Rising Health Costs


General Motors, and DaimlerChrysler recently joined a legal challenge
to block two Michigan health systems from building two new hospitals
in the Detroit suburbs. The Big 3 automakers, with a combined annual
employee health bill of nearly $10 billion, worry that the new hospitals
will lead to overcapacity in Detroit’s Oakland County suburbs.
They argue, correctly, that in the hospital business, overcapacity
pushes medical costs up, because it encourages doctors to put more
patients—particularly those with good health plans who pay
little out of pocket—into empty hospital beds. 

not surprising that businesses worry about developments in the health
sector since health coverage has become one of the largest expenses
for many U.S. employers. Employers’ health-care costs, which
are expected to rise 12 percent this year, have doubled since 1999
for each active employee to an average of $7,308. (Companies have
also downloaded costs onto workers and retirees.) 

reason for the current “job loss recovery” is rising health
costs. Companies prefer to increase existing employees’ hours,
even if they have to pay overtime, rather than cover new workers’
health insurance. The loss of more than 2.8 million manufacturing
jobs since August 2000 is due partly to health costs that tend to
be higher in the manufacturing sector. Only 13 percent of workers
between 18-64 years of age employed in manufacturing are uninsured,
whereas the rate is 18 percent for all industries. Similarly, since
manufacturing jobs have a higher unionization rate than the rest
of the private sector, manufacturing companies tend to provide better

When up against other nations with publicly funded healthcare systems,
U.S. manufacturers just can’t compete. 

to the Canadian Auto Workers union, public health coverage gives
automakers a $10 hourly cost advantage per worker in Canada compared
to U.S. autoworkers. That’s about a $20,000 per worker annual
savings. Canada’s

Financial Post

concludes, “rising
health-care costs may be one reason why jobs keep disappearing in
the United States—a situation that’s hard not to compare
with Canada, where the labor market has been booming and health
care is publicly funded.” 

health expenditures are by far the highest of any country in the
world at 15 percent of GDP.  No other country spends even 11
percent of GDP. The U.S. also spends much more in absolute dollars.
U.S. citizens pay $5,440 on average for health coverage while Canadians,
the fourth biggest spenders, shell out $2,927. 

commonly cited reason for the larger U.S. health bill is the lack
of price controls on drugs. Price controls, however, are not the
only reason U.S. drug prices are higher than the rest of the industrialized
world. Another important reason is that the U.S. government—aside
from Medicaid and the military—has little control over the
purchase of drugs, unlike in countries with universal healthcare.
Government drug purchasing can drive down prices through bulk discounts,
which is why the pharmaceutical industry lobbied ferociously for
the recent Medicare drug plan to explicitly prohibit bulk price
discounts. Not only are drugs more expensive, but U.S. residents
are the biggest pill poppers in the world, at least partly because
of deregulated pharmaceutical industry advertising. (Drug consumption
is so endemic that pharmaceutical companies are reducing their drug
trials in the U.S., in part, because it’s hard to find trial
subjects not already on some drug.) Pharmaceutical companies in
the U.S. are free to charge whatever they can to recoup their highest-in-the-world
advertising costs.  

contributor to higher costs in the U.S. health system is the focus
on expensive technologies that are not necessarily of much use.
Then there is the higher rate of unnecessary procedures. The

Street Journal

reports “as much as half of the care provided
to U.S. citizens is unnecessary, including procedures that don’t
do any good, tests that are repeated, and drugs for which there
is no evidence of benefit.” Hospitals have a financial self-interest
in increasing medical procedures. So do fee-for-service doctors
and specialists who completely dominate U.S. health care. The


explains, “Since doctors and hospitals are paid only for procedures
and treatments they provide, they are actually penalized if they
eliminate unnecessary procedures or practice preventive care.” 

consideration of the efficacy of every test or treatment, which
should underpin all medical evaluations, is too often overlooked
when profits are to be had. Contrary to popular wisdom, curative
medicine is not always a good. Though often beneficial in the short
term, curative medicine can also be detrimental to health. For instance,

Chicago Tribune

calculated that there were 103,000 deaths
in 2000 from hospital-grown infections. According to the

Street Journal

, there are “an estimated 51.5 million [prescription
dispensed drug] errors annually, with 3.3 million of them potentially
serious or deadly.” 

better understanding of how different drugs interact and a reduction
in the number of unnecessary prescriptions would decrease side effects.
Likewise up to 75 percent of the hospital infections are thought
to be preventable, mostly from better cleaning techniques by doctors
and nurses. Yet our economic system, which focuses almost exclusively
on cures and technology where the biggest profits are to be found,
spends little on basic hospital infection control. 

significant contributor to U.S. health costs are the higher administrative
costs associated with multiple insurers, each of which have their
own bureaucracy and advertising expenses. Data reported last summer
in the

New England Journal of Medicine

shows that, adjusting
for population, the U.S. spends $209 billion more every year on
extra administrative costs than the Canadian single-payer (government)
insurance system. The study didn’t even take into account the
additional 10 to 15 percent of revenue that is siphoned off as profit
by insurance companies and profit-oriented hospitals. 

Dysfunctional Healthcare 


U.S. and Canadian governments spend approximately the same on healthcare—in
2001, Canada spent 7 percent of GDP while the U.S. government spent
6.7 percent. But in the U.S., 75 million are without insurance at
some point every two years while in Canada, government spending
provides health coverage for everyone. 

only is the U.S. health system more expensive it is also less effective
at keeping people healthy. U.S. life expectancy is lower than every
other rich nation and some poor ones. According to some estimates
about 18,000 U.S. residents die each year as a direct result of
being uninsured. Those who die are almost entirely the working poor.
In addition, “Canada’s health care system far surpasses
the United States in avoiding unnecessary, disease-related deaths,”
according to a study published in the

American Journal of Public

. According to the

International Journal of Health

, “the average ranking for the United States on
16 health indicators in a 1998 comparative study of 13 countries
by Starfield was 12th, second from the bottom.” 

public health care system in Canada compared to the U.S., for instance,
acts as a counterweight to the entrepreneurial focus on cures over
prevention and Canada’s “socialized” medicine, through
more centralized and rational planning, puts an increased emphasis
on public health. In most provinces, vaccinations are provided in
a more accessible and rational manner. Public health units are better
equipped. Quality public education is also more widely available
than in the U.S. 

publicly funded system does have a financial incentive to do what
really works. What works is prevention. While estimates on the issue
vary, health “experts” agree that the majority of life
expectancy improvements over the past century are the result of
public health promotion not curative medicine. At one end of the
spectrum, Laurie Garrett in the

Betrayal of Trust

2000) estimates that “86 percent of increased life expectancy
was due to decreases in infectious diseases. The same can be said
for the United States, where less than 4 percent of the total improvement
in life expectancy since the 1700s can be credited to twentieth
century advances in medical care.” Others disagree with her
strong enthusiasm for public health promotion. Nevertheless, there
is a general agreement that prevention is what works. 

sometimes hear that “an ounce of prevention is worth a pound
of cure,” which is confusing since “prevention” is
increasingly synonymous with check ups—full body CT scans,
cancer tests, etc. These technologies are meant to diagnose a disease
early so medicine can then cure it. But the essence of prevention
is really avoiding disease altogether. The problem is there’s
big money to be made selling and administering these so-called “preventive”
medical technologies and little in public health promotion. Major
companies such as General Electric and Johnson & Johnson sell
billions of dollars worth of preventive technologies that are really
nothing more than entry points into the curative medicine establishment.
(There is also evidence to suggest that many of the “preventive”
tests are of little medical use and can actually be damaging. The

National Post

reports, “half of all prostate cancers
picked up by a widely used blood test are ‘irrelevant’….
The findings suggest thousands of men could be undergoing treatments
that can leave them impotent or incontinent for a cancer that might
never have killed them.”) 

addition, doctors who are paid on a fee-for-service basis—in
other jobs, this is called piecework— profit from check ups.
So they have a financial self-interest in defining “prevention”
as a checkup or test. That’s not all. Lesley Doyal in

Political Economy of Health

(South End Press, 1981) explains,
“power and prestige in medicine are allocated to a very considerable
extent on the basis of scientific and technological innovation and
on the extent to which particular specialists [doctors] are able
to exercise their instrumental skills.… Doctors are trained
to see themselves as scientists, and, for the majority, job satisfaction
is largely derived from the scientific and technological aspects
of their work.” 

it were only a matter of the difference in profitability possibilities
between public health promotion and medical devices, or doctor’s
relationship to technology, the word “prevention” wouldn’t
be so confusing. 

health promotion, to properly combat ill health, has to confront
various entrenched corporate interests. Anti-smoking campaigns,
for instance, run afoul of big tobacco. Activists challenge food
companies’ incessant advertising of larger portions of unhealthy
foods and domination of the food market, but you’re not supposed
to talk about the link between a lack of public transit or sensible,
walkable urban planning, and obesity. Anti-cancer activists are
told “there’s no problem” with the fact that companies
release an average of two to five new chemicals into the environment
each day, with little testing for safety, or that worldwide production
of chemical substances has increased from one million tons in 1930
to 400 million tons today. Even more traditional public health promotion,
such as improved sewage, water systems, vaccine systems, education,
health inspections, and infection control—all of which require
increased social spending (taxes) and so can be unpopular with wealth-owning
classes—have to confront neoliberal capitalism. 

from public health promotion and access to curative medical care,
poverty and socio-economic status are significant determinants of
illness and life expectancy in every nation. A growing body of evidence
suggests that countries with lower levels of economic inequality
have higher life expectancies. According to the

Financial Times

“if you look for differences between countries, the relationship
between income and health largely disintegrates. Rich Americans,
for instance, are healthier on average than poor Americans, as measured
by life expectancy. But, although the U.S. is a much richer country
than, say, Greece, Americans on average have a lower life expectancy
than Greeks. 

reasons are that once a floor standard of living is attained, people
tend to be healthier when three conditions hold: they are valued
and respected by others; they feel ‘in control’ in their
work and home lives; and they enjoy a dense network of social contacts.” 

a look at Japan, Dr. Stephen Bezruchka from the University of Washington
explains: “Japanese men smoke the most of all rich countries.
Yet they are the healthiest population on the planet. It seems you
can smoke in Japan and get away with it. It’s not that smoking
is good for you, but that compared to other things, it isn’t
that bad. Smoking is much worse for you in the U.S. than it is for
the Japanese in Japan, where the gap between the rich and poor is
much less…. Similarly, it isn’t Japan’s health care
system that is responsible for its remarkable health. Anyone who
has looked at their system will tell you it isn’t much to write
home about…Japan is a caring and sharing society that looks
after everyone and that matters most for your health.” (The
Japanese only spend 43 cents for every dollar spent on health care
in the U.S., yet a Japanese woman can expect to live to the age
of 84 and men 77.2, while the U.S. average is 79.5 and 73.8.) 

impacts human health—for good or bad—is not simply the
narrowly defined curative health sector. Still it is important—for
the psychological as well as physical health of the uninsured and
to strengthen the commitment to equality—that the U.S. gains
a system of universal health coverage.  

companies, for-profit hospitals, pharmaceutical companies, and doctors—the
historical linchpin of corporate medicine—oppose universal
health insurance. They are powerful political players. According

Acumen Journal

, “since late 1999 [U.S.] health care
lobbying spending has consistently passed that of any other industry.
In 2002, that amounted to expenditures of $264 million…the health
care industry as a whole accounted for 15 percent of the $1.8 billion
in lobbying spending for 2002.” 

the battle for government health insurance will, increasingly, find
some friends in the (big) business community that worry about their
companies’ health costs and tactical alliances for universal
health insurance should be made. The lack of universal, publicly
funded, U.S. healthcare system is an international embarrassment
and, more importantly, a waste of precious human health.

Yves Engler is
a Montreal-based activist currently writing a book on student activism.