And yet, health insurance companies have very low profit margins, the lowest amongst the insurance companies. So who is getting all the money?
First, there are a lot of tests and procedures ordered by doctors that only have some, but very small, benefits for the patients [0]. Doctors are incentivized to do this because each procedure has a set price (negotiated with insurance companies and Medicare / Medicaid) and the only way to get more revenue is to perform more procedures.
Second, patients themselves order a lot of procedures out of fear. Arguably, they can be better off without these procedures. A prime example is end-of-life care, where patients and families often want to "do everything possible" even if those intrusive medical procedures bring nothing but a few weeks of miserable living [1]. Those end-of-life procedures are extremely expensive while having questionable benefits in terms of bringing a "happy" life rather than just a longer life [2].
[0] https://www.scientificamerican.com/article/unnecessary-tests...
[1] https://www.npr.org/sections/money/2014/03/05/286126451/livi...
[2] https://www.amazon.com/Being-Mortal-Illness-Medicine-Matters...
Another relevant effect worth noting here is CYA medicine: doctors order tests aimed at catching highly unlikely conditions to protect themselves against the hypothetical lawsuit that asks "why didn't you test for that?" Whatever the truth is about malpractice suits, the perception in the industry seems to be that these cases are overwhelmingly biased against doctors if even one question can be raised about the course of treatment.
I'm not an economist, but it seems like a 5% margin on a $850 billion market is worth a 10% margin on a $425 billion market.
Its a big market, but insurance companies are not the ones making a killing.
They charge whatever the fuck they want.
Also; equipment manufacturers and drug companies: who both abuse the shit out of our patent system. But even off-patent drugs are being priced ridiculously high now. Barriers to competition are still extremely high.
Since manufacturing capacity of IV bags was taken out in PR, there is a national shortage. This is NOW causing rationing (in effect). Prices are going up, but nobody's addressing the manufacturing problem - because: Puerto Rico.
Doctor pay is really high in the US and its very regulated. Its expensive to be a doctor (long schooling, expensive mal praxis insurance), license ceilings, state-licensing and effective banning of doctor importation.
Doctors get a decent share of the cost (1/10 i read somewhere), buts its still not the bulk. Nevertheless, just allowing doctors to come in and have unlimited licensing would hit costs a lot.
It is quite incredible that the U.S., the symbol of freedom, can't freely import drugs from abroad. Considering the rampant use of pharma specially, dropping the costs 1/2 of meds would lower the cost of healthcare overnight by an enormous amount.
An interesting bit of data that highlights just how profitable this industry can be comes from the wikipedia page for McKesson Corporation[1]:
> On June 24, 2013, The Wall Street Journal reported that McKesson Chairman and CEO John Hammergren's pension benefits of $159 million had set a record for "the largest pension on file for a current executive of a public company, and almost certainly the largest ever in corporate America." A study in 2012 by GMI Ratings, which tracks executive pay, found that 60% of CEOs at S&P 500 companies have pensions, and their value averages $11.5 million.
And no: marketing is not necessary for these products. TV commercials and other ads to public: not necessary.