June 06, 2005
The Sickening Cost of American Healthcare
I knew that the United States spent more of its GNP on healthcare goods and services than any other nation on Earth, but I was amazed to discover the degree of that difference and how little we get in return.
According to the OECD, in 1960 the per capita cost of healthcare in America was only $144; by 2002 it had risen more than six times faster than the Consumer Price Index to $5,267. Most impressively, however, we have the most expensive healthcare system in the world, by far. The United States spent 52% more per capita than the country with the second most expensive healthcare system on earth, Switzerland; 80% more than Canada; and 144% more than the United Kingdom.
Those are depressing numbers certainly, but they're justifiable because everyone knows that high quality healthcare is expensive. After all, the best healthcare system in the world should be the most expensive, shouldn't it? Imagine my chagrin when I stumbled upon the World Health Organization's World Health Report - 2000, however, and searched it's national rankings for the land of the free and the home of the brave. OK, so we weren't number one. We weren't number two or even number three. We weren't in the top five or the top ten either. I really started to get worried though when we didn't make the top twenty or the top thirty. Where did we end up? Thirty-seventh! I was amazed. The WHO had ranked the quality of healthcare in the United States as on par the quality of healthcare in Costa Rica and Slovenia!
Ironically and shamefully, insult was added to injury when I discovered that the nation with the world's best healthcare system was France. Sacre bleu! How was it possible for the French to spend less than $2,800 per person and receive the highest quality healthcare in the world when we spend nearly twice as much per person as they do and end up ranked thirty-seventh? Digging a little deeper, I noticed that per capita public expenditures in France ($2,080) were only slightly less than they were here ($2,364). It was in the private spending for healthcare that America really showed its stuff to the rest of the world. In 2002 per capita private expenditures for healthcare amounted to $656 in France, $883 in Canada and $359 in the UK. In the good old US of A, however, every man woman and child spent nearly three thousand dollars ($2,903) out of their own pockets, an impressive margin of victory by any standard. Each of us spent nearly four and a half times more than the French, nearly three and a half times more than the Canadians and eight times more than the British. What did we get in return for all of our hard-earned dollars? We got the worst possible result: developing world healthcare at industrialized world prices. By any measure, the privatization of healthcare must be considered to be a colossal failure both quantitatively and qualitatively.
But why? Why is the most common medical procedure in the United States a walletectomy? The competitive forces of the marketplace succeed marvelously in providing high quality goods and services at efficient prices in so many other industries. Why did they flop so resoundingly in this one? In other words, why did Reaganomics succeed so well in the airline and telecommunications industries, for example, but fail so abysmally in the healthcare industry?
The answer lies in the illusive quality of free choice. In a fair marketplace, both buyers and sellers possess variable degrees of choice. As the consumer's desire to buy and the producer's desire to sell change, prices fluctuate accordingly. When need replaces want in the pricing equation, however, the dynamics of supply and demand become moot. Marketplace conditions are immaterial when the choice is between sickness and health or between life and death. A hungry person may pay more for a sandwich than a sated one, but a staving person will pay anything.
Notwithstanding elective procedures, the provision of medical goods and services differs profoundly from most other human endeavors, such as air travel and telecommunications, because the buyer's choice is effectively eliminated from the purchasing decision. People may say, "It looks like a slow weekend. I think I'll call Aunt Martha. Better yet, I think I'll fly out to see her," but nobody says, "It looks like a slow weekend. I think I'll go get an appendectomy." The consumption of medical goods and sevices is based upon need, not desire, which eliminates the efficiencies inherent in fair market capitalism.
So what's Uncle Sam to do? Perhaps our elected representatives should hearken back to our founding document, the Declaration of Independence, for a clue. According to Jefferson, the only valid rationale for the very existence of government is to protect the "inalienable rights" of its citizenry, and that among these rights, are life, liberty and the pusuit of happiness. As the first of Jefferson's enumerated rights, life and health are the most fundamental of our natural rights. Contemporary civilized societies may choose to help educate the ignorant, clothe the naked or feed the hungry, but they must help cure the sick. It is the ultimate human entitlement.
Imagine for a moment that the federal government treated the second of Jefferson's "inalienable rights", the right to liberty, as cavalierly as it treats the first. Our armed forces protect our collective liberty from foreign conquest and our police forces protect our individual liberty from criminal exploitation. Why shouldn't the federal government disband our military and police forces and rely on the private marketplace to provide these services for us? After all, a large standing army and a federal police force are relatively recent developments in American history, and they're very expensive. Why don't the acolytes of Reaganomics contend that we should be as free to choose our own soldiers and policemen as we are to choose our own doctors and pharmacists? We could go back to receiving our collective protection from the armies of feudal lords and our individual protection from roving bands of gunslingers. What price would we be willing to pay these private providers to protect our liberties when foreign conquerors or local criminals threatened them? We would pay them pretty much the same amount as when injury or disease threatens our lives or the lives of our loved ones: anything they ask.
The days of pharmaceutical drug pushers and samurai surgeons selling their goods and services only to those who can afford to pay their exorbitant and collusive prices must end. Our elected representatives must honor their most fundamental obigation: to protect the lives of their constituents, not the bank accounts of their contributors.
The next time you're at the pharmacy or your doctor's office and peel off a hundred to pay the tab, it might help to ease your financial pain a bit to look down at the picture of the man whose face adorns the bill and recall the words he wrote 270 years ago:
"Necessity never made a good bargain."Posted by Chuck Hanrahan at June 6, 2005 04:39 PM
You blame the Doctors and Pharmacists too much. They no longer get any real money in their professions. A Doctor has to be 35 yrs. old before he gets to see any real profit in being a Doctor. Ever watch ER? The poor Residents portrayed there are quite accurate to how Doctors are paid.
The real culprits are the HMOs and the Drug Industry who dictate how much we pay. Being strong supporters of Republicans, these Major Corporations have dictated our Laws and crushed the common man under.
Good Luck getting BushCo to listen…
Posted by: Aldous at June 6, 2005 08:47 PMNice job, Chuck. I think most people know the system stinks but few know the full extent of it. But that old bugaboo “socialized medicine” will keep us from addressing the subject to any great extent, at least for the time being. As a result, many our people suffer, nearly all of us pay a fortune, many of our more critical businesses are much less competitive than their international counterparts due to high benefit costs, and we remain the only nation in the industrialized world to lack a universal healthcare system. Of course, the chances of getting this thing fixed are about the same as getting a modern doctor to make a house call. Health savings accounts, anyone?
Posted by: Reed Sanders at June 6, 2005 08:52 PMGovernment is mostly to blame for the increasingly unaffordable and unreliable health-care system.
PROBLEM: The United States has the most expensive healthcare system in the world with almost yearly double-digit increases in costs, increasingly inadequate and shoddy service and an ever expanding population of people too poor to afford any healthcare at all.
OBJECTIVE: An affordable, high-quality, universal healthcare system.
SOLUTION: THE DIRECT PAY MEDICAL FUND PLAN
INTRODUCTION: Calls for healthcare reform almost always include a single payer system solution. Most, if not all envision a system administered by the Government, as in Canada or Britain. ALL SUCH PLANS WILL BE MISERABLE FAILURES; medical costs in the United States did not start to escalate at almost yearly double digit rates until the Government, with the best of intentions, set up Medicare and Medicaid. In effect, the Government agreed to be the final deep pocket payer for whatever bill was sent to it. The result: costs skyrocketed, medical fraud became institutionalized, and actual medical care quality declined.
ANY AND ALL ATTEMPTS TO CONTROL COSTS WILL FAIL IF EITHER THE GOVERNMENT OR INSURANCE COMPANIES ARE THE GUARANTORS OF FINAL PAYMENT.
The DIRECT PAY MEDICAL FUND PLAN eliminates all reliance on either the Government or insurance companies, it further eliminates all middlemen between the actual providers, ie, doctors and dentists, and the patients.
HOW WILL IT WORK? Regional MEDICAL FUNDS will be set up. These Funds will be wholly owned by and administered on behalf of the medical workers.(doctors, dentists, nurses, lab and xray tech, etc.)Every medical professional will be required to join one of these regional funds and work full time for the Fund. Every American will be required to join it’s regional plan and automatically, through payroll deduction, contribute 5% of each paycheck plus $20 per dependent. Each American will then receive a member card which will entitle the holder to full and complete medical care (including all prescription drugs) with absolutely no additional charges or copayments. ALL AMERICANS WILL BE COVERED CRADLE TO GRAVE. The homeless and unemployed will be treated free-of-charge.
WHAT WILL THE GOVERNMENT’S ROLL BE? Some may have noticed that one major middleman yet remains; hospitals. UNDER THE DIRECT PAY MEDICAL FUND PLAN, PRIVATE AND STATE HOSPITALS AND CLINICS WILL HAVE NO ROLL.
Also, under this plan, veterans will no longer get second class treatment. ALL VETERANS HOSPITALS WILL BE CLOSED, and veterans will be entitled to the same high quality care as every american.
The Federal Government will initially fund the building of a nationwide network of the most modern up-to-date hospitals and elder care facilities. These facilities will then be turned over, gratis, to the the regional MEDICAL FUNDS, and thereafter be exempt from all taxes and utility charges.
The goverment will need to address, by legislation, structural changes to ensure:
1. An ample supply of high quality, low cost drugs. (See link above)
2. An ample supply of better trained and service oriented professionals.(See link above)
3. A system to monitor the care provided to ensure all Americans are receiving the best possible care.
WHO WILL BENEFIT?
1. Every American who requires medical care or service.
2. Every business as they will no longer have any employee healthcare costs.
WHO WILL OPPOSE THIS PLAN?
1. All insurance companies.
2. All private hospitals and hospital corporations.
3. The American Medical Association.
4. The Government bureaucracy for Medicare and Medicaid and all it’s subcontractors and suppliers.
5. Almost all Congressmen and Senators who have been and are regular recipients of bribes (called campaign contributions) from most of the above listed groups.
A fundamental change in our tax system will accompany this reform plan: HEALTHCARE WITHHOLDING WILL BE BASED ON THE GROSS INCOME OF EACH INDIVIDUAL AND WILL HAVE NO CAP OR UPPER LIMIT. FEDERAL WITHHOLDING TAXES WILL THEN BE BASED ON THE ADJUSTED GROSS INCOME.
_______________________________
This is just one of many of the Nation’s most pressing problems.
The nation is facing many pressing problems, now culminating at the same time, that can never be resolved if government is not willing to do so. A fundamental change in government must take place first, but only the people can make it happen. Voters must be responsible and do their part to peacefully force government to be responsible also. This One-Simple-Idea provides a solution to voters that is: easy to understand, easy to do, doesn’t need a party, doesn’t need a lot of money, doesn’t need labels or other divisive tactics that divide and cleverly distract the people from the fact that government is failing us and we’re failing ourselves for allowing it. This one-simple-idea wisely uses the one thing each voter already has and should learn to use wisely to count the most to make both, the people and government responsible and accountable: their vote
I took my 14 y.o. daughter to the orthopedist today. Turns out an old knee injury (minor at the time) resulted in small bone chips separating from the top of her fibula, lower leg bone, just below the knee cap. It has begun to swell, and become tender and at times painful when pressed on, and aches when her leg is bent for a protracted period of time.
He took x-rays and felt her knee and told us what the deal was. He said what is happening is the tiny bone chips are embedded in and lying underneath a tendon which comes up to her knee. These chips are irritating the nerves in her tendon causing the pain.
We asked what could be done. He said surgery. I asked will that fix the problem. He said, it will help and she definitely needs it done. I asked if the surgery would end the pain. He said, not all of it since he won’t be able to get all the fragments out of the tendon because getting them out would shred the tendon, but he can get the ones lying under the tendon. I asked if the swelling and bump would go away. He said, no, but it would get smaller.
I asked him if the surgery could be done with a local aenesthetic. He said no, she would have to go completely under. I asked what the risk factor was with her going under. He said it is small. I asked how small, he said, small. I asked if people die from going under. He said a very small number do. I asked if she could go into a protracted coma as a result. He said he could not give any guarantees.
I asked if it would improve on its own over time. He said yes, eventually the body will create callouses around the fragments and they won’t irritate the tendon and nerves so much later on. I asked if the pain would go completely away with the surgery. He said probably not.
So. In his expert opinion would should spend many thousands of dollars for surgery that could kill my daughter or put her in a coma so that we could reduce the swelling a little bit and maybe reduce the pain and discomfort some, but, it could be years before all the pain went away.
Since the pain will go away all by itself eventually, and there is no threat of reinjury due to the chips, I decided not to risk my daughter’s life to accomodate the expert opinion of the Dr. and line his pockets for a condition he could not cure in the first place.
what do you think? Should my daughter suffer some pain and go without the surgery or should we pay attention to the experts and impoverish our own existence while elevating theirs?
Expert opinion my ass. If I had not asked the right questions, the Dr.s worthless expert opinion would have caused us significant financial harm while not curing her problem. How many other millions of Americans risk unnecessary surgery only to find the surgery did not cure the problem?
I had surgery once prompted by sleep apnea to correct a deviated septum to clear the airway. Guess what? I still have a deviated septum which is worse now than before surgery, and my sleep apnea turned out not to be related to my deviated septum at all. Cost, back then, $5,445.00. And for that money I got zilch, nada, “just another day older and deeper in debt”.
Posted by: David R. Remer at June 6, 2005 10:55 PMDavid, you should consider medical tourism. If they can’t fix your daughter’s knee in New Delhi, at least you get to see the Taj Mahal. :)
And those HSA’s Bush is so fond of are great tax shelters for people who can already afford healthcare. Of course if you can’t afford it, an empty tax-free account doesn’t help, does it?
The one proposal that both Kerry AND Bush offered up during the campaign was incentives to digitize and computerize healthcare administration. It doesn’t get at the root of the problem, but it should cut current costs in half by reducing per-transaction costs from $25 to a few pennies.
Democrats, of course, are offering solutions like that. Republicans… Well, the election is over, isn’t it. No need to pander to the middle-class after they’ve served their purpose. ;)
‘In other words, why did Reaganomics succeed so well in the airline and telecommunications industries, for example, but fail so abysmally in the healthcare industry?”
I’m sorry, Maybe I am missing the point here, but aren’t the Major Airlines all operating in the red? Except for Southwest. And which telecommunications industries are left? I think they are all made overseas now, tell me if I am wrong. I AM HOPING THAT I AM. This is where Reaganomics has left us. Any praise left for that actor now? Is it any wonder that healthcare costs
are where they are? Still believe that Reaganomics, was good for US? “The rich got richer, the poor got poorer, all off the backs of the middle class.”
As always,
Wayne
Hi all:
Posted by Chuck Hanrahan at June 6, 2005 04:39 PM
I forgot to give You kudos or acknowledge a fine article, please accept my sincerest apologies.
As always,
Wayne
Hi Wayne,
Thank you for your generous comments.
Although I agree with you that, taken on whole, Reaganomics is patently ludicrous, I think that some industries benefited from less regualtion. As technologies improved & competition increased, the relative prices for both telephone service & air travel have fallen dramatically since the mid-1970’s.
But what’s good for the consumer isn’t always good for the producer. Individual airlines & telcom companies may flourish or perish, but the market survives as long as fair market conditions exist (i.e. real competition within a supply & demand dynamic). If half a dozen airlines go under, it may be a tough pill to swallow, espeically for their employees, but that’s better than the government propping them up artifically. After all, when was the last time you drove to work in your Studebaker or a DeSoto?
Just because Reagan’s governmental and taxation credo of “less is better” was astoundingly simplistic, profoundly injurious & flat out wrong most of the time doesn’t mean it was wrong all of the time. Reaganomics worked about aw well as a broken clock, but even a broken clock is right twice a day.
Chuck
Posted by: Chuck Hanrahan at June 7, 2005 05:29 PMRoving bands of Gunslingers? Thankee Sai for thine suggestion. All you who failed to suggest this have forgotten the face of your fathers.
(a little Dark Tower humor)
Seriously, though, as a middle class American who knows what it’s like to have a health care system that doesn’t take care of your health, I think it’s high time we put some regulations in so that the insurance and drug companies can no longer extort money from folks for healthcare that never shows up.
Posted by: Stephen Daugherty at June 7, 2005 05:59 PMA few years ago, California Democrats made it illegal for insurance companies to collude on prices, and premium costs immediately dropped 20%.
Posted by: American Pundit at June 7, 2005 10:06 PMAnd we need consumer review boards, made up of retired physicians and nurses. If a person undertakes surgery for a deviated septum and after the splints are removed the septum is still deviated, there needs to be a review board willing to hit such shylock doctors with some stiff fines.
We have no consumer review boards in America over medical practice and now tort reform has reduced much of the recourse consumers did have.
It is time for consumers of health care to strart demanding the review process be removed from the perpetrators, and placed in the hands of consumer advocates.
Posted by: David R. Remer at June 7, 2005 10:25 PMHave you ever thought about the millions of people that work in the medical insurance business.
Do you think they’re really providing you a necessary service?
Think again. Why pay all of these people unnecessarily?
Why not pay medical providers directly?
PROBLEM:
Government and insurance companies set up a system with themselves as middlemen, resulting in:
[X] skyrocketing costs;
[X] increasing medical insurance premiums;
[X] increasing malpractice insurance for health providers;
[X] increased taxes;
[X] institutionalized medical fraud;
[X] proliferation of fraud, and ridiculously high, multi-million dollar judgements (making the ambulence chasing lawyers rich mostly);
[X] an over-complicated system, confused by too many parties with conflicts of interest;
[X] insurance companies making medical decisions instead of your doctors;
[X] medical care quality becoming increasingly unreliable and expensive;
[X] ALL attempts to control costs will failed, since government or insurance companies are the guarantors of final payment.
SOLUTION:
We need a direct pay medcial FUND PLAN:
(1) administered by the healthcare providers themselves,
(2) that eliminates all reliance on either the government or insurance companies (middlemen) between health providers and patients,
(3) and eliminates insurance company bean-counters making medical decisions;
(4) will help control costs, since government and insurance companies not the guarantors of final payment,
(5) will reduce fraud because there will no longer be an ignorant and indifferent middleman that doesn’t care about fraud, and merely raise insurance premiums or raise taxes;
CONCLUSION:
(1) Get rid of the middlemen (government and insurance companies).
(2) People pay directly into a medical fund that must be managed by the medical providers themselves, by people with medical knowledge and backgrounds.
(3) This won’t solve everything, but it would be a big step in the right direction. What we’re doing now isn’t working.
I have group medical insurance at the moment through an employer, but was checking around the other day, and the costs per month (just for me: age 47) were ridiculous. Most offered what I have now for about $600 per month. The cheapest was about $300 per month with $7500 deductible. Ouch! It would be better to just self insure; open an account, start with as much as possible (say $15K), and then put $250 per month into that personal account. And, put portions of it into CDs and other interest bearing instruments. In five years, it would grow to more than $30K (over $45K in 10 years). Then, if I never get sick, I’ll still have that money. Medical Insurance companies are about to price themselves right out of business, because few will be able to afford it, and those that can, should just self insure.
Posted by: d.a.n at June 8, 2005 09:50 AMChuck,
Good article! It is clear that our skyrocketing healthcare cost are starting the effect the U.S. economy, and our tax dollars adversely; case(s) in point United Airlines and GM, not to mention the rest of the Airline industry. Labor has long be recognized as the single biggest cost a business faces, but healthcare is fast become the single biggest cost of employing a human being outside of his or her salary. Something must be down and quickly; we have no more fingers to stick in the dike.
We need Universal Health Care and we need it soon. It can and should be a graduated plan, but one the covers all Americans once and for all. None of us live in a vacuum, what affects the poor in the inner-cities of this nation will eventually filter out to the suburbs where the more affluent live and breed. Virus’ do not care how much you make or how high your fence is; flesh is flesh, is flesh.
For a “Christian” nation we are woefully lacking in even a basic understanding of Christian doctrine. Would Jesus allow children to go hungry and without healthcare? Why the conservative worry about a group of cells frozen in a dish, real live children are at risk because they lack health care. Some culture of life!
“Expert opinion my ass. If I had not asked the right questions, the Dr.s worthless expert opinion would have caused us significant financial harm while not curing her problem. How many other millions of Americans risk unnecessary surgery only to find the surgery did not cure the problem?”
and how many people undergo surgery or chemo or therapy that is life-saving - without which they would lose quality of life OR life itself? YOU are going to the doctor and asking for their medical opinion. they will do what they can to address your problem. it isn’t always the answer we want - and it isn’t always a cure - but it’s the best that a trained specialist can do.
as far as the apnea - doctors are humans - highly trained specialists yes - but humans too. they make mistakes. it’s inevitable. why is it so hard for people to remember that?
i just wanted to defend the medical community. this is in no way a discussion of the article at top.
Posted by: cat at June 15, 2005 12:11 AMcat, I understand human error. But if I err and it costs the IRS $5445.00, they make me pay it back to them. I would be happy with the medical system reimbursing patients their costs and time and suffering for medical errors. Oh, shoot, that’s right, tort reform ended that practice, didn’t it?
Posted by: David R. Remer at June 18, 2005 02:20 AM
