A Major Problem For U.S. Consumers

Carl Finamore in Znet writes that despite healthcare reform, getting sick in America is still very risky:
  • Commonwealth Fund estimates 25 million people with insurance still struggled to pay medical bills in 2010.
  • Nearly 66% of all personal bankruptcies are still linked to those debts.
  • 48 million had no health insurance in 2011.
  • At least 29 million people are estimated to remain completely uninsured even after the Affordable Care Act is fully implemented seven years from now, according to The Congressional Budget Office.

A Windfall for the Private Sector

However, health care remains a very good deal for wealthy investors. According to Bain & Company:
  • Private equity global investments in healthcare doubled in one year – from $15 billion in 2010 to $30 billion in 2011.
  • This represents 15% of all private equity deals in the world last year by companies like Bain.
  • This netted a profit of $500 billion. “The Problem Is Profit”

“The Problem Is Profit”

Carl recently attended a national conference of Physicians for a National Health Program (PNHP) in San Francisco and asked Andy Coates, MD, president-elect of PNHP, to identify the top problem with healthcare in the U.S. Dr. Coates replied:

I am very tempted to say ‘profit is the problem,’ end of story. But there’s more. “The American system has an enormous amount of unnecessary bureaucratic waste. A great burden of time-consuming administrative efforts, aimed at extracting profit from caregiving, weighs upon us.  So much of the cost of healthcare has nothing to do with what is happening at the bedside. The quest for corporate profits undermines the effort to provide medical care to human beings.

How Taxpayers Fund The Private Sector

According to Carl Finamore, America’s for-profit healthcare system  is mostly paid for with tax dollars:

  • Our taxes pay around 60% of our current health spending.
  • This includes, among other things:
    • Tax subsidies for private health insurance and public employee health benefits.
    • Direct government Medicare and Medicaid subsidies.

Other Countries Get More For Their Money

Dr. Steffie Woolhandler, professor of public health at City University of New York,  visiting professor of medicine at Harvard Medical School and spokesperson for PNHP compared this to what happens in other developed countries, pointing out that:

  • The majority of healthcare funding in other developed countries is also paid through taxes but in each case the costs are much lower and they get more.
  • U.S. health spending amounts to around $9,000 per capita.
  • Other developed countries spend about half as much.
    • the U.S. spends 16% of gross domestic product (GDP) on health care, compared with 8% to 10% in most major industrialized nations.
  • The private sector squanders around 31% of their budget on non-treatment related administrative costs.
  • Outcomes are not better: for instance, the U.S.  lags in life expectancy behind other developed countries.

Fact: Not-For-Profit Works Better

The difference is that most of them have some form of a not-for-profit national public healthcare system. Examples can be found right here in America. For instance, the government-paid and operated Veterans Health Administration (VA) has better outcomes, including:

  • Superior medical services.
  • Bulk purchases of prescription drugs at substantially reduced costs.
  • Fortune magazine calls the VA “the most wired and cost-effective health system in the land.”

But the trend toward privatizing Medicare and Medicaid to appease pharmaceutical giants creates the opposite effect: the government is prohibited by law from making these same bulk purchases on the open market for Medicare and Medicaid.

The Proof is in The Data

These statistics are clearly documented, and, for all the political rhetoric in Washington about Medicare and Medicaid, the problem is not public management but a for-profit system that increasingly directs Medicare and Medicaid tax funds to private providers and insurers through such costly privatized programs as Medicare Part D and Medicare Advantage programs.

Carl previews research that will shortly be published in the International Journal of Health Services by policy experts including Dr. Woolhandler showing the massive amount of tax dollars Medicare has overpaid private insurance companies under the Medicare Advantage program, and its predecessor programs over the past 27 years:

  • Total excess payments over the past 27 years is amount to $282.6 billion.
  • Most of this has been paid over the past eight years.

Our Money Can Be Better Spent

Imagine if all that waste were spent more wisely? For instance, this wasteful spending could be spent on:

  • Improving patient care.
  • Enhansing Medicare’s trust fund.
  • Reducing the federal deficit

The only way to do so is for government to stand up to the health care providers, but given their economic clout with the media and government, this has proven extremely very elusive.

Washington continues to debate around the edges of the issue, with no real will to take on this powerful sector.  While some threaten to repeal “Obamacare” in favor of a purely market-driven system – which we already know doesn’t work in healthcare, Obamacare is filled with giveaways to the private sector.  Such giveaways are not surprising given the American-style “sausage making” form of politics. The best possible option – single payor system – was taken off the table nearly from the start in order to assuage private suppliers of healthcare, including “insatiable Wall Street investors operating without any of the control or regulation taxpayers should expect.” Carl concludes:

Is there any wonder costs are going up? We as a society will pay the price as millions of uninsured avoid treatment, millions suffer economic hardship because of rising co-pay and deductible costs and millions discover too late their skimpy insurance coverage will not cover their medically recommended recovery plan…Certainly both research and activism are necessary components of the renewed and reinvigorated national healthcare debate that we so desperately need. But, for this debate to be productive, it cannot, unlike the Congressional discussions we’ve seen, tap dance around the greed and inefficiency of the profiteers who are engulfing and undermining our medical system.

As I have often written in this blog, the solution lies in education. And in today’s highly politicized media environment,  the conventional wisdom in Washington is obfuscation.

The ACA Is Just The Beginning

The Affordable Care Act is a good first step in that it does expand access to health care while providing mandated preventative benefits. But it is only a first, fledgling step on a long road of improvement. And one of the better outcomes of the ACA would be if it stimulates more constructive reform building on its foundation.

That some politicians would propose to turn back the clock on even this first step speaks volumes about the clout of this behemoth industry. That people are still so unknowledgeable about the drivers of health care costs that they continue buy into the fiction of the free market in healthcare despite all evidence to the contrary speaks volumes about the industry’s public relations machine – namely, media and politicians.

Health care is the most significant frontier of government reform because, unless these truths are squarely faced and dealt with, the U.S. public will continue to pay an unthinkable price to fund a grossly inefficient system that redistributes taxpayer money to the upstream corporate providers –  the large hospital groups and pharmaceutical companies.

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