Tuesday, December 8, 2009


As promised from last night ...

Today we’ve learned that the U.S. Senate has formed a deal on health care reform. I haven’t seen what’s in the deal so I won’t comment on whether I like it or not. However, as I promised last night, I am going to present a rather quick overview that explains why we need REAL health care reform. First, the cost comparisons (links have been provided in previous posts; click on topic labels below).

I think one of the greatest concerns I have is what non-competition and virtual monopolies have done for private health care costs in America. Think about this: In 1970 America spent 7.2 cents of every dollar we generated on health care costs. Today we spend 17.6 cents of every dollar we earn on health care. Here are projected costs in America, starting the year 2018, if we do absolutely nothing regarding health care.

* 2018 = 20 cents of every dollar earned goes to health care.

* 2025 = 25 cents of every dollar earned goes to health care.

* 2052 = 49 cents of every dollar earned goes to health care.

Put another way, our monopolistic private system will eventually swallow our national income if we do nothing to reign in costs.

Does this have to happen? Not if we look at costs around the world, and how they achieve those costs.

If we look elsewhere we see costs that aren’t remotely near what we spend as a nation.

* Canada   = 10 cents of every dollar earned goes to health care.

* France    = 11 cents of every franc/Euro earned …

* Germany = 10.6 cents of every mark/Euro earned …

* Japan      = 8.1 sen of every yen earned …

* UK         = 8.4 pence of every pound earned …

* Switz.    = 11 centimes out of every franc/Euro earned …

What’s worse is what we spend on administrative costs in America. The most widely accepted figures tell us that the private sector spends about 30 cents of every dollar they get in premiums on administrative costs (media, profits, bonuses, etc.). The federal government, on the other hand, spends 2 cents of their budget on administrative costs.

More recent, industry friendly, estimates point to the federal government spending 5 cents of every health care dollar on administrative costs while the private sector spends approximately 17 cents. Still, either way you slice it, health care administrative costs are at least 3 times as high in the private sector than they are in the public sector.

But, wait, it gets worse.

What does health care cost our national economy in terms of competitiveness and efficiency? Think of it this way. Corporate America has to purchase health care at a price that is 30% higher than what other countries pay (see above). Want to buy a U.S. made automobile? Tack on 30% extra to cover the health care costs of each worker in America versus what Japan and Germany pay to build their automobiles.

Rising co-pays, skyrocketing premiums, denial specialists, and suddenly being dropped from coverage also work against individual security and overall economic efficiency. Simply put, when workers are forced to transfer more of what they earn to the health care industry because of the non-competitive nature of the industry workers are worse off. This not only robs consumption from other areas of the economy but it creates financial land mines for individual families beset with sudden surprises, like claim denials or being dropped from insurance rolls.

These financial land mines, in turn, have contributed to a surge in personal bankruptcies in America. More than 1.2 million bankruptcy cases are expected to be filed by the end of this year. Well over half of these are filed because of the inability to deal with the costs of catastrophic illness. Incredibly, half of catastrophic illness bankruptcies happen to families with health insurance.

Finally, while we might be able to put an accounting figure on the cost, there is no way to measure the personal and emotional costs when 44,000 Americans die from lack of health insurance in America.

Still, many on the far right will argue that quality and customer satisfaction are what separate America from the rest of the world? Let’s take a look at the claim.

This OECD report makes it clear that more people in the U.K., Germany, and France (among others) are happier with their overall health care system than we are here in the U.S.

Still, there’s no doubt that a good number of Americans are happy with their health care. Here’s why. What the vast majority of Americans like about their health care is really mandated and/or covered by the government. Think about the following:

* The federal government covers the elderly, our military personnel, and our military veterans through Medicare, military hospitals, and the VA.

* Private firms and employers are subsidized ($246.1 billion in 2008) by the American taxpayer so that they can provide private health insurance. Put another way, your private employer gets reimbursed by the federal government for providing “private” health insurance.

* Government regulations - and not private insurance policy - forbid private (government subsidized) employer insurance plans from discriminating against employees with pre-existing conditions.

* When we combine Medicare, our military personnel, and what the American taxpayer subsidizes for “private” sector plans we find that 60% of total health care costs are absorbed by the federal government.

* With the federal government involved in covering 60% of all national health costs one thing becomes clear: We’re already paying for a National Health program. We’re just not getting the benefits.

At the end of the day Europeans are more satisfied with their health care system than we are. And to the extent that we are happy with our health care system it’s because the federal government is managing or mandating some of the more key elements that make our nation’s health care system work. Again, we already have a national health care program. We just don’t get the benefits.

In other areas that should make us reconsider why the Party of No opposes reform, we should ask the following questions …

* Why is it that 62.9% of physicians support a public option?

* Why is it that life expectancy is higher in Japan, the UK, Germany and Switzerland?

* Why is it that Portugal, Greece, and even Cuba have better infant mortality rates than we do?

Related to life expectancy and infant mortality rates, I have just one question: Where the hell are the “right to life” crazies in this debate? Just wondering ...

Look, when all is said and done, profit maximization is the primary motive for the private insurance industry. It’s that simple. This explains why the private insurance industry's primary techniques for holding down costs are: (1) practicing risk selection, (2) limiting services covered, (3) constraining payments to providers, (4) hiring & training claim denial specialists, and (5) shifting costs to patients. Improved health care is not in the mix. If this status quo continues we are all in big trouble.

We need national health care reform that brings real reform and real competition. A vibrant public option is supposed to do this ... just as public universities provide a "public option" to those who can’t or don’t want to attend private universities. I get this. Most of you get this. We’ll see over the next few days whether Congress gets it too.
- Mark

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