The Dysfunction and Corruption of our Healthcare System, Its Damage to the National Economy and Other Basic Healthcare Matters (Guest post)
(Guest blogger Christine was preparing this piece for publication as a series in a regional paper, which accounts for omission of links and longer explanations and the not-quite-finished editing.)
The current U.S. healthcare system is tragically corrupt and dysfunctional. It is destructive to the American business economy and our ability to compete globally. The structure of the system violates fundamental insurance risk principles and has inherent conflicts of interest that prevent quality national health care delivery and cost efficiency. The only rational solution is one universal, single payer healthcare system for all U.S. citizens.
Part I. The U.S. Healthcare System is Corrupt, Perverse and Dysfunctional
Corruption and dysfunction in the U.S. health care system are due to inherent and irresolvable conflicts of interest under the private provider system. This corruption and dysfunction are damaging to welfare of the nation and the lives of its citizens. The U.S. is now 20th, close to the bottom of the list of developed countries, on the World Corruption Index.
Rationing of health care by insurance company employees is a direct result of a conflict of interest between providing insurance benefits to paying members in need of health care, and earning profits for corporate shareholders. Employees of insurance companies are paid bonuses based on how little care they approve. Companies have denial and delay procedures that cause suffering and death. Much is made of the waiting lists in foreign countries; but there is little or no awareness of the waiting and denial lists in this country because of the veil of privacy behind which insurance companies operate. And, of course there is the ultimate rationing: no healthcare at all.
The private insurer bureaucracy is a mechanism used to justify not paying hospitals and providers, including doctors, in a timely manner and refusing to pay for all services provided. This creates a cash flow nightmare. A U.S. House bill to force private insurers to pay hospitals within 90 days was defeated by the insurance lobby. Insurance companies aggressively negotiate contracts with hospitals and other providers that often result in the actual cost of the services not being covered. Finally, hospitals, while operating in an environment with insurers and Medicare controlling the majority of pricing and payments for services, are required by the EMTALA (The Emergency Medical Treatment and Labor Act) to admit and treat anyone with an emergency medical condition for free. A system where treatment of the uninsured is done in the least cost-effective setting, after their conditions have become serious enough to warrant emergency room treatment, is ironic to the point of absurdity, with the final contradiction being that there is no payment at all.
Fraud on the part of insurers and providers has skyrocketed since 1980 as the amounts of money in healthcare also skyrocketed. In 2000 the U.S. Supreme Court unanimously agreed that insurers could be sued for racketeering under RICO. Humana and HCA have lost lawsuit after lawsuit for not passing negotiated discounts on to medical providers and customers. There are 6 health care lobbyists for every member of Congress, 3300 lobbyists in all, pouring $263.4 million dollars into Congress in 2009.
Drug makers alone spent more than $134 million on lobbyists. The manifest tragedies of the pharmaceutical industry in the U.S. include the fact that it benefits from huge public welfare investments on the front end since almost all drug research has some public funding component. Then private market advocates insist that there be no negotiation for lower prices on drugs. The industry has perverted the integrity of top end professional journals by squelching publication of unfavorable data and by publication of false data, sometimes leading to horrific human suffering and death. Beyond all of this is the unbelievable and extravagant advertising machine of pharmaceuticals and the impact it has. Americans are the leading prescription drug addicts in the world.
Then there is one final sad dysfunction, that of wildly divergent pricing and treatments. The consumer is caught in an impossible position of not being able to understand how much procedures will cost or are worth. When an M.D. can bill $23,500 for an emergency appendectomy for which the insurance company will pay an out-of-network fee of $4,629, when someone without insurance is charged massively more than someone with insurance in the same hospital for the same procedure, when M.D.s have to enter unreasonable contracts with insurers who pay at a rate too low to cover the procedure, or not at all, it is time for a big change in the system. The recent study of medical care in McAllen, Texas, the second highest cost provider area in the U.S, one where malpractice reform has already been enacted, showed that overtreatment and overtesting by M.Ds are a result of the profit motive, pure and simple. Thus, more and more Americans are going abroad for healthcare. A surgery that will cost $100,000 in the United States can be done at the excellent Bunlungrad Hospital in Thailand for $20,000. For an insured with an 80% co- pay plan this is a savings of $13,400 (after transportation and accommodation for 2) and $64,000 for the American insurance companies which have made the Thai hospital a preferred provider.
Part II. The U.S Economy and Destructive Healthcare Chaos
The U.S. economy is losing ground in critical ways and our disastrous healthcare system is part of that downward trajectory.
U.S. companies that provide employer paid and subsidized healthcare are unable to complete with companies of other developed industrialized nations, all of which have a national healthcare in some form. The corporate cost for healthcare in the U.S. adds between 6 and 16% to payroll expenses, with larger companies employing the most workers at the higher end of the range. This healthcare cost is cited as one of the reasons for U.S. industries and companies going offshore, downsizing or collapsing altogether.
The loss of industry hurts our foreign exchange, causes Americans to buy foreign products and weakens the nation economically.
The U.S. has the highest percentage of GDP going to health care in the world: 16%. This means there is less money in the U.S. economy available to go to constructive development of new businesses and infrastructure. Contrary to popular perceptions, the United States has a much smaller small-business sector (as a share of total employment) than other countries at a comparable level of economic development. This is consistent with the view that high health care costs discourage small business formation, since risk both to the employer and employee is higher in the U.S. where there are no government safety nets. It is estimated that more than 20% of all U.S. workers are afraid to leave their jobs because of the effect of loss of health insurance on them, or their family members.
At least 60% of U.S. personal bankruptcies are due to medical bills. Of these, 68% of the bankruptcy filers had health insurance but could not cover the deductibles, co-pays and treatment denials or became so sick that they lost their jobs and their insurance. These bankruptcies affect the cost of credit for everyone else in the country.
Part III. The Misunderstood Basics
A basic principle of insurance is that a large diverse demographic pool spreads the risk. The U.S. has perverted the risk principle completely by removing the Medicare population with the highest risk, the government employees with the richest benefits, and the military, and put them all on the public purse. We have then segregated the youngest and healthiest citizens whose risk should be subsidizing all of the above and placed them in the hands of cherry picking, profit-driven, private insurers with high bureaucratic overhead. This is such an irrational arrangement that it beggars belief. The U.S. health care bureaucracy costs $399.4 billion annually, of which the 2004 Harvard study estimated that $286 billion could be saved. This $399.4 billion is 31% of U.S. healthcare spending as opposed to 16.7% in Canada where all citizens are insured.
Tort reform will not offer savings. Tort reform has already taken place in 27 states, including Texas and California and has had no impact on pricing. The McAllen, Texas M.D. study showed that the profit motive drove overtesting and overtreating. Malpractice insurance and claims are estimated to add 2% to medical costs. To give a specific instance of spending in the hospital area, Childrens Hospital in Los Angeles, with a $600,000 million annual operating budget, spends $3.25 million on total malpractice costs, including insurances. This is less than ½ of 1% of the budget. The malpractice boogeyman is the product of ignorance, or, once again corrupted interests fanning ignorance.
American health care is not the best in the world. At its best, it is of course, equal to the best in the world and, in some high tech areas certainly the best. However, Americans go to Europe and elsewhere for procedures and treatments that are not available in the U.S. On an overall basis, the U.S. ranks poorly among developed nations. Medical education in the U.S. has also been corrupted by money in that students are opting for high income specializations while basic care, family, geriatric and internal medicine are being neglected. Obviously this drives costs up even further since there is a marketing of the specialized services.
There are other conflicts: environmental diseases such as cancer are almost exclusively the result of corporate and government decisions for profit, but the cost is borne by individuals; lifestyle diseases such as those related to obesity are heavily driven by the agencies of agribusiness and food corporations, whose profit taking through pushing and advertising terrible health choices starts with children. Drunk driving, cell phones and texting, the shocking number of American gun homicides all a result of "free choice" and rugged individualism, have tragic, innocent victims and the healthcare system pays, or doesn't, along with the individuals and their families who are hurt, not once, but twice.
For the budget conscious, the cost of the Bush tax cuts was almost $2.5 trillion over the decade after they were enacted, 2 ½ times as much as the House Democrats' health care proposal, which is weak on meaningful financial reform. The budget-deficit disaster of the Bush wars in Iraq and Afghanistan loom far beyond this and are generating future health care liabilities.
The United States needs to confront and abolish the corruption in its medical care system. There are several universal single payer system models in other countries, all of them in line with basic insurance risk principles of a full pool, and all of them more economically efficient than the one that exists in the United States. The aging population in developed countries is going to put pressure on all of the health care systems. The systems that are inherently dysfunctional and corrupt will be bankrupt first. Medicare will certainly sink with the unreformed corrupt ship of U.S. healthcare.