Why Medical Expenses Are Completely Overpriced

"There is a conspiracy of her prophets in her midst like a roaring lion tearing the prey. They have devoured lives; they have taken treasure and precious things; they have made many widows in the midst of her.
Her priests have done violence to My Law and have profaned My holy things; they have made no distinction between the holy and the common, and they have not taught the difference between the unclean and the clean; and they have closed their eyes from My Sabbaths, and I am defiled among them.
Her leaders within her are like wolves tearing the prey, by shedding blood and destroying lives in order to make dishonest profit.
And her prophets have coated with whitewash for them, seeing false visions and divining lies for them, saying, ‘This is what the Lord God says,’ when the Lord has not spoken.
The people of the land have practiced extortion and committed robbery, and they have oppressed the poor and needy, and have oppressed the stranger without justice."
---Ezekiel 22:25-29


GE Medical Technologies Inc. is the primary worldwide manufacturer of high tech healthcare equipment. The company holds the patent rights on MRI machines, CAT scan equipment, X-ray equipment, and dental machinery, and hospital lab tech equipment. In 2023, GE Medical earned $5.2 Billion USD in revenues and reported a bright outlook for the future.

During their 4th quarter report to shareholders, the company's CFO announced: "I’m extremely proud of our team’s execution in 2023 and our focus on patients and customers as well as the progress we’ve made as a standalone company. We achieved or exceeded our financial and operational objectives we laid out at the beginning of the year." In truth, GE Medical has little or no regard for patients. The company is essentially a monopoly. They engage in racketeering and routinely bribe bureaucrats and public officials to maintain their monopoly status.


MONEY LENDERS HAVE POISONED THE MARKET
Aside from a few loss leaders, every product GE Medical manufactures is grossly over-priced. Their MRI machines for example cost less than $2,500 USD to manufacture. On average, GE Medical sells those machines to hospitals, HMOs , and specialty care facilities for over $500,000 GBP each. Their executives mark the prices up over 20000% because they can. They have politicians and bureaucrats are in their back pockets, and their senior executives collude with insurance industry executives.

The healthcare industry is a close-knit community. GE Medical's chairman sits on the Board of Directors of fourteen different companies. Two of those are medical supply companies and three are insurance companies (Aetna, Blue Cross Blue Shield, and United Healthcare). The company's CEO sits on the board of Pfizer Pharmaceuticals. Both are invested in Aetna, Blue Cross Blue Shield, and United Healthcare. So too are their CFO, their top three sales executives, and their head of research.

Healthcare is the 7th largest industry worldwide in terms of revenues (over $9.1 Billion USD ) and the largest in terms of assets. This wasn't always the case. Fifty years ago, healthcare ranked as the 27th largest industry. In 1971, analysts at Brown Brothers Harriman recognized a slow in population growth in Western industrialized nations and forecast the growth in healthcare expenditures amongst geriatrics. Based on their extrapolations, Brown Brothers Harriman's hedge fund managers began pouring money into insurance companies. Other firms followed suit.

For all intents and purposes, insurance companies are hedge funds. They offer protection against catastrophe and predict the likelihood of catastrophe. They collect premiums from customers, invest those premiums in stocks, bonds, commodities, and futures and pay out a fraction of what they collect.

Over the past fifty years, healthcare has become the most sophisticated insurance product on the market. Insurance companies that specialize in healthcare gather enormous amounts of data on their customers and predict the likelihood of catastrophe for each. Within Western industrialized nations, their executives have deliberately fixed prices within the market to bleed the median household income just below the median household expense threshold. They do this to force consumers into debt.

Nine of the ten largest healthcare insurers are owned by seven of the world's largest banks. Morgan Stanley owns Kaiser Permanente, Anthem is owned by Citigroup, HCSC is owned by Bank of America, UnitedHealth is owned by Barclays, Centene Corp is owned by Wells Fargo, Aetna is owned by Solomon Partners, Guidewell is owned by Goldman Sachs, Highmark is owned by J.P. Morgan, and Humana is owned by RBC. Each of the last ten years, each of these insurers has churned out record profits. Each insurer has also more than doubled premiums over that span.

These same banks have profited from consolidation they themselves have forced within the industry. Each firm manages multiple legal defense funds that back trial attorneys that specialize in injury accidents and malpractice suits. The legal defense funds used to back injury cases are a specialty class of hedge fund known as Fixed Index Price Floats that offer guaranteed yields of at least 11%. The banks target small to medium businesses that fit their portfolios with the cases they back. These types of cases have increased by more than 400% over the last quarter century.

Malpractice suits have increased at a similar rate over the same time period. This increase has been driven by banking pressures. In a push to maximize profits, institutional investors have forced hostile takeovers throughout the industry. Fifty years ago, more than three quarters licensed physicians within Western industrialized nations were self-employed. Today, less a tenth of all physicians own their own practice.

Corporatization within the healthcare industry has been detrimental for patients. Adjusted for inflation, prices have risen tenfold over the past past fifty years. At the same time the level of care has deteriorated. These trends are expected to continue as the industry continues to consolidate.

DELIBERATE PRICE GOUGING
GE Medical's MRI machine is a glaring example of the price gouging that exists throughout the healthcare industry today. The parts and materials used to manufacture their most expensive machines cost less than $1,100 USD to manufacture. The frame is made of fiberglass poly resin, the load bearings are steel, the seat is made of PVC, the scanning equipment consists of infrared sensors, and the circuitry is comparable to an IBM hard drive.

With the exception of the circuit boards, GE Medical's MRI machines are factory assembled and require no more than eight man-hours to complete. The machines have seven circuit boards and a skilled worker can effectively hand-assemble a full set within a single day. The total labor costs required to assemble a machine are less than $700 USD. This includes administrative expenses and worker's benefits.

In 2001, GE Medical's Executive Steering Committee challenged engineers to "redesign the appearance" of their MRI machines to make them "appear futuristic". Committee members believed the change in design would "confound" customers and that they would be willing to "spend more than they were worth." Their Business Development Team spent that afternoon developing a "pitch plan" that included bribes, kickbacks, and untraceable gifts.

In 2007, GE Capital's Healthcare Finance Team unveiled the new design to healthcare executives and secondary suppliers during trade shows and industry conferences. To secure contracts, they even supplied prostitutes and narcotics to a handful of buyers.

In terms of bribes, kickbacks, and illegal activities GE Medical isn't alone. Most pharmaceutical companies employ the same tactics. The same is true with a handful of surgical suppliers including McKesson.


HEALTHCARE PROVIDERS ALSO INFLATE COSTS
On average, GE Medical has manufactured and sold 1000 MRI machines each of the last seven years. Buyers include hospitals, specialty care facilities, HMOs, and a handful of secondary suppliers that cater to the healthcare industry. GE Medical warranties their machines for seven full years.
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A typical specialty care facility performs three MRIs per day, a typical hospital five, and a typical HMO seven. The material costs to perform an MRI are around $91.58 USD for specialty care facilities, $54.95 USD for hospitals, and $39.25 USD for HMOs. Despite these relatively affordable costs, patients are typically billed more than $1,000 USD for an MRI. Insurance companies eat most of that cost.

Insurance companies pass much of that cost on to taxpayers. Within the United States for example, Federal, state, and local governments subsidize healthcare insurers with more than $500 Billion USD in aid each of the last seventeen years. That figure jumped to $1.7 Trillion USD in each of the last four, and is forecast to $3.0 by 2027.

Author: Erik Gagnon - Chi Rho Consulting