Financial Pollution in the US Health Care System

Wasteful health care spending results from low-value care, undertreatment, pricing failures, fraud, and administrative complexity.¹ Such spending costs US residents between $760 billion and $935 billion each year¹ and harms populations through burdensome health insurance prices and taxes. Therefore, we need a metaphor more powerful than waste; waste conjures images of byproducts that are benign if properly discarded—routed to treatment plants, cleaned, and recycled. We should refer to wasteful health care spending and its toxic effects as financial pollution.

Pollution is waste that is harmful.² Financial pollution arises when exorbitant or unnecessary health care spending depletes resources needed for the well-being of the population. Akin to environmental pollution, financial pollution is human made, contaminates connected systems, remains largely invisible to many, and disproportionately harms vulnerable populations. Just as market forces fail to prevent manufacturers from polluting the environment, such forces have also been unable to reduce harmful health care waste. Importantly, nonmarketplace approaches that have diminished environmental pollution hold promise for reducing financial pollution.

Environmental harms are often largely invisible, discernable more through statistical analyses than individual cases. More smog means more asthma and cancer, even when no individual case of asthma or cancer can be clearly blamed on the pollution. The same holds for financial pollution. Rising health care expenditures lead to more expensive insurance premiums, increasing the number of people either uninsured or underinsured. As a result of poor health care coverage, some forgo important preventive care or delay urgent care, thereby experiencing unnecessary harm, although no individual harm is easily attributable to the overall increase in health care expenditures.

Environmental pollution is often insidious, causing harm over years or decades, with efforts to reduce pollution typically promising benefits only in the distant future. The same holds for financial pollution. Commercial insurers raise premiums and deductibles for broad segments of their populations to cover increasing costs, slowly eroding the generosity of wages and employer-based insurance coverage.³ Rising expenditures have also chipped away at state and federal budgets. The result has been a creeping accrual of serious harms: people having to choose between health care and food; life-altering government programs cut or pared to the bone. Some of those programs, such as public education,⁴ have a stronger association with health outcomes than many medical interventions.

Increased health insurance premiums and less investment in common goods leave households with fewer resources for education, housing, and child-rearing. Low-income populations experience a greater relative impact on their opportunities and thus bear the largest burden of financial pollution, just as with environmental pollution.

Similar to environmental pollution, financial pollution and associated harms are not apparent to most who are affected. Increasing premium payments typically occur invisibly as regular payroll deductions. Rising Medicare and Medicaid expenditures lead to higher taxes, larger budget deficits, or a reduction in government services. Many people are unlikely to appreciate the relationship between, for example, exorbitantly priced health services and wage stagnation or tax increases. Thus, financial pollution spreads largely unnoticed.

Environmental experts teach us that pollution⁵ originates from both point sources and nonpoint sources. Point sources are large emitters, such as chemical companies and coal mining plants, while nonpoint sources are smaller but more numerous emitters, such as individual consumers and small businesses. This categorization also applies to health care financial pollution. Financial pollution comes from large emitters, such as pharmaceutical companies, device manufacturers, and large health care delivery systems. Many nonpoint sources, such as small group practices that provide low-value care, also create financial pollution.

Some may argue that the term financial toxic effects already expresses the urgency of addressing increasing health care spending. However, financial toxic effects are defined as direct harm that occurs when patients must pay out of pocket for substantial shares of health service prices. In contrast, financial pollution indirectly spreads to the population, even to those with no health care use, through health insurance premium increases, rising deductibles, stagnating salaries, cuts in public education, health and infrastructure budgets, and tax increases. Therefore, it is more widespread and insidious. For example, during the past 3 decades, the US Food and Drug Administration has lowered therapeutic efficacy standards,⁶ allowing drug and device makers to receive approval for treatments with unclear or marginal clinical benefit. Multiple factors induce US payers to purchase services known to be minimally effective or exorbitantly priced. These include state coverage mandates (eg, of cancer therapies), manufacturer-generated demand (eg, direct-to-consumer advertisements and pseudopatient advocacy), moral hazard, and societal expectations to have access to all new health technologies. With this shielding, emitters of financial pollution maximize revenue through excess care or prices much higher than a typical patient can afford. For example, pharmaceutical manufacturers set the price of novel anticancer medications well above out-of-pocket maximum levels, thus requiring major population-level subsidization through health insurance premium increases. When set in this range, the percentage of insured patients experiencing financial toxic effects, and the level of these effects, remain largely the same regardless of the price. That is, out-of-pocket maximum limits leave insured patients with the same financial toxic effects at either a $5000 or $500 000 price. However, the $500 000 price contributes much more to rising premiums and taxes and thus to financial pollution.

The modern movement to reduce environmental pollution has faced many challenges. Market forces alone have been inadequate, polluting entities erect obstructions,⁷ and grassroots efforts can be limited because many people are unaware of harms or are relatively powerless compared with polluters. Nevertheless, environmental policy experts have had success in navigating a path toward the common good. Effective approaches have included environmental legislation, policy development, standard setting and enforcement, and public education to set new expectations for what constitutes appropriate environmental care. Health care policy makers should analyze such approaches and adopt those that can help reduce financial pollution and increase population well-being.

As with the environment,⁷ dilution is not the solution to health care financial pollution. Current public health, economic, and equity crises urgently demand a different mindset and a new metaphor for action.

Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2021 Wagner AK et al. JAMA Health Forum.

Corresponding Author: Anita Katharina Wagner, PharmD, MPH, DrPH, Department of Population Medicine, Harvard Medical School and Harvard Pilgrim Health Care Institute, 401 Park Dr, Ste #401 East, Boston, MA 02215 (awagner@hms.harvard.edu).

Conflict of Interest Disclosures: None reported.