You might not easily recognize the name, Uwe Reinhardt. He was not an actor, politician, or an exceptional dancer displaying his moves on “Dancing with the Stars.” Nor was he a novelist who wrote fiction. However, he often did write, but he used his profound economic and healthcare knowledge to educate Americans about a persistent issue that refuses to go away in this country – unmitigated pricing in U.S. healthcare.
“Price gouging” is a term used when a seller spikes the prices of goods, services or commodities to a level much higher than is considered reasonable or fair, and is considered exploitative, potentially to an unethical extent.
- $47,600 for a $400 MRI of the lower back
- $238 for a $15 vial of eyedrops (ofloxacin)
- $89,000 for a $1,500 for a steroid (deflazacort) to treat children with Duchenne muscular dystrophy
- $12,600 for a $150 emergency department visit for a similar condition
- $382,000 for a $54,000 air ambulance ride (from Ixtapa, Mexico to Chicago)
The reason pricing is called “healthcare” and not “price gouging” is quite simple – it may be morally and ethically wrong, but it’s currently not illegal. The problem with healthcare price gouging is that it hurts people, especially when they are in vulnerable situations. In the U.S. system of healthcare, we live in the ‘Wild West’ of anything goes – and does it ever! Compared to other advanced countries, the U.S. has the most expensive health system in the world, with prices at least twice as high for healthcare goods, drugs and services.
In 2003, Princeton economist Uwe Reinhardt, a prolific health policy expert, and his colleagues, penned an illuminating article in the journal, Health Affairs, “It’s the Prices, Stupid.” The article disputed the insurance and medical provider arguments that higher health usage in the U.S. caused costs to be higher than they should be. Instead, the authors clarified that higher spending is due mostly to higher prices for healthcare goods and services in the U.S.
Two years after his death in 2017, Reinhardt’s wife released a book, “Priced Out – The Economic and Ethical Costs of American Health Care,” about her husband’s compilations of today’s U.S. healthcare system – why it costs so much more and delivers so much less when compared to other advanced countries.
Reinhardt himself was planning on releasing this work in a forthcoming book, but he unfortunately died before its eventual release and publication. The crux of the healthcare problem, Reinhardt wrote, “is not one of economics but of social ethics.” He was often quoted saying, “Our health system is in danger of pricing kindness out of our souls.”
Reinhardt unabashedly spoke and wrote that the U.S. health system was carefully structured to enable legislation – triggered by special interest groups – to allow the supply side of the health care sector to extract enormous sums of money from the rest of society.
By having this control, the medical establishment argued that higher prices were necessary to pay for the development of new life-changing drugs, beautiful new medical buildings, and a host of other ‘necessary’ edifices of grandeur baked into the U.S. healthcare sector. Keeping the system opaque allowed those in charge to control the narrative of higher prices.
If public winds swayed to question these outrageous prices, fingers by the medical establishment were usually pointing in the direction of patients being too unhealthy and consequently requiring more services and procedures. Another culprit on why prices are high – unmitigated governmental regulation. Additionally, “because Americans are so litigious,” defensive medicine was a convenient approach to combat “unnecessary” lawsuits, citing that “tort reform will help fix this injustice.” Unchallenged pricing behaviors come in many flavors of reasons.
Reinhardt was right. This problem persists to this day – and unfortunately, will continue for a long time to come.
To stay abreast of healthcare-related issues, we invite you to subscribe to this blog.