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Posted by: thepinetree on 06/18/2017 04:19 PM Updated by: thepinetree on 06/18/2017 04:20 PM
Expires: 01/01/2022 12:00 AM
:

Sickness Unto Death Part VI: Free Market Health Care that Isn't Free ~ By John MacWillie, Ph.D.

Murphys, CA...If you draw a graph of the American health care system, it looks like a home-stitched quilt made by someone that cannot see. Nothing fits together -- not the colors, the design, or the function. There are a lot of reasons for this picture, but how we fund health care is the single biggest problem.




By almost any measure, the American version of health care is bizarre: one health care system for seniors (Medicare); another for veterans (Veterans Health Administration); yet another for the poor (Medicaid); and for a majority of Americans employed by medium and large companies, there is a network of possibilities offered by a mix of not-for-profit and profit-making insurance firms; finally, there is a stop-gap measure for employees that lose their jobs (COBRA). That leaves a large percentage of Americans with no insurance coverage at all -- perhaps of because of pre-existing conditions, lack of financial resources to purchase private health insurance, or works for a small business doesn't offer any health insurance.

As one moves from one plan to another, those lucky enough to be insured may have to change doctors, dentists, clinics, laboratories, and therapists. And along with clinicians, the quality of insurance coverage changes, as do patients' payments for premiums and deductibles.

How It All Began

How did we get such a patchwork quilt of services and insurance? Surprisingly, the adoption of health insurance in the United States is relatively new. Before World II, health insurance programs were spotty at best and were primarily run by hospitals -- the first one was in Dallas -- to help fill empty beds. This concept became what we know today as Blue Cross. During the war, U.S. employers, desperate to find workers, began to offer health insurance as a benefit of employment. In 1943, the Internal Revenue Service ruled that employer-sponsored health care benefits would be tax deductible as an expense of doing business. By the early 1950's, more than two-thirds of adults were covered by health plans.

Research and development, as well as research on the battlefield, led to major innovations in health care technology (medicines, procedures, training, and facilities). Not only did this R&D lead to much better health outcomes, it was also more expensive. In 1900, the average household spent $100 a year (in dollars equivalent to 2009) mostly on quack remedies like "snake oil". By 1950, Americans were spending $407 per person for health care services. By 1980, that per person rate jumped to $2050 per year and by 2009, the cost increased to $6807 per year (all dollars in current 2009 dollars). Today, the cost is $7847 in 2009 dollars (or, for those keeping track with earlier columns $9451 in today's dollars).

Somebody is Paying More

What is most striking in this data is the proportion of this cost paid out of pocket by consumers and how much is paid by insurance companies and government agencies. In 1900, all costs were borne by the consumer. In 1950, fifty-six percent of health care costs were paid out of pocket. But by 2009, only fourteen percent of costs were paid by consumers and eighty-six percent of costs were paid by third parties. (All data except 2015 from Fuchs, New England Journal of Medicine, 2013. Data for 2015 is from OECD 2017).

Why?

The principle reasons for this increased cost are complicated, but there is no doubt that there are three very significant reasons.

First, as mentioned in an earlier column, Americans love technology. Technology promises better health care and better health care promises a longer life. The problem with this syllogism is that it isn't working for Americans -- we invest more in technology than any other country and we live substantially shorter lives than those living in comparable systems.

Second, attempts to contain these costs by eliminating duplicative purchases and redundant capital investments have never made it out of Congress. At least twice in the past fifteen years, legislators responding to the pleas of pharmaceutical and medical device manufacturers have buried these reforms.

The third major reason for cost increases is the rise of the for-profit insurance companies in the market, collusion, and market consolidation (acquisitions). In 1981, 12% of the health insurance market was supplied by for-profit insurance. By 1997, that proportion increased to 65%. (Jonathan Cohn 2007). Today that percentage is estimated at more than 70%. It is estimated that the cost to consumers for for-profit insurance companies as intermediaries is between 7-15% of their annual premiums.

Insurance Monopolies

In 2015, Aetna (2016 revenue = $60 billion) and Humana (2016 revenue = $54 billion) announced their intention to merge. If permitted, the two firms would control 25% of the Medicare market. It isn't as though Obamacare hasn't been good for business. Aetna shares were trading at $42.09 per share and Humana's at $79.52 on Jan 1, 2008 before President Obama took office. On October 1, 2016 (when most forecasters thought Hillary Clinton was going to win the Presidency and there was no expectation of "repeal and replace"), Aetna's shares traded at $124.01 (+194%) and Humana's were traded at $171.53 (+115%). A Federal judge blocked the proposed merger in 2017 citing the consequences of monopolization. Another merger by Anthem and CIGNA has also been blocked for the same reasons.

Many Congressmen refer to the importance of a free and open health care market. But the data strongly suggests that what we have isn't a market, but a monopoly of insurance interests in which sicker citizens are abandoned while Aetna's CEO pockets $17 million in annual compensation.

[To be continued]


AUTHOR: John MacWillie is a native of Calaveras County, California. He graduated from UC Berkeley where he studied European history and bio-engineering. His graduate studies include economics and urban planning at New York University and philosophy at San Francisco State. He received his Ph.D. from the University of Leeds in the U.K. He worked for ten years in law enforcement policy and administration in New York City, spent nearly thirty years as a senior executive in the software industry, primarily in information security, and for the past twelve years has been teaching in undergraduate and graduate programs at California State University -- East Bay in multimedia, art history, and criminal justice. He resides with his wife, an attorney, in Murphys CA.


Comments - Make a comment
The comments are owned by the poster. We are not responsible for its content. We value free speech but remember this is a public forum and we hope that people would use common sense and decency. If you see an offensive comment please email us at news@thepinetree.net
HAHAHAHAHAHA!
Posted on: 2017-06-18 16:21:29   By: Anonymous
 
HAHAHAHAHAHAHAHA! LYING, CHEATING, CROOKED HILLARY! HAHAHAHAHAHAHAHAHA!!

[Reply ]

    Re: HAHAHAHAHAHA!
    Posted on: 2017-06-18 17:47:34   By: Anonymous
      Edited By: thepinetree
    On: 2017-06-19 06:24:51


    [Reply ]

HE IS A FUCKING INSANE POTUS
Posted on: 2017-06-18 17:49:07   By: Anonymous
  Edited By: thepinetree
On: 2017-06-19 06:26:23


[Reply ]

No Subject
Posted on: 2017-06-18 18:41:53   By: Anonymous
 
This series is thoughtful and informative. Thank you for bringing it to us though I apologize on behalf of those who continue to hijack the Pine Tree with their ignorance. Please know many are reading.

[Reply ]

    Re:
    Posted on: 2017-06-18 20:06:31   By: Anonymous
     
    It is sad that some are so afraid of other's opinions that they ruin a posting thread.
    What PINETREE should do is limit post text to 144 character spaces and that would stop the BIG Space Dude from ruining public discourse and free speech.

    [Reply ]

      GOP Christian Values
      Posted on: 2017-06-18 20:40:40   By: Anonymous
       
      Just Die already if you can't afford jacked up health care grift.
      The GOP AHCA is only about tax cuts for $Billionaires- their 3.9% tax to fund health care for 24 million.
      Hel* No let them die- GOP OK, we will kill for you.

      [Reply ]

DEATH PANELS
Posted on: 2017-06-19 02:19:25   By: Anonymous
  Edited By: thepinetree
On: 2017-06-19 06:23:00


[Reply ]

Groups
Posted on: 2017-06-19 03:57:49   By: Anonymous
 
If one is not a member of one of the bargaining groups mentioned above then the insurance companies have a license to screw you unmercifully. Check the price of insurance for the employed small business person if you are in doubt.

Too young for medicare, too much income for medicaid (but not enough for medical care), and no group bargaining power - you're looking at $15-$25,000/year for a $5,000 deductible policy so you'll end up bleeding profusely from the wallet or just uninsured. Meanwhile society's parasites are getting free health care from medicaid or the hospital emergency department.

National standardized policies, standardized regional rates, and no government mandated regional monopolies. Allow insurance companies to rate based on behavioral factors - smoking, obesity, exercise, etc.

There's a lot that can be done to improve the system without handing the whole thing over to the government (would the VA be your first choice for medical care?) but that will not occur in a country that has the best politicians money can buy and politicians who's careers depend on handing out "free" benefits to their constituents.

[Reply ]

Groups
Posted on: 2017-06-19 03:57:49   By: Anonymous
 
If one is not a member of one of the bargaining groups mentioned above then the insurance companies have a license to screw you unmercifully. Check the price of insurance for the employed small business person if you are in doubt.

Too young for medicare, too much income for medicaid (but not enough for medical care), and no group bargaining power - you're looking at $15-$25,000/year for a $5,000 deductible policy so you'll end up bleeding profusely from the wallet or just uninsured. Meanwhile society's parasites are getting free health care from medicaid or the hospital emergency department.

National standardized policies, standardized regional rates, and no government mandated regional monopolies. Allow insurance companies to rate based on behavioral factors - smoking, obesity, exercise, etc.

There's a lot that can be done to improve the system without handing the whole thing over to the government (would the VA be your first choice for medical care?) but that will not occur in a country that has the best politicians money can buy and politicians who's careers depend on handing out "free" benefits to their constituents.

[Reply ]


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