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THE TRUTH BEHIND HEALTHCARE PRICES

Infinitely Rising: The Truth Behind Exorbitant Healthcare Prices

Hannah J. Coltrane

RC 2001: Writing Across the Curriculum, Appalachian State University

Dr. Kevin Young

April 3rd, 2022

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Abstract

For several decades now, increasingly expensive healthcare costs have struck American citizens

and put many into life-changing debt. Millions of people live in fear of what may happen if their

families were to face an extreme medical situation that would put them in the hospital and have

to pay thousands in medical bills. Some are faced with paying off medical debt for their entire

lives. Numerous factors play a part in the high prices of medical services. One major one is that

companies do not provide full cost transparency. Hospitals have been exposed, showing markups

of up to 1000% on medical services. Slowly, small acts are taking place to try and counteract

this, such as a new online pharmacy with full cost transparency. Things like this will encourage

other companies to lower their prices and be transparent as well because customers will always

go to the company with the lowest prices. The use of thousands of privately owned insurance

companies in the U.S. can have some positive impacts but they do not always prove to be

beneficial when a major surgery still costs patients thousands of dollars. Some countries have

been able to implement a system that allows universal or free healthcare coverage (or both). The

U.S. could take on a similar single-payer system using the tax money in order to achieve the

same and relieve millions of Americans of their exorbitant medical bills.

Keywords: expensive healthcare, medical debt, cost transparency, markups, universal

healthcare, free healthcare, single-payer system

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Infinitely Rising: The Truth Behind Exorbitant Healthcare Prices

Rising healthcare prices have been a problem in America since the 1980s. It is one of the

largest problems for those in any healthcare profession and ultimately harms the patients seeking

this expensive care. While prices are already high, they continue to grow exponentially as time

progresses. Part of this comes from inflation in the economy, but many accounts show that

inflation is not entirely to blame for the skyrocketing prices. A big question remains on how

America can help this problem and those who cannot afford proper treatment because of it.

Cost transparency may be one of the biggest underlying factors when it comes to the

extreme prices of everything in healthcare. This includes pharmaceutical drugs, a routine

doctor’s visit, a trip to the ER for stitches, etc. Healthcare providers and hospitals fail to provide

full cost transparency to their patients and clients. Because of this, any hospital has the chance to

charge any price they desire without clients knowing how much of a markup is being placed on

these services. However, Lazarus from the Los Angeles Times reported screenshots from a

hospital computer that show “price hikes ranging from 575% to 675% being automatically

generated by the hospital’s software” (2021). This calculation is not something that companies

willingly share with their patients, as a markup this high is absurd and would cause an uproar.

Lazarus continues with numerous examples showing the original price and the markup; one

markup going up to 1000% above the original price.

In healthcare, this is likely a completely normal occurrence that is not discussed because

companies are not price transparent. Lazarus describes this as “institutionalized price gouging”

(2021). Ironically, price gouging is illegal in North Carolina according to FindLaw. Specifically,
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during the instance of an emergency and/or natural disaster is when the law takes effect (2020).

However, the government seems to have made a pass for pharmaceutical companies and

healthcare organizations to price gouge patients seeking medical care, sometimes

life-threatening. According to a source used by Lazarus, hospitals markup these goods and

services because “‘insurance companies wouldn’t give [hospitals] what [they] want’” without the

markup (2021).

With all of this in mind, it is likely that the capitalized society we currently face may play

a part in healthcare companies marking up prices to make some services extremely difficult to

pay. Among the strain of paying these bills, they also place a large financial burden on families

and individuals who already struggle monetarily. According to a year-long study with numerous

interviews with American adults, “half of all U.S. adults are concerned that a major health event

in their household could lead to bankruptcy” (Witters, 2020). For this many people to have such

a concern, it would be likely to conclude that those who do have a concern for this have

encountered a substantial medical bill in the past and know just how expensive the cost of care

is. Millions of people choose against seeking medical attention and using helpful medical

emergency services like ambulances when needed because of the consequential bill.

Insurance companies are used to help take some of the weight off of people when paying

bills. In some cases, it can truly be helpful. However, one would have to take into account those

who are uninsured. They regularly face having to pay full coverage for services. Many people do

not have enough money to get insurance which leaves them paying full prices for medical

expenses like everyday medications. The insurance system that the U.S. currently uses does not
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benefit people enough to not have to worry over the tremendous medical bills like major

surgeries that most insurance companies would not fully cover.

There has not been much done to change the situation America is currently in. The lack

of action is another driving force that allows this issue to persist. However, a few very recent

actions have taken place that may aid in this if the news about it spreads. The Trump

administration finalized a new rule that “imposes new transparency requirements on group health

plans and health insurers in the individual group markets” (Keith, 2020). While word about this

came out in 2020, it will take many years for the entirety of it to take full effect. Nonetheless,

this is a very important rule as people will be able to have more transparency on the cost of

healthcare services and compare to other healthcare facilities. Comparing services is difficult to

do when companies do not disclose that kind of information. However, now it will be possible,

and it is believed that “better access to cost information will increase competition and demand

for lower prices” (Keith, 2020).

Additionally, Mark Cuban has come out with a pharmaceutical company that is entirely

cost transparent. The drugs sold through his company, The Mark Cuban Cost Plus Drug

Company, give customers a layout of how their drugs get to be the price they are. Through this,

they show a 15% markup on the drugs to keep their company in business, and even compare

their prices to a normal pharmacy’s price (Hernandez, 2022). This is a big step for lowering drug

prices and this is because customers can now compare the costs they are currently paying for

their medications to Cuban’s company’s prices. By doing so, any customer will be able to see

just how much they are being overcharged, especially since Cuban’s website shows how much

drug companies have to pay for the drug. As of right now, Cuban’s website has about one
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hundred drugs listed, but it is likely that over time, the list will grow and become a more

universal option for consumers. This encourages other pharmacies to become price transparent

and one day lower their prices.

Drug prices have become extremely high, and many people do not know the process

behind it. Drugs go through many stages of being processed and their prices increase along the

way. With there being “no regulations governing how drugs are priced”, pharmacies have leeway

to increase prices to a point that they believe is their estimated value (Entis, 2019). Pharmacy

Benefit Managers (PBMs) play a large role in the pricing of these drugs. Unfortunately, the

current situation does not place priority on the spending and savings for patients. Instead, they do

what is best for the pharmacy as a whole. PBMs are the ones that get to negotiate pricing with

the manufacturers of the drugs. Manufacturers offer rebates on the drugs but the higher the rebate

they offer, the more they increase the listing price of the drug (Entis, 2019). Again, referring to

the capitalist society, manufacturers would rather offer a higher rebate and increase the listing

price than offer a larger discount. This is because the manufacturers make more money this way,

driving up all of the drug prices on the market.

Policy Proposal

The question of how to solve the healthcare issue in America is very heavy and entails

many different aspects. If there was something that could be done, why has no one implemented

anything thus far? Think about places like the UK and many other countries in Europe that all

have free or universal healthcare. They are able to do so because they utilize a single-payer

healthcare system. This means that there is only one party who is responsible for paying for

healthcare, the government. They do so by using the tax system (Montgomery, 2022). The U.S.
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uses this for some people through Medicaid. However, not everyone uses this as most people use

privately owned insurance companies. In other countries like Canada, they provide universal

coverage using a single-payer system. This means that the government is the only party paying

(using tax money) and every single person in the country is insured (Montgomery, 2022).

A policy like this in America would take away the problem that millions of Americans

are left uninsured and would make it so that there would no longer be medical bills for patients.

The downside is the possibility of higher taxes. However, when thinking about the amount of

money one spends in a lifetime on medical bills, prescriptions, doctor’s visits, etc., the extra tax

dollar might just be worth it. Many go into bankruptcy or extreme debt from paying expensive,

overpriced medical bills. With a universal single-payer system, it could solve this problem.

It would be difficult to convert America to a single-payer system with what we currently

use. There are numerous groups of people and companies that would not be positively impacted

by this. These people may include doctors whose salaries could possibly get cut (Kroeger, 2018).

However, over time it would become easier to adapt to the new system and figure out every

small detail. A gradual movement into this kind of system may also help ease into such an abrupt

and different change. Especially since the current system is something that the U.S. has been

dealing with for decades.

Overall, the healthcare crisis of rising costs and subsequential citizen debt is an

increasingly large problem in America. Healthcare organizations and pharmaceutical companies

take advantage of the fact that they are not required to be fully transparent about their prices to

their customers. The Price Transparency Final Rule will help to solve this problem, which brings

Americans one step closer to being able to decrease the prices that they pay for these services.
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Additionally, a universal single-payer system would greatly help the issue of expensive

healthcare by putting tax money toward a government-funded payment system. This way, all

citizens are covered and do not have extreme medical bills to put them in debt and fear

bankruptcy.
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References

Entis, L. (2019, April 9). Why does medicine cost so much? here's how drug prices are set. Time.

Retrieved March 23, 2022, from https://time.com/5564547/drug-prices-medicine/

Hernandez, J. (2022, January 24). Billionaire Mark Cuban launches online pharmacy aimed at

lowering generic drug prices. NPR. Retrieved March 23, 2022, from

https://www.npr.org/2022/01/24/1075344246/mark-cuban-pharmacy

Keith, K. (2020, November 1). Trump administration finalizes transparency rule for Health

Insurers: Health Affairs Forefront. Health Affairs. Retrieved March 23, 2022, from

https://www.healthaffairs.org/do/10.1377/forefront.20201101.662872/full/

Kroeger, K. (2018, September 27). Why can European countries afford universal health care but

not the U.S.? Medium. Retrieved March 23, 2022, from

https://kentkroeger.medium.com/why-can-european-countries-afford-universal-health-care-

and-the-u-s-cant-966da2358e20

Lazarus, D. (2021, December 10). Column: Leaked SoCal Hospital Records reveal huge,

automated markups for Healthcare. Los Angeles Times. Retrieved March 23, 2022, from

https://www.latimes.com/business/story/2021-12-10/column-healthcare-billing-markups
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Montgomery, K. (2022, March 12). Difference between universal coverage and a single-payer

system. Verywell Health. Retrieved March 23, 2022, from

https://www.verywellhealth.com/difference-between-universal-coverage-and-single-payer-

system-1738546

Price gouging laws by State. Findlaw. (2020, March 24). Retrieved March 23, 2022, from

https://www.findlaw.com/consumer/consumer-transactions/price-gouging-laws-by-state.ht

ml

Witters, D. (2021, November 20). 50% in U.S. fear bankruptcy due to major health event.

Gallup.com. Retrieved March 23, 2022, from

https://news.gallup.com/poll/317948/fear-bankruptcy-due-major-health-event.aspx