It had puzzled me for awhile why medical related costs were so expensive. Why does a simple, 20 minute operation to remove a cyst cost $700? Why does an aspirin pill cost $20?
To any person with common sense, this should beg some questions.
To find the answer, let us backtrack about 60+ years into the past to discover what caused these skyrocketing costs.
Healthcare wasn't always so expensive.
Believe it or not, there used to be a time in this country when most people could easily see a doctor and get treatment without paying an arm and a leg (no pun intended).
A certain generation of Americans remembers when doctors made house calls, and even got to know their patients pretty well.
Ron Paul (who used to be an obstetrician) has said that there was even a time when doctors would take care of the poor at a very low charge or even for free.
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| Dr. Ron Paul |
The author Jacob Hornberger grew up in Laredo, Texas in the 50's. According to the Census Bureau, it was the poorest town in the nation, as measured by per capita income. And yet, he stated: "I never knew of one single doctor who turned people away. They treated everyone who came into their office. I never heard of a doctor complaining about having to provide free services to the poor."
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| Jacob Hornberger |
The poor often brought doctors gifts as some sort of compensation. How did the doctors do financially?
"They were among the wealthiest people in town." Hornberger went on to say that the wealthier and middle class citizens fees subsidized those that couldn't pay. And since there was less bureaucracy and inefficiency (I will get more into this below), the doctors could focus more on caring for their patients.
How did we get here?
One of the reasons is the requirement of medical insurance itself.
As stated above, it used to be the case that most medical costs were handled directly. You visited the doctor, you paid a fee. You had an operation done, they sent you the bill.
However, this started to change starting during World War 2.
When the war started revving up, in addition to 11 million men going to fight, workers were needed to produce war materials. Since there were numerous businesses competing for labor, wages rose dramatically.
The government wanted to limit the cost of the war, so they set limits on wages and prices. Employers could only pay their employees a certain amount.
Since there was such a shortage of labor, employers had to find other ways to attract workers. They started to offer employer paid medical insurance for people that came and worked for them. The insurance wasn't booked as "taxable income", and it still attracted workers, so this was a win-win for the businesses.
This continued after World War 2, when many labor unions started demanding employer mandated health insurance as one of their contract demands. Many employers started offering health insurance as well, to prevent their own employees from unionizing.
Why did this drive up costs?
Since the costs of medical services were now being picked up by a third party payer, the insurance agency (which started off as something the employer paid for, but later could be paid for individually) there was less incentive to control costs.
Here's why:
1) Pooled risks means everyone pays for everyone (essentially), rather than people paying for the costs on an "as needed" basis. People tend to care less about the costs of things when they are spread amongst many people. (Which explains why we have an $18 trillion National Debt, and an estimated $200 trillion of unfunded liabilities!!)
2) Since the insurance fees were/are subject to rise, this gives payers less and less control over their medical costs. Constantly rising medical costs just became an accepted fact of life. It's like that old analogy: "If you put a frog in a pot of water and gradually turn up the heat, the frog will boil because it will get used to the gradual increase, and therefore not notice it. Whereas if you throw the frog into a pot of boiling water, it will jump out immediately." More and more in recent decades when the costs started reaching dizzying heights, the public has pushed harder for a broad sweeping solution such as Obamacare, or the planned but never implemented, "Hilarycare" in the early Nineties.
3) Insurance companies are in business to make a profit, so naturally they take a certain cut for themselves. As somebody that supports true capitalism, I have no problem with people making money. The problem is more how they are making it, which is not by providing a good or service, but by being (in my view) an unnecessary middle man, which is only there because government requires it. Another issue is the amount of cronyism and corruption that comes under this sort of system. (I will write more in this the selection below about Obamacare.)
4) Doctors themselves have less incentive to control costs, for the similar reason stated in point 1. The costs are being picked up by a third party.
5) Another factor is the improvements in technology. Yet in my view, even these could be better controlled because the prices of computers and like technology have gone down, relative to quality. The first few computers were the size of a house and could barely do anything. Now we have iPhones and the like that are as powerful as computers that came out a decade or so ago. I can play Nintendo 64 games on a device I can hold in my hand.. and about 20 years ago that system was considered top of the line.
6) One more issue is the lawsuits against doctors and hospitals. While I defend someone's right to sue for damages done by malpractice, this has certainly driven up the costs. I think perhaps a cap is needed on the amount of money that can be settled on.
A very important, but largely never discussed problem: The American Medical Association
This organization, which is really just a glorified union, has been a thorn in the public's side. Like all unions, it works primarily for its own interests, rather than "the public good".
Politicians are afraid to go against it, because it has been around for so long, has tremendous influence and power, and the public is largely unaware of what it has done.
In 1910, a man named Abraham Flexner was commissioned by the Carnegie Foundation to write a report about American medical studies. Flexner had no advanced degree or medical background. He only got this task because his brother was Dr Simon Flexner, head of the Rockefeller Institute for Medical Research.
The AMA took his advice, and immediately shut down schools that made a profit, accepted African Americans and/or women, and specialized in homeopathy.
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| Abraham Flexner |
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| Dr. Simon Flexner |
The AMA has:
- Deliberately restricted the number of medical schools. Literally half of the medical schools in the country were shut down in the initial years following the Flexner report.
19 of the 50 states have been limited to only having one school in their state. Are we supposed to believe that this was done with the "public's best interest" in mind? Is this not reminiscent of the government restricting competition, such as they do with the Post Office?
- Restricted the number of doctors, thus making each doctor more valuable and earning them a higher salary. Great if you're a doctor, not so much if you're a patient.
- The whole "Certificate of Need" system has created an obstruction for new hospitals and medical practices. The system only allows a new medical practice or hospital to be opened in an area if the existing hospital (which itself is approved by the AMA), says it's okay.
- Restrictions on buying insurance across state lines, which would further increase competition. I think too, that in today's world with information being so accessible, it would be great to let people buy from companies wherever they are located, since they could easily transmit their information. This would drive the prices down too, obviously.
Obamacare and the problems with it.
Believe it or not, I was for Obamacare originally. I wanted, and still want everyone to have affordable healthcare.
I believed the hype. I know now that I supported a lie.
The original intention of Obamacare was thus: Create a public option where people who can't afford conventional health insurance could buy it. People on the political left wanted single payer, people on the right wanted a more free market solution. This was supposed to be a compromise of both those ideas.
It's crazy to me, that this plan was conceived by the Heritage Foundation (a right wing think tank, for those that don't know.). The problem was this idea didn't pan out as planned.
For one thing, many people that had plans previously did in fact like their current plans. And what did the President tell us again and again?
"If you like your healthcare plan, you can keep it. PERIOD."
When the ACA was implemented, numerous people started getting cancellation notices in the mail, saying that they could couldn't keep their plan, since they didn't fit under the Obamacare guidelines. That, and they had to pay more money with the now approved plans.
I have to ask... Why is it that certain companies qualified, and others didn't?
Were the qualifications based on actual medical needs or political reasons?
This doesn't even go into the fact that restaurants and other businesses have cut worker hours in order to be exempt, have to pay fines if they don't offer health insurance that meets the government's approval, Obamacare doesn't really help with competition, and myriad of other problems.
And that Social Security, Medicare, Medicaid have unfunded liabilities (promises to pay out to future recipients) of over $70 trillion dollars. That's a discussion in of itself.
Supply and Demand:
An issue that I can't emphasize enough is that the ACA doesn't address the supply part of the supply and demand equation in our healthcare system... All it does is artificially stimulate demand for the goods and services.
Under our current system, demand can rise without limit. If demand can rise without limit, so can the price.
Increased demand+(Relatively) fixed supply= Rise in prices
Obamacare is not actively opening more hospitals, removing barriers to entry, or coming up with more efficient ways to train doctors.
It is true that more doctors and nurses will be created by this, but that's only because people are being forced to pay for them. It's not that we're training more doctors, and they're competing with one another to drive the prices of their services down. Not right by me, when the average American has less than $500 saved.
Issues that I have with government provided medical care in other countries:
A common objection that I hear all the time to what I'm saying is:
"Well Canada, Britain, and (fill in the blank) have healthcare provided for them by the government!!!"
I realize that superficially that sounds nice, but you have to look at the details and see what I'm critical of.
- What incentive does the government have to control costs? Can anyone name for me a single area in which our government has controlled spending? Politicians aren't thinking long term... they're thinking about winning their next election. They don't care if they add substantially to the debt, because it will just fall on the next people to pay it off.
Contrast this with a private business where you have to earn the firm money or else you're out.
-Countries such as Britain have limited doctor pay. Although this sounds good, it creates a series of problems.. For one thing, with lower pay, but still the stress, risks, and hours, fewer and fewer people will want to go into medicine. This would mean less and less quality in our medical care. In addition to the quality suffering, there are fewer doctors... so in many cases, patients have to be rushed through check ups and other procedures in order to accommodate everyone.
Also, because there are fewer doctors, this leads to longer wait times. I read a story of someone who had to wait a year in Canada for a hip implant, and their emergency room wait times are even longer than ours.
- I have issues too with the types of operations that the tax dollars cover in those countries cover... Things like:
Breast implants, Hair implants, Sex change operations, Nose jobs, etc.
If you want to do that on your own, at your own expense, fine by me... but I worry that politicians might start doing that here as a way of buying votes.
Where do we go from here?:
I realize that I'm not a doctor, and I don't have all the answers, but I think one of the keys here is to disentangle the special interests from our healthcare system.
I'm not sure that the AMA can be broken up, but it needs to at least be stripped of some of it's power.
A few other ideas:
- Do an "apprenticeship" type system with doctors. One idea that I came across was have a physician take on six or so "associate physicians" that he could supervise as they carried out basic tasks under him. Things such as setting a broken bone, telling if a person has strept throat, etc. The tasks that they would do would be based on their qualifications, and he as well as they would be held legally liable if something went wrong.
- One study I read said that nurses can do as much as 80% of the care that primary physicians do, and at only 40% of the cost. There's another idea.
- Our entitlements (Social Security, Medicare, Medicaid) have to means tested... If you earn above a certain level of income, you get less money... if you earn well over six figures, you don't get anything.
Thank you all for reading! If anyone has any comments, suggestions, advice, I will be glad to hear them!
-STK
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