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Healthcare Companies Are Fleecing Americans…Here’S How

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#1 GrumpyOldGuy

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Posted 02 June 2016 - 11:37 PM

Healthcare is a huge expense for Americans and is growing.   The numbers confirm it.  In 2015:

- Healthcare spending grew by 5.3% to $3.2 trillion.
- Healthcare accounted for 17.5% of GDP .
- Healthcare expenses were $10,000 for every man, woman, child.

 

There are any number of factors that increase healthcare costs.  A few are legitimate, but many are policies, strategies, and business practices developed by the healthcare and insurance industries to create huge profits at the expense of consumers and patients.  The healthcare market has been significantly manipulated and distorted in favor of the industry.  Government at its best has been complacent, and at its worst has aided and abetted.

A variety of seemingly unrelated things have contributed:

1)  For years Big Pharma has been running a program called “Pay to Delay”.  When a drug patent expires it becomes legal for generic drug makers to produce and sell the drug in competition with the company that held the patent.  The company approaches the generic makers and offers them large payouts to NOT manufacture the drug.  Payments often run in the $10 million range.  Generic manufacturers agree, walk out with a big check for doing nothing and the company continues to sell at very high prices, and even increases the price to cover the payout.   Every year, bills are introduced in Congress to make this practice illegal, but they always seem to die in committee.  Healthcare lobbyists are hard at work.

2) The healthcare industry spends more on government lobbying than any other industry.  $230M in 2015.

3) Buried in every healthcare agreement or consent form you fill out is a “Forced Arbitration” clause.  If something goes wrong, you’re prohibited from filing a lawsuit or joining a class action suit.  For any grievance, you must go to arbitration where the provider picks, and pays for, the arbitrator.  The arbitrator never rules against the provider or he’ll never get hired again.  He always rules against the patient.   This strategy is designed to reduce litigation costs when things go wrong in the operating room or doctor’s office.  They win, you lose.   And did you ever wonder why ads for drugs always have endless lists of “side effects”?  It gives the companies grounds to deny arbitration, because “you were warned”.  They win, you double-lose.

4) Many hospitals are operated as non-profits.  They pay no taxes.  Yet, they make substantial profit.  Examples:

 

Hospital                                               Operating Profit (2013)
Univ of Pittsburgh Medical Center       $769,700,054
Cleveland Clinic                                   $572,298,875
Barnes Jewish Hospital (St Louis)       $489,696,091
New York Presbyterian                        $383,477,548

The list is long…

These non-profits avoid scrutiny from the IRS by “affiliating” themselves with a religious organization or a public education institution.  And what do they do with all these profits?  Mostly pay top management.  For the four hospitals shown above, the average top level management salary was $3,807,000 per year.

5) The Medicare system is prohibited by Congress from negotiating drug prices with the drug makers.  Medicare must pay whatever prices the drug makers set.  In what industry is the largest customer forbidden to negotiate prices?  Drug company lobbyists win again.

6) The passage of the Affordable Care Act (ACA or “Obamacare”) hasn’t helped.  The ACA was mostly authored by the healthcare and insurance industries.  Nowhere in the Act do the words “cost control”, “cost containment”, “cost management”, or “cost reduction” appear.  Nowhere.  Also, the Act requires everyone in the country to become customers for the insurance industry.  It’s a corporate dream…legislated customers.

7) Over the past 10 years, Wall St has invested $50B in healthcare industry stocks.  Investors now set the strategy for the industry.  In 2010, JP Morgan sent a letter to many large medical companies stating they should “exit research and start creating value”.  The bank recommended that drug companies buy patents for popular drugs and then start increasing prices…significantly.  Big Pharma listened and it’s exactly what they’re doing.  A few examples:

Drug Company          Patent Purchased       Price Increase 2011 to 2015
Valeant                      Nitropress                   410%
AbbVie                       Humira                       130%
Amgen                       Enbrel                         300%
Pfizer                         Lyrica                          112%
AstraZeneca              Symbicourt                 159%
Eli Lilly                       Cialis                           300%

This explains why the drug industry has some of the highest profit margins.  In Q1 of 2016 AbbVie posted a net profit of 23%.  Amgen showed 34%.  Biogen showed 36%.  Gilead Sciences showed 46%.  Compare to Google at 21% and Walmart at 3.5%.

8) The healthcare industry has a very clever scheme to protect their image.  They purchase large amounts of ad space with main stream media. ($8.7B in 2015)  On the May 30th NBC Nightly News with Lester Holt, there were 15 ad spots, 10 of them (67%) were for some healthcare product of service.  Then, because the media doesn’t want to jeopardize the ad revenue stream, they never run stories critical of the healthcare industry.  Very cozy arrangement.

Any one of these items taken by itself might not raise too many eyebrows.  But when you put it all together, the picture of a calculated strategy appears.  They’re looking for any possible way to take your money.

 

So, what can you do?  First stay healthy.  Try not to become a customer to the industry.  Second, write your congressman.  Third, there may be a ballot measure this November that would require Medi-Cal to pay no more for drugs than the Dept of Veterans Affairs, who has negotiated much lower prices.  Vote for it.  You know this ballot measure is good for patients when you learn that Big Pharma has pledged $70M to fight it.

 

 






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