OHSU President Praises High Cost of U.S. Healthcare System

The United States spends -- or wastes, as some might say -- 17.1 percent of its gross domestic product on healthcare while Germany and Denmark spend only 11 percent. Japan spends 10 percent. Norway and Australia make do at 9 percent.

In per capita terms, U.S. spending is even higher than other countries. The U.S. spends $9,100 per person on healthcare while Japan spends $3,700.

For all its excessive spending, all of those foreign countries have far better health outcomes than the United States. Americans have the lowest life-expectancy and the highest infant-mortality rate of any of the first-world countries analyzed in the annual Commonwealth Fund report.

Compared to Japan, Americans are more than three times as likely to die of heart disease and American babies are three times as likely to die in infancy.

But to hear Oregon Health & Science University President Dr. Joe Robertson tell it -- it’s a good thing that Americans waste so much money on the country’s mediocre health system.

“Healthcare is 17 percent of GDP and this economy would falter if it wasn’t,” Robertson boasted to a crowd of health insurance brokers as well as health insurance and hospital executives at a conference put on by the Portland Association of Health Underwriters.

Robertson made his point by arguing that unlike other economic sectors, the healthcare industry is planning to hire more and more people, creating jobs even as it sponges more money from the rest of the economy.

The OHSU president openly questioned whether lowering the growth in healthcare costs to 3.4 percent -- the rate which Oregon’s Medicaid system agreed to be capped -- was even an admirable goal.

According to the Commonwealth Fund, the high cost of healthcare in America “has far-reaching consequences in the U.S. economy, contributing to wage stagnation, personal bankruptcy, and budget deficits, and creating a competitive disadvantage relative to other nations.”

But in the rarefied bubble of the healthcare industry, Robertson could speak without irony, and with little controversy attached. As Upton Sinclair wrote, “It is difficult to get a man to understand something if his salary depends upon him not understanding it.”

Oregon Health & Science University is fat with cash, with a 5 percent tax-free profit margin on a revenue of $2 billion. That roughly $100 million profit does not include the $1.4 million salary and bonuses for Robertson, which like the high six-figure salaries paid out to the other OHSU executives, is treated as a cost of doing business.

Oregon has the second-most expensive non-profit hospitals in the country, behind only California. Kaiser Health Facts reported that the average daily cost of a hospital stay at Oregon non-profits is $3,381 -- more than twice the cost of a hospital stay in Iowa and about $1,000 more than Illinois or New York.

The insurance mandates and Medicaid expansion from the Affordable Care Act bailed out the hospitals from the obligation of charity care, and left them with enormous operating margins, money that they have largely kept for themselves. As individual health insurance rates at Moda Health and Oregon’s Health Co-Op are proposed to soar as much as 32.3 percent for next year, Sacred Heart Medical Center in Springfield raked in a $171 million surplus.

OHSU benefits from its ownership stake in the state’s largest coordinated care organization, Health Share of Oregon, which indubitably allows OHSU to retain more favorable Medicaid rates for both hospital services and its network of clinics.

In turn, the Oregon Health Authority under Director Lynne Saxton has heavily favored Health Share over its competitor, giving it 20 percent higher rates than FamilyCare for adults who gained coverage from the Affordable Care Act, without showing evidence that Health Share’s members in this category are any riskier to insure than FamilyCare’s.

Drugs the Problem, Not Us

Robertson and other healthcare executives, as well as Saxton did point their fingers at the pharmaceutical industry for problematic price increases -- a sleight of hand intended to misdirect attention from the soaring profits at the hospital systems, the real driver of healthcare costs.

Pharmaceutical costs are said to be rising as much as 10 percent, but pharmaceuticals account for only 10 percent of total medical costs. A 10 percent rise in pharmaceutical costs equates to only a 1 percent gain in total healthcare costs, not the 6 to 7 percent that’s typically been occurring.

Saxton said that the state agency had sent delegates to Washington, D.C., this week to lobby for a new Medicaid waiver that allows the state to carve out specialty drug costs from the 3.4 percent growth rate, arguing they have no control over their costs.

If successful, this cop-out would effectively help CCOs and their hospital partners assume the full 3.4 percent growth, without siphoning off their share of the annual increase to drugs for Hepatitis C, cancer or multiple sclerosis, even as these miracle drugs reduce the need for other healthcare expenses.

The state has also argued that it deserves this carve-out because the coordinated care system has saved the federal government so much money -- $1.7 billion, compared to the inflation in spending at other states that don’t have the 3.4 percent cap on growth. But that money does not include the $1.9 billion the federal government front-loaded into Oregon’s healthcare transformation. In fact, the Oregon experiment has cost the federal government $200 million.

(Image Source: CheapFullCoverageAutoInsurance.com)