Big Profits in Caring for the Elderly

The United States spends an average of about $13,000 per person every year on health care. No other country comes close to spending so much:

What do Americans get for all this spending? Our health care system does tend to produce more innovation than many others. U.S. companies developed some of the first Covid vaccines, for example. But much of the spending does little to improve people’s lives. Despite all our spending, the U.S. has the lowest life expectancy of any high-income country:

Twenty years ago, a group of researchers — Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi Petrosyan — published an academic paper that tried to solve the mystery. The title told the story: “It’s the prices, stupid.”

The main reason that U.S. health spending is so high is not that Americans are sicker than people elsewhere or are heavier users of medical care (although both those factors play a role). The main reason is that almost every form of care in the U.S. costs more: doctor’s visits, hospital stays, drug prescriptions, surgeries and more. The American health care system maximizes the profits of health care companies at the expense of families’ budgets.

Dying broke

You can find a poignant example in a series that The Times and KFF Health News (a nonprofit) have been publishing in recent weeks. It’s called Dying Broke, and it examines the long-term care industry. One major part of the industry is known as assisted living, a name for facilities that are home to about 850,000 older Americans who need help with daily activities — like getting dressed or taking medications — but who don’t need constant nursing care.

These facilities can be highly profitable. “Half of operators in the business of assisted living earn returns of 20 percent or more than it costs to run the sites, an industry survey shows,” Jordan Rau, a reporter for KFF, writes. “That is far higher than the money made in most other health sectors.”

Many facilities, Jordan explains, “charge $5,000 a month or more and then layer on extra fees at every step. Residents’ bills and price lists from a dozen facilities offer a glimpse of the charges: $12 for a blood pressure check; $50 per injection (more for insulin); $93 a month to order medications from a pharmacy not used by the facility; $315 a month for daily help with an inhaler.”

Other countries tend to hold down health care costs through regulation. Their government officials set prices that are high enough for health care providers to operate yet significantly lower than in the U.S. Policymakers here, by contrast, allow the market to operate more freely. But competition often fails to bring down prices because the health care sector is so complex, with opaque pricing and bureaucratic insurance plans.

It’s worth pointing out that the U.S. didn’t always have such high health care prices relative to other countries. The gap began to widen in the 1980s, as Austin Frakt, a health economist at Boston University, has pointed out. That decade also happens to be when the U.S. began moving more toward a laissez-faire economy.

(Related: A 2018 investigation in The Washington Post found that care deteriorated at a chain of nursing homes after the Carlyle Group, a private equity firm, took it over.)

Cheaper at home

The problems with long-term care in the U.S. involve much more than high prices, as Jordan and The Times’s Reed Abelson explain in the Dying Broke series. They also stem from our country’s aging population; slow income growth in recent decades that has left families without much savings; a broken long-term insurance market; a lack of subsidies to help Americans care for aging relatives at home (which is much cheaper than institutional care); and a patchwork, inefficient health sector.

Many other countries are also aging and struggling with long-term care. But the problems are worse in the U.S.

For more: At an online event tomorrow at noon Eastern, Reed and Jordan will talk with people who are caring for their parents.

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