By Abby Jin
My old economics teacher liked to advise us to move out of America to Canada for their free healthcare. Looking back, he said this too often for it to have been just a light-hearted joke. Anyone who knows a little about the economics of the US healthcare system has probably heard that it’s more complicated and more expensive than that of most other developed countries. It’s like patchwork: there are public programs like Medicare and Medicaid for more vulnerable populations, but most Americans are covered by private health insurance, which gets costly fast. As an archetype of capitalism, minimal government regulation, high levels of competition, and profit-driven companies increase prices for a system that takes care of our well-being.
It was quite a reality check when I learned all of this. Growing up, I wanted to be a doctor like my dad, because I believed hospitals were a magical place where kind people cured sick people purely out of the goodness of their hearts. While that’s not the totally wrong idea, it was naive not to think about the financial motivation as well. My dad would come home with stories about how his colleague was working at two hospitals at the same time for the money, which caused him to neglect many of his duties, or how the hospital administration refused to hire more qualified workers due to lack of funding. If we look at hospitals or healthcare companies as businesses, it makes sense as to why they need to prioritize profits. Successful ones only function because they have the ability to provide high-quality services with the most advanced technologies; they have to invest in research and development to be competitive.
Unfortunately, this profit-driven field leaves room for business malpractices that take advantage of the American healthcare system. For instance, private equity has a shady reputation in this sector. Earlier this year, a struggling hospital operating under Prospect Medical Holdings in a rural, high-need community in Pennsylvania collapsed due to the private equity firm Leonard Green & Partners. Like many private equity firms that invest in healthcare, they promised to make hospitals more efficient and profitable, while actually extracting profit for themselves instead of providing the financing to improve the hospital’s operations. The firm sold their stake in Prospect Medical Holdings when the hospital was in deep debt during COVID, merely saying that the decision was “part of the normal life cycle of [their] investments” and that the buyout of Prospect enabled “the company to continue the tough work of turning around troubled safety net hospitals.” However, Prospect filed for bankruptcy and the hospital was forced to shut down when their patients needed them. It doesn’t sit right that Leonard Green & Partners profited from this situation when they left the healthcare system worse off than they found it.
In fact, recent research says that private equity may be doing more harm than good in the medical field. Studies show that their acquisitions cause quality to decline and prices to rise. According to The Guardian, “Private equity-owned health facilities are also known for rejecting higher-risk patients in order to keep down the cost of care.” When financial gain is prioritized over patients who actually need the most help, it’s clear that there are ethical flaws that need to be addressed. It’s the most vulnerable populations that are hurt at the end, which contradicts the purpose of healthcare.
Privatization of healthcare isn’t necessarily the problem—public programs struggle to balance finances with appropriate care as well. There’s only one thing we know for certain: prices for healthcare in America are going up. With the government’s recent federal healthcare spending cuts, hospitals that serve patients on Medicare and Medicaid also need to make cuts in services. The Howard University Hospital in DC is a leading center for maternal health and sickle-cell treatment, but if the healthcare subsidy expires, more people could lose insurance coverage – driving up the cost of care for the hospital. Medicare plans in 2026 are projected to shrink in services and be “pric[ed] for profitability rather than for growth,” according to Lisa Gill, a senior analyst at J.P. Morgan. Medicare itself has private health plans like Medicare Advantage and Medigap that create more accessibility for patients but are also more expensive, defeating its original purpose to serve seniors who are no longer making a steady income.
Aside from management, business practices from healthcare companies themselves can also raise ethical concerns. Healthcare marketing, for instance, is a nuanced area where companies must pitch their products to potential customers while providing accurate information and avoiding exaggeration. A classic representation of misleading marketing is the OxyContin lawsuit. OxyContin, Purdue Pharma’s opioid pain medication, was aggressively and falsely promoted to have stronger effects for the non-cancer-related pain market. The company raised sales to over $1 billion in just four years. The public was entirely misled about the addictive nature of OxyContin, which took advantage of their addicted consumers and eventually pled guilty to misbranding the opioid in a 2007 lawsuit. This was a preventative failure of government regulation.
Similarly, Kenvue has been recently facing a lawsuit for deceptively advertising Tylenol as safe to take during pregnancy. Although most studies and doctors say that it is, the Trump administration has been destroying the medicine’s reputation by linking it to autism. As a consequence, the company’s stock lost over one-third of its value in just three months. Fortunately, Kenvue has the funds to try protecting the brand name, with a 2024 advertising budget of $1.6 billion. The success of consumer health companies is largely dependent on profit, so everything is done to protect any products that are challenged. Throughout all the chaos, Kimberly-Clark announced an intent to acquire Kenvue for $40 billion, a wager that may be financially strategic based on the timing of the Tylenol crisis.
The profit motive also causes pharmaceutical companies to set high costs for medicine. Developing drugs is expensive, but that tends to be a facade that businesses hide behind: research has shown no correlation between a drug’s price and its cost of development. Competition can encourage innovation, but it causes issues when drugmakers simultaneously compete by copying each other’s products and also raise prices. Drug prices are also driven up with increased marketing costs. This is not to say that research, competition, or advertising are inherently detrimental, but something must change once patients can no longer afford what they need to retain health.As Robert H. Shmerling writes in Harvard Health Publishing, “what we really need is an overhaul to remove middlemen who contribute to added cost without always adding value.”
It’s interesting to observe how nonprofit hospital systems might compare to for-profit ones, since their financial gains would be reinvested into the business instead. Kaiser Foundation Hospitals is one of the largest nonprofit hospital systems using a prepaid membership system, where patients pay a standard fee and they take care of the rest. According to the official website, “this accountability aligns incentives to keep people healthy, rather than seeking to generate revenues when they are sick.”
There are ethical ways to run healthcare businesses. Enforcing government policies by agencies like the Food and Drug Administration has been one strategy to ensure transparency and scrutinize business practices to keep them accountable. Companies, however, will often try to find loopholes around restrictions. To a certain extent, we should aim not to waste time scrutinizing technicalities and instead reevaluate the fundamental mission of organizations in the industry. We need more with conscientious leadership who build a culture of patients first.
Costs and care are not, and should not be, mutually exclusive; they must be weighed in balance. It may be too late to entirely dismantle America’s convoluted healthcare system. But perhaps there is something to learn from other countries with seemingly better systems. Ranked by factors such as cost and quality, the US currently comes in 69th place, a jarring contrast to its high international standing. At the end of the day, there is no point in having highly advanced and progressive healthcare if its delivery is impractical and unethical. Businesses naturally exist to make profit, but when it comes to healthcare, such a goal may have to come second sometimes. If businesses are able to see past financial gains and prioritize the delivery of high-quality services, there is still some hope left for our healthcare system.