I may as well tackle the healthcare issue. The topic is much too complex to address in a single post (or possibly in an entire book!), so “Part 1” will describe some of the major issues with American healthcare and “Part 2” (in a few days) will address solutions.
Hang on to your hats!
Here are a few relevant facts about American healthcare (feel free to skip to the summary if you are pressed for time):
THE CURRENT STATE OF AMERICAN HEALTHCARE
- Some Americans die each year because they lack health coverage. The exact number is difficult to nail down (a 2009 study set the estimate at 45,000).
- In 2016 a Harvard study found that states expanding Medicaid coverage for lower income citizens (discussed later) had lower mortality rates. So lack of medical coverage matters. If you want to read a heartbreaking account of one man’s probable imminent death because of our system, read this.
- Approximately 18% of all American expenditures are on healthcare (most peer countries spend about 9%). That is more than $3 trillion per year.
- We may not be getting our money’s worth because Americans are less healthy than citizens in countries spending much less and our infant mortality rates are higher. Of course at least some of our poor health is self-inflicted and results from poor lifestyle choices.
- Even though we claim to have the best medical care in the world (and for some of us that is probably true), the USA’s life expectancy rate is lower than that of our peer countries and we rank only 42nd in the world.
- Approximately 73% of uninsured Americans work at a job that does not offer healthcare benefits. Yes, you read that correctly. That means those folks must either live without health insurance or buy it on their own.
CONSEQUENCES FOR THOSE WITHOUT INSURANCE
- People without health coverage are less likely to have preventative care and thus wind up being hospitalized more frequently. They also have fewer “diagnostic and therapeutic services” and, consequently, have a higher mortality rate than those of us with insurance.
- Approximately 62% of all personal bankruptcies are the result of medical bills that an individual cannot pay.
- More than half of those who are uninsured have difficulty paying for medical care. Approximately half of all uninsured Americans have at least one unpaid medical bill.
CONSEQENCES FOR HOSPITALS
- When citizens do not have health insurance, hospitals must pick up the cost. Uninsured folks who are ill go to the emergency room at a hospital and by law they must be treated. Northwestern University’s Kellogg School estimates that every uninsured person in a local area costs the local hospitals an additional $900 of uninsured coverage per year. Approximately 8% of the public has no healthcare insurance, a significant drop from the 22% uninsured in 2010, but that still means hospitals may be required to cover the costs for about 25 million patients without compensation.
As you probably know, Medicaid is the largest government program providing healthcare coverage for the disabled and those with low incomes. Medicaid covers about 2/3 of Americans in nursing homes. The program currently covers about 74 million low-income and disabled Americans, half of whom are children.
Under Medicaid, national standards are established by the federal government and states can expand coverage if they so choose. On average, the national government covers a little more than 50% of a state’s Medicaid funding, with Kentucky and Mississippi receiving more than 75% of their Medicaid funding from the Feds. I don’t want to get too bogged down in details, but you can click here to learn more if you are interested.
Prior to passage of The Affordable Care Act (Obamacare) Medicaid primarily covered low-income pregnant women, children, and a limited number of parents. The ACA expanded Medicaid (but the expansion was adopted by only 31 states) to include medical care for individuals living below 138% of the national poverty level. In 2015 Medicaid cost the state and national governments $532 billion.
There are two major problems facing Medicaid. 1) Since 19 states did not accept Medicaid expansion many low income Americans are still not covered. 2) Cost. Medicaid costs have increased significantly since the program’s creation in 1965. With required coverage under Medicaid expansion both states and the feds must pick up the costs.
WHY IS AMERICAN HEALTHCARE SO EXPENSIVE?
- The large insurance companies earn pretty good profits. In 2014, for example, UnitedHealthgroup, the nation’s largest health insurance provider, earned $10.3 billion in profits. In 2010 when the Affordable Care Act was signed in to law UnitedGroup stock was worth $30.40 cents per share but by 2015 it was valued at more than $113 per share. Between 2009 and 2016 Humana, another large insurance provider, had a 1,000% increase in its stock value, more four times higher than the Dow Jones average.
- Healthcare-related CEO salaries have increased an average of 11% every year since Obamacare went in to effect in 2010. CEO’s earn an average of $20 million per year in compensation. These executives, at least one of whom earned more than $800 million in one year, do not work to lower healthcare costs. A pharmaceutical CEO, for example, will push for more prescriptions whether needed or not. Other CEO’s push for more tests and procedures and anything else that will increase the value of their company’s stock.
- A recent article by CBS News explored other reasons American healthcare is so much more expensive than in our peer countries. Their findings?
- Administrative costs are higher because we have countless insurance companies plus Medicaid and Medicare. The Duke University Hospital, for example, employees approximately 1,500 billing clerks to sort out all the charges!
- Americans want the newest technology, and that is expensive. And sometimes the newest treatments are not necessarily the best.
- It is easier to sue doctors in America than in most other countries and this causes doctors to sometimes over prescribe tests and treatments. In a large survey 90% of doctors say they over prescribe medicine and procedures to protect themselves.
- Many states make it difficult for medical facilities to expand services and require the approval of government and, sometimes, the approval of competitors (such as other hospitals). This removes competition, an essential factor of a capitalist economy.
- Consumers are not told costs in advance and often do not learn how much a procedure costs until weeks or months later. So consumers cannot shop around for less expensive treatments.
- Another factor contributing to high medical costs is Chargemaster, an innocent term with major consequences. The Chargemaster is the master pricing list for hospitals and it is negotiated behind closed doors with insurance providers. One cynical doctor describes this process whereby these rates are set and the goals of setting the rates. Essentially, the Chargemaster is what allows hospitals to charge patients. Recent legal challenges claim that many Chargemaster rates were three times higher than hospital costs and also treat patients paying expenses out of their own pockets unfairly since they were not part of the price negotiations. This also results in almost unbelievably different rates being charged by hospitals for exactly the same treatment or procedure. The process also makes it possible for hospitals to charge $15 for one Tylenol tablet, $53 for non-sterilized gloves used by a nurse or other provider, $93.50 for the use of lights during a surgical procedure, and $23 for one alcohol swab.
WHAT ABOUT ALL THE RICH DOCTORS?
- Many doctors, the healthcare professionals who SHOULD be benefitting from the system, are frustrated with and by the system. A 2013 survey found that about half of American doctors wish they had chosen a different career. In 2013 doctors were graduating from school (after studying between 10 and 14 years) with an average debt of about $165,000, and a large percentage of doctors are actually seeing their salaries decrease. Doctors also report that a large portion of their time is spent on paperwork rather than patient care.
OK. LET’S TRY TO SUMMARIZE
- Healthcare in the United States eats up more of our spending than in other countries, but our healthcare is no better and we still die at a younger age and pay more out of our pockets than do folks in peer countries.
- One of the reasons we pay more is because our system is fueled by greed. Doctors justifiably expect to earn good incomes because they spend at least ten years in college with some specialties requiring much more. However, although some doctors do become wealthy the executives for insurance companies, pharmaceutical companies, etc. earn much more.
- Some Americans die unnecessarily each year because they lack healthcare coverage.
- Insurance companies are also paying great dividends to their shareholders.
- Hospitals must treat people regardless of their ability to pay, and this is either passed on to those of us with insurance or is a loss for the hospitals.
- Only about 46% of American companies provide healthcare insurance to their employees.
- People without healthcare insurance live shorter lives and suffer increased financial distress because of medical costs.
- Chargemaster may or may not be evil, but it does provide for what appear to be excessive hospital charges.
- Americans’ ability to sue doctors and other healthcare providers probably increases costs. There is some indication that those costs are declining, however.
- Administration costs for hospitals and doctors offices are extremely high because of the multiple funding sources that must be billed.
- It is difficult for consumers to “shop around” for medical care because we don’t know costs in advance. Costs are not consistent and the costs for the same procedures may vary significantly.
- Medicaid expansion under President Obama extended medical care to low income Americans, but only 31 states adopted it.
America’s healthcare system is in crisis, and the above discussion only scratches the surface. How can it be fixed? Is Obamacare our best option? What about a “single payer” system similar to systems provided by Canada and most of our peer nations? Or should government get out of the healthcare business?
The answer depends on one’s ideological leanings.