As a practicing physician who has worked in the health care field in five different countries, I have a pretty solid idea of why health care in the U.S. is so problematic. In the U.S., many entities related to health care are owned by the same companies. This is a concept called vertical integration, where one business controls every stage of the supply chain. To understand this, imagine the car industry. Suppose one company owned the factory that manufactures car parts. That same company also owns the dealership that sells the cars. They also own the bank that provides the auto loans. They own the insurance company that sells the car insurance. They own the repair shops that fix the cars. And they own the suppliers that provide the replacement parts.
If this were the case, how expensive do you think cars and car insurance would be? A company that both sets the price and receives the payment would have no incentive to keep those prices low. This is increasingly what is happening in major parts of U.S. health care.
For example, my health insurance is UnitedHealthcare, which is owned by UnitedHealth Group. They operate a highly integrated model:
- A pharmacy benefit manager (PBM), which acts as a middleman for prescription drugs, called OptumRx
- A group purchasing organization (GPO) called Emisar
- A pharmaceutical commercialization company called Nuvaila
- An advanced therapy distribution and pharmacy business called Optum Frontier Therapies
- A pharmacy called Optum Specialty Pharmacy
- A retail pharmacy called Genoa Healthcare
- Health care providers through Optum
This level of ownership is not unique to UnitedHealthcare. Other large health care companies, including Aetna, Cigna, and Anthem, also use vertically integrated models. Why one company is allowed to own businesses at every step of the process is beyond me.
An upcoming problem
Another development that is adding yet another layer to this system is third-party litigation funding. This is when investors, sometimes including private equity firms and other investment funds, provide money to finance lawsuits. In return, those investors receive a portion of the financial award if the lawsuit is successful. Owning the insurance company, the PBM, the GPO, the drug manufacturer, the distribution centers, the pharmacies, and the doctors’ offices is apparently not enough. This completely new entity has now been added, creating yet another financial incentive connected to health care.
One result that I am seeing is increasing insurance costs for health care providers. In some cases, malpractice insurance has already become so expensive that physicians stop practicing. Many health care providers cannot afford the coverage. Rising liability costs also discourage new physicians from entering the field. We already have a shortage of health care providers, and policies that push doctors out of practice only make it harder for patients to get care.
Private equity firms, investment funds, and financial groups now fund lawsuits in the same way they would fund other business ventures. When this intersects with health care, it creates another financial layer in the system. In addition to insurers, pharmacy benefit managers, manufacturers, distributors, and providers, there can now also be investors whose financial return depends on the outcome of medical lawsuits. This means that lawsuits themselves can become financial assets that outside companies invest in. Litigation funding is now yet another business connected to health care where these companies can generate revenue.
What is not a solution
Having worked in many different countries has given me a unique perspective. First, I will say that the idea of a government-run health insurance system for everyone might sound appealing. However, I have worked in countries that use this type of system, and it has its own problems. Imagine your doctor’s office being run like the DMV. Government-run organizations are often slow, filled with bureaucracy, and difficult to move forward efficiently. The last time I went to the DMV, I had an appointment and I was still there for three and a half hours. I have patients who live in countries with socialized medicine who actually fly to the U.S. for their appointments with me. Somehow, it is actually quicker for them to be seen that way.
In many of these countries where socialized medicine exists, people who have the financial means often purchase private insurance on top of the government system, if that is available. They do this because the government-run health care system does not always provide the level of access or quality of care they are looking for. Think about it this way. If you are arrested, the government provides a public defender for free. But if you had the money, would you go with the public defender or hire your own private attorney?
To be clear, universal health care simply means that everyone in the country has access to health care. By that strict definition, universal health care is a good thing. However, the term is often erroneously used to imply a health care system that is run by the government. The more accurate term for a government-run health care system is socialized medicine. To be clear, I am not arguing against universal health care. I am arguing against socialized medicine. I make this argument having worked in socialized medicine in the U.K. and in universal health care in Australia and Japan. The fact that people argue for or against the two without knowing there is a huge difference is concerning but a topic for another time.
A potential solution
I do not like to complain about problems without offering at least some ideas about what might improve them. My proposed idea would be to separate each entity within the health care system. Let doctors run doctors’ offices. Let pharmacists run pharmacies. Let insurance companies stay within their own lane. As for PBMs, we should ask whether they are actually necessary.
And for companies that fund litigation against health care providers, what benefit to society are they providing? People already sue health care providers all the time. This simply encourages even more litigation. The U.S. is already one of the most litigious countries in the world. Eliminate the middlemen, and the entities that remain should be run by the professionals who actually understand how those parts of the system work. Finally, universal health care would be nice, but perhaps not the government-run kind.
Stephanie Waggel is a physician and founder of Improve Medical Culture. She can be reached on X @imedicalculture, Facebook, and Instagram.
At her clinic, Improve Life PLLC, she helps adolescents, young adults, and women treat anxiety, depression, relationship problems, stress, OCD, ADHD, and self-esteem issues. She also founded a concierge medical practice for mothers at Moms Physician, which provides personalized care and support for mothers navigating the physical and mental health challenges of pregnancy, postpartum life, and parenthood.
Dr. Waggel is also a mother, cancer survivor, author, marathon runner, motivational speaker, and teacher. She has lived in the Washington, DC area for over fifteen years and enjoys serving the community. She has worked in health care in five countries and is overall very familiar with many cultures.
Dr. Waggel works to decrease the stigma of mental illness that is present in our society. She was filmed for the movie Do No Harm, which focuses on and discusses abuse in the medical education system, and has been asked to speak for various organizations such as Public Citizen, Care2, and One Story. Her story was chronicled in the KevinMD articles, “Hospital fires doctor for having cancer” and “The doctor fired for having cancer speaks up.”
She is a member of Postpartum Support International, with a focus on perinatal mental health, and offers internship programs for high school students, college students, and medical students.
