.

    When you have car insurance, your insurance company doesn't pay the same amount for repairs as you would pay if you had no insurance. Your repair shop doesn't charge an individual the same as an insurance company. The difference between the list price for repairs and what people or companies actually pay is shown as a loss for the repair shop and can be applied against income on their taxes. It is a write off. This happens all over capitalist America.

    1. "Somerby definitely doesn't understand health care costs. He thinks the inflated numbers that represent what companies carry on their books are the same as what people (or insurance) actually pay. That isn't necessarily true."
      The cost that Bob keeps mentioning is $9451 per capita -- is this just an accounting gimmick, too?
      Per your explanation, which, by the way, I have no reason to accept as correct, Langone got paid the same $19,000, and the rest just got written off as a loss on taxes, while at the same time generating profit. If this were true -- and it's not -- this would constitute a clear case of tax fraud. Once again, there must be an explanation of why they were nominally charging $99K and then $130K. Furthermore, as Bob points out, it's curious why the treatment was 19K to begin with.

    2. They can charge $19 k USD because of patent monopolies for pharmacuetical drugs!

    3. Ilya illustrates here why Maddow doesn't want to talk about this.

  2. Is it fair that someone who has chosen to weigh 400 lbs should cost our healthcare system so much more than someone who maintains a normal weight? When insurance pays the bill, there is little incentive for individuals to try to keep their costs down by managing their own health lifestyle choices. We are enabling the obesity that is higher in our society than in other parts of the world.

    1. Here's a discussion using 2007 data. Spoiler, the culprit is not obesity. [LINK]

      Subsequent videos by the same vlogger uses more recent data, but just to correct one claim in the video linked to here, per capita there are more MRI scans performed in Japan than in the United States:

      [QUOTE] …In the United States, a standard MRI scan of the head costs about $1000 to $1400. In Japan, the health ministry thinks that price is far too high. The fixed price for an MRI of the head in Japan is around $105. That’s why Japan with the highest per capita rate of MRI scans in the world, still spends less than most developed countries on health care; you can buy a lot of scans if the price is dirt-cheap.

      I once asked Professor Ikegami why doctors put up with this; why don’t they just refuse to take MRI scans if the fee is so low? “The answer to that is the Fee Schedule,” the economist replied, “There is only on payment scale in Japan. If a doctor won’t accept the price in the schedule, he won’t get any business. And he won’t have the scans he needs to diagnose his patients. So the doctors accept the price.”

      As it turns out, the heavy-handed price control from above has had a salutary effect on the cost of medical care. Because the permitted fee for an MRI scan is so low, for example, Japanese doctors went to the MRI manufacturers–Hitachi, Toshiba, etc.– and demanded a new line of compact, inexpensive MRI machines.

      The industry responded. Today, Japanese doctors and clinics can buy MRI scanners for around $150,000– about one-tenth the price of the bigger machines used in the United States.... [END QUOTE]


    2. The only problem with this is that the doctor doesn't get paid for the MRI scan. The doctor pays someone else for it, using the info in the scan to diagnose and treat the patient. A doctor would like to have cheaper scans, not be upset by them. They are paying for the scans, not receiving payment for them, unless you are conflating doctors with hospitals. Doctors don't typically own their own MRI scanners in the US.

      It is handy that the manufacturers of the scanners are also Japanese businesses. It is unclear to me why there is a an advantage to a small, compact machine. If Japanese clinics are buying cheaper scanners it is because the prices given to them are more favorable than those offered to US hospitals. That is not clever or more ethical -- it is a business practice that advantages their own country over other countries. Not much we can do about that unless we build our own machines.

      It seems like a truism that price controls would lower prices. Short of a revolution, how will you accomplish that in the US? If you're waiting for Bernie to do it, don't hold your breath. He is busy helping his wife defend herself against bank fraud charges. Do you imagine Republicans will suddenly abandon free market economics? There are other examples of screwed up situations where free market doesn't work well. Nothing is happening there either. Health care is not unique in that respect.

    3. Your "fat person" bashing er, um, I mean your speculation about the patient's weight being the cause of the increased cost doesn't pass the smell test.

      The patient weighed the same at hospital #1 as he did at hospital #2. Obviously his weight was not a factor in the price increase from $19,000 to $132,000.

      Why don't you take your bigoted ignorance somewhere else. Or, better yet, just keep it contained in your bigoted little mind.

    4. If the public (or his/her insurance company) pays more because of the patient's weight, that is an additional cost of health care in our society. If we have higher rates of obesity across the board, compared to other nations, that means we will be paying more for this and other weight-related treatments.

      There is nothing bigoted in noting that the US permits its citizens to become fatter than other cultures do. This is obvious from our demographics. Michelle Obama tried to do something about it, but her good efforts are being undone by Trump et al. We do badly on a variety of measures of health, despite our spending, because we don't make an effort to curb unhealthy lifestyles. No one should weigh 400 lbs. That level of obesity is a treatable health condition. We need the will to treat it.

    5. Because he seemingly always has to post something, @7:51 PM writes:

      [QUOTE] The only problem with this is that the doctor doesn't get paid for the MRI scan. The doctor pays someone else for it, using the info in the scan to diagnose and treat the patient. A doctor would like to have cheaper scans, not be upset by them. They are paying for the scans, not receiving payment for them, unless you are conflating doctors with hospitals. Doctors don't typically own their own MRI scanners in the US. [END QUOTE]

      First off, why does it matter who's getting the proceeds from the inflated MRI costs in the United States when the question, in its broadest terms, is why are per capita medical costs in the United States so high? Second, is the commenter completely unfamiliar with the term "kickback" or of the conflict involved when prescribing doctors hold an ownership stake in a lab or imaging center? On the off chance that @7:51 PM is uninformed and isn't here to waste everyone's time playing the part of an inexhaustible contrarian here's some background on that last point LINK.

    6. Anyone can own a healthcare company. It makes sense doctors would invest in their own industry. I suppose you think computer scientists shouldn't invest in their industry either. Blaming dictors for the healthcare mess is grossly unfair. It is scapegoating.

    7. So you are here to waste everyone's time.

    8. That's not much of an argument.

  3. Several years ago, my wife was sent to three different hospitals in the same network (Banner), depending on the test or specialist she needed at the time. One was 10 minutes away, the next 25 minutes, and the oldest and biggest was 50 minutes. She would get ill and want to go the the ER. I would take her to the nearest ER.
    On one occasion the ER staff said she needed to be admitted to the biggest hospital, one I had driven her to many times. I said I would take her there.
    The staff said no, she must go by ambulance, a 40 minute drive.
    The bill to Medicare was ....wait for it...$3000.00!
    I'm sure Medicare paid less, but this illustrates the moral hazard with health care insurance. I did nothing about it because it cost me nothing. Most people don't look at anything on a bill except their copay or deductible.
    The pricing is usually hidden, the procedures are couched in code numbers, and many times the patient doesn't even know what they owe until they get a bill from a collection agency six or eight months later. I once had a $900.00 bill for an ER visit that made me sicker than when I went in. I called and asked will you settle for $300.00. They accepted immediately.
    I looked at some of my wife's hospital charges. She could not bring her daily meds to the hospital. The hospital pharmacy was charging more for one pill than she paid for a month's prescription.
    I am a military brat. I grew up on military bases, and one thing I learned is that when "Uncle Sugar" is footing the bill, nobody gives a damn what it costs.

    1. They have liability issues if they let her go with you and she needs emergency care before reaching the hospital. Your car is not equipped like an ambulance. They may not know how serious her condition might be.

    2. I understand their position. What I don't accept is raiding the government with an absurd charge. The other OECD nations have strict rules about charges. We don't. It seems the price of every service has to be negotiated after the fact.
      I didn't mention the bills I got from Banner Health. Every month for a year after my wife passed away, I would get bills from them, $100.00 here, $6000.00 there, every one bogus. Fortunately, I found an accountant at Banner that checked every one and said they were all billing errors. They were all dismissed. How many bogus bills are paid without dispute? Sometimes several times. The mind boggles.

    3. An invoice that is written off is not necessarily bogus.

      If I offer customers a 15% discount for prompt payment, I have adjusted the price. The invoice isn't bogus because of that. It doesn't necessarily mean the price was too high to begin with. It means that cash flow is being prioritized over receipts. The 15% is the cost of obtaining the money sooner. Health care billing is hard to understand. It is NOT transparent to patients. That doesn't mean it is necessarily corrupt or bogus or mistaken or fraudulent, etc. It doesn't mean there are piles of money being raked in by greedy corporations. It means someone writing a book about such issues should spend the time needed to understand what is going on. I don't get the sense that is true of this author.

    4. Dave the Guitar PlayerJune 29, 2017 at 1:16 PM

      The fact that the average spending for health care in the U.S. is *twice* what every other country spends *does* mean that greedy corporations are raking in our money. You might want to believe that hospitals and doctors are not part of the problem, but they are obviously not part of the solution. I may not understand patient billing, but someone needs to step in and follow the money to determine why a service can cost 10 times more at one hospital than another and propose methods to assure that we (as a nation) are not routinely over-charged, as we currently are.

  4. I suspect that like many university hospitals, the NYU health center is a cash cow for the university itself. You can no doubt look it up in their annual report.