Why is healthcare so expensive in the U.S.?

Let’s begin at Lowe’s Home Improvement.

I was wandering the alleyways they call “aisles,” squeezed in on both sides by walls packed solid with stuff that made me feel like I was back in New York City, lost among the skyscrapers.

A kid wearing institutional orange approached me. His hair was neat, his face was clean and he was smiling. A very unusual looking Lowe’s employee. Looked more like one of the young missionaries who I saw frequently cruising the streets of Latin American towns.

Before I could ask him where they hide the doo-dads I was looking for, he beamed, “May I make you the best offer you’ll get all day?”

He zipped through an obviously rehearsed pitch, offering to come to my house, get a water sample, test it for free and give me the results. I knew I was missing the most important information. “Why would you do that?” I prompted him.

“Because most public water supplies have contaminants that you don’t know about. But we have water purification systems that can fix that!”

I said thanks anyway because I know a fair amount about public water supplies.

Also know enough about scams to avoid them.

If you’re wondering what this has to do with the title of this article, I promise to make the connection. Let’s begin with a quiz, answering the title’s question:

A. Because it’s the best healthcare system in the world

B. Because of greedy physicians

C. Because of greedy pharma

D. Because of greedy hospitals

E. Because that’s just the way it is

F. Other

As the TV shows say, “Lock in your answer.”

A. We assess the quality of nation’s healthcare systems by outcome measurements. We usually compare the U.S. to other wealthy industrialized countries.

As a group, these are called the Organization for Economic Co-operation and Development (OECD) countries, including mostly western European countries, Australia, Japan and Canada. I’ve gone over this in previous articles, but here’s a quick synopsis:

• Life expectancy in the U.S. is four years lower than in OECD countries.

• Maternal deaths in the U.S. are three times higher than any in the OECD (a veritable scandal!).

• Infant mortality is one and a half times higher.

And for these (and other) dismal results, we pay a staggering cost of $14,855 per person per year. In the OECD countries, where outcomes are better, the average is just $5,967 per person. (Kaiser Family Foundation, an excellent source on healthcare).

Hardly the best Healthcare in the world.

B. As for greedy physicians, while MDs make more in the U.S. than almost anywhere else, the cost for physicians’ services is just 8.6 percent of our entire healthcare budget. In Canada, it’s 12 to 14 percent. In Sweden and Netherlands, 10 to 12 percent (NIH). So, not a major contributor to our costs.

C. Regarding pharma, U.S. costs were found to be 2.78 times higher than 33 OECD countries in a 2024 RAND Healthcare study. Here’s where the real problems begin to peek up at us from the murky waters of the healthcare swamp.

In the U.S., there’s a middleman between manufacturers and your pharmacy. These pharmacy benefits managers control the list of drugs that payers, like insurance companies, may approve for payment.

Then, because these PBM’s control access to the massive markets of the payers, they negotiate the lowest possible prices for drugs from the manufacturers. Next, because PBMs process claims for drugs, they determine how much they will pay the pharmacies. Then they charge the insurance companies more than the pharmacies get paid, and keep the difference to add to their profit.

I know this is murky (all swamps are) so I’m leaving out several twisting, confusing details. But this one is important: PBMs are large monopolies — 80 percent of all prescriptions are managed by just three PBMs (Federal Trade Commission).

Result? A 2020 AARP study of 943 commonly used drugs revealed that prices set by PBMs were rising at a rate three times that of inflation. Worse, the agency administering both Medicare and MediCal saw a 26.8 percent rise in retail drug costs over the four year period of 2012 to 2016 (AMA study).

The PBMs operate inside both insurance companies and healthcare provider organizations, so they basically negotiate with themselves.

It’s a scam.

Do you know anyone who has lost their local pharmacy lately?

D. A significant number of hospitals have become corporate, for-profit institutions. By 2023, just five such corporations provided half of all hospital care in 42 states. (Families USA).

Corporate hospitals make 10 times the net income of independent hospitals. How? Studies have shown that they charged 282 percent more than Medicare allows, resulting in a $22 million profit for each corporate hospital per year.

The federal government, which administers Medicare, controls how much they will pay hospitals for Medicare patients, no matter how much the hospitals bill. But those without Medicare are often stuck with sky-high bills.

The leading source of personal bankruptcy in the U.S. is … medical bills. Rural independent hospitals — like JCF — generate the least profit.

Corporate hospitals are a scam.

E. “Just the way it is.” I have not yet met a person on Medicare who didn’t like it. It covers enough of necessary costs to make physician and hospital care affordable to those on that system.

The mechanism it uses is simple: it pays medical bills when submitted on the Medicare schedule. The government administers it at a responsibly low administrative cost between 1 and 2 percent.

However, the thing called “Medicare Advantage” is a very different beast. In spite of its name, “Medicare Advantage” (M-C Adv) is not Medicare. It is a healthcare payer system provided by private, for-profit insurance companies.

Here’s how it works:

1. Unlike traditional Medicare, it does not pay bills from the Medicare Trust Fund as they are submitted. Instead, the government gives the insurance company a year’s worth of funding for each person it enrolls, in a lump-sum out of the Medicare Trust Fund.

2. The insurance company decides which physicians, hospitals and pharmacies its enrollees may use.

3. Before your physician can order an expensive test or procedure, they must request approval from the Medicare Advantage insurance company. This is “prior authorization.”

4. The insurance company may deny such authorization.

5. If the Medicare Advantage company denies the prior authorization, it nevertheless keeps the money they were given upfront to provide care.

6. Medicare Advantage companies advertise heavily toward healthier people, those who will use fewer medical services, i.e., use less of the money the company has for the enrollee’s care.

7. Medicare Advantage companies negotiate with less expensive

(lower quality) providers than traditional Medicare for the more intensive care like cancer, nursing and home health (Center for Economic and Policy Research).

8. To make their insurance look more attractive, they offer benefits not available under traditional Medicare such as gym memberships, dental and vision care. Studies reveal that most enrollees don’t use very much dental and vision benefits, so it’s not much of a cost to the companies.

What is the impact of Medicare Advantage?

1. Health outcomes are no different from those people enrolled in traditional Medicare (KFF).

2. To maximize profits, Medicare Advantage, payers deny many prior authorizations (two million in 2021).

3. Per an AMA survey of physicians, the prior authorization process delays treatment. Eighty-percent said the delays or denials led many patients to abandon treatment and 33 perent said serious adverse events resulted.

4. Comparing Medicare Advantage to the rest of the insurance market, Medicare Advantage companies made a profit of $1,730 per enrollee in 2021; the figure for the others was $745 (CEPR).

5. The cost to taxpayers is rising. In 2011, Medicare Advantage cost the Medicare Trust Fund $124 billion. In 2025 the number was $573 billion (KFF).

6. Medicare Advantage is depleting the Medicare Trust Fund much faster than traditional Medicare costs. This causes all Medicare enrollees to pay higher premiums, even those not using Medicare Advantage.

7. If the Medicare agency could use the money wasted on profits for Medicare Advantage, it would be able to provide dental, vision and hearing to all enrollees (CEPR).

“Medicare Advantage” is a scam.

A scam against taxpayers who fund the Medicare Trust Fund.

A scam that, together with corporate hospitals’ inflated bills and the PBM scam on drugs, make us all pay more for healthcare than any other country. With inferior health results. Makes the daily scams from internet, phone or hardware stores into small potatoes.

What would be better? All the data (there is a lot) shows that the systems in other OECD countries (including Australia, the UK, Canada, Scandinavian countries, New Zealand and Italy) work well, producing better health results at less than half the cost we pay into our system.

Th is are not socialized medicine.

These are single payer systems: One entity administers the funds and private providers give the care.

In the U.S., the Medicare system, administered by the government, uses only 1 to 2 percent for administrative costs. By comparison, all other U.S. insurance company payers (including Medicare Advantage) average 12 to 18 percent for administration. And profit. In a prior article I gave you figures for the obscene benefit packages of insurance companies’ executives.

If we could eliminate the waste from these three healthcare scams (Medicare Advantage, poorly regulated corporate hospitals and PBMs) we could save billions for our Medicare Trust Fund.

Then we could build a much better healthcare system. Medicare is already up and running, popular with its enrollees and with most providers. A single payer system like Medicare For All is what we need.

What can you do?

Find people running for congress who believe in the single payer system. And vote for them.

Dr. Charles Mosher, M.D., M.P.H., was Mariposa’s county health officer from 1988-2014. Prior to his work at Mariposa County, Mosher served in the Peace Corps, worked for the state of Georgia and served for 11 years with the Merced County Health Department. He can be reached at author@greaterstory.com.