American Healthcare Cost Drivers: Explaining the Technology Money Pit

Let’s begin with a simple illustration that probably resembles what you have encountered if you’ve entered a medical office anywhere in the USA in recent years. That is, if you are lucky enough to have health insurance. But then again, if you don’t, you probably haven’t entered any medical offices.


The receptionist probably handed you a clipboard asking for your basic information including family health history and of course your insurance details. In recent years, I’ve been handed an electronic tablet instead of a clipboard. Interestingly (to me, at least) on my most recent rounds the tablets have vanished, and the clipboards have returned. Something rotten in the state of technology, perhaps?


One way or another, all that information will become part of an electronic record-keeping system. And the financial part will likely be interlinked with the data systems of your health insurer.


At my physician’s office, the practice accepts a bewildering variety of health plans. These include several local, state, and federal systems. Medicare, Tenncare (Medicaid), different plans for Knoxville City employees, County employees, University of Tennessee employees, of which I am one. As it turns out, because the University of Tennessee is part of the State government, I actually have the same coverage as the governor and legislators. That’s how I know I have a terrific plan―the Republicans in charge of our Tennessee legislature may do a lousy job governing the State, but you can bet your bottom dollar they’ve taken excellent care of themselves.


But wait, there’s more! Many large employers allow their employees to choose among a smorgasbord of different plans. Different deductibles, allowable services, service companies, on and on. But take a step back from all that and ask yourself the question, what does any of it have to do with my own health care requirements? I mean, suppose your appendix bursts, or you have a heart attack, or it turns out you have diabetes. Don’t you just want to go to a doctor or hospital and have the problem addressed? Are you going to say, gee, I have an agonizing pain in my side, so let me figure out whether I need to go to this hospital system over here, or that one over there? That’s the right way to deliver and receive healthcare?


Supposedly this is a great free market opportunity for me. Why, I can decide which plan will best serve me. But that turns out to be a con man’s pipe dream. Consider: in my service area we have a few major hospital providers, including Tennova and the University of Tennessee Med Center. Every October, I can decide which of the several providers will best serve my needs. But how exactly do I figure out whether I might need a given medical treatment in May that previous October? Most people can’t predict when they might have a serious accident or come down with a grave illness. Guess wrong, and you get the inferior service, right? That’s the American way!


Medical profiteers have even introduced all sorts of complexity into Medicare. Do you have parts A, B, C, D or F–I give the whole system an F. Do you have standard Medicare or Medicare Advantage? Getting back to all those plans, it turns out that the necessity for dealing with it all has pretty much driven single-physician offices and smaller practices out of business. You might recall that that was the impetus for many a healthcare slogan: “You like your doctor? You can keep your doctor!” Except that most people can’t any longer. The doctors have thrown in the towel and surrendered their businesses to larger and larger aggregates of providers who can afford the technology required to process these multitudes of insurance forms and claims. It’s gotten to the point where my physician’s group office doesn’t even try to tell me what my bill is when I come in for service. They take my information, send it off for processing, and a few weeks later I get a bill. I’m supposed to be able to figure out whether the bill is correct, but I gave up on that years ago.


The insurance companies employ thousands of clerks, claims adjusters, and the like whose primary purpose has nothing to do with getting you healthcare. They are there to see if they can save the company money by figuring out a way to force you to pay more or outright deny your coverage. I’ve written elsewhere about the multi-year struggle we had with our insurer to get them to cover an injury and surgery for our son who sustained that injury while away for the summer. But that’s peanuts compared to what happens daily to others in this fair land of ours.


I introduced this topic because of technology, and here is how that fits in. Because a patient who enters a practice might have insurance provided by a dozen different providers each with their own bureaucratic requirements, physicians have to buy into expensive systems to determine who gets billed for what. Hospitals require those same systems, as well as their own for amping up their bills. This is how a one-cent aspirin gets charged at $10 or more on your hospital bill. The aspirin is only worth that one cent, but the hospital figures in a charge for their pharmacist to dispense the aspirin, someone to cart the aspirin up to your room, the orderly or nurse who serves it up to you, and the labor it takes to track that aspirin through each stage of the process. And all of that is tracked by huge, costly billing systems which are completely unnecessary in most other countries of the world.


All this is a major part of the cost drivers of American healthcare, and none of it exists in most other places. If you’re Canadian and come down with appendicitis, you go to the local hospital, they accept the exactly one form of health insurance they have, and they attend to your issue. Live in Alberta but have the problem in Montreal? No problem, it’s all covered! The same is true in Finland, Switzerland, Norway, Scotland, Luxembourg, France, Germany, Japan, Korea, Australia, New Zealand. Those are just a few of the countries who spend far less than we do and show better outcomes.


Now this is a very important point: as you read the back-and-forth of the political games that are unfolding and will continue to unfold through the next election (and beyond), you will hear the frequent and persistent claim that the forms of socialized medicine being proposed will somehow increase costs. This claim is predicated on the false premise that there are no cost savings to be obtained from simplifying the process. Therefore you must keep in mind that what I am describing here—enormous costs associated with tracking and billing the stages of healthcare—can be eliminated under many of those proposals. I’m not claiming that we can save all the funds currently being invested in healthcare tracking. Some of that is necessary for the actual needs of providing healthcare. But the billing component is unnecessary, and all the costs associated with billing can be eliminated under most of the proposals we are discussing. Don’t get me wrong—technology is great. Medical technology can save lives—I know because I was the third person in the world to have a colonoscopy back in 1971. But you know what? I don’t think I ever met anyone whose life was saved by a billing system.