This Healthcare is Killing Us
The perpetual cycle of money madness.
Summary: The first installment of our healthcare series encapsulated the magnitude of the industry that accounts for 20% of our nation’s GDP and how efforts to pursue universal healthcare were scuttled over the years. Today’s essay examines the role of private insurance in our system and details how Obamacare came to life with little discussion around a public option or the possibility of Medicare for All.
Chapter One: Understanding the scope of healthcare.
The New York Times dropped an article this week detailing the rising U.S. mortality rate. A fall that Dr. Steven Woolf, director emeritus of the Center on Society and Health at Virginia Commonwealth University called “historic.” From the article:
“It was the largest reduction in life expectancy in the United States over the course of a two-year period since the early 1920s, when life expectancy fell to 57.2 in 1923. That drop-off may have been related to high unemployment and suicide rates during an earlier recession, as well as a steep increase in mortality among nonwhite men and women.
“Although the U.S. health care system is among the best in the world, Americans suffer from what experts have called “the U.S. health disadvantage,” an amalgam of influences that erode well-being, Dr. Woolf said.
“These include a fragmented, profit-driven health care system; poor diet and a lack of physical activity; and pervasive risk factors such as smoking, widespread access to guns, poverty and pollution. The problems are compounded for marginalized groups by racism and segregation, he added.”
I want to thank the Times for the proper introduction to our second healthcare episode as we chip away at the American system, how it compares to others around the world and the unique challenges we face in repairing it.
There’s a general belief that the United States has the most inefficient and disparate level of healthcare among what is known as The Organisation for Economic Co-operation and Development (OECD). Unless you’re filthy rich, in which case our care is wonderful. But I digress. For clarity of process, OECD is just one of the acronym organizations that we’re relying on when contrasting systems, structures and outcomes across the world. And that’s a good place to pick back up on the topic and frame the discussion.
In terms of measurement, OECD nations aren’t the be all and end all. To start, this is an organization of 38 member nations representing Europe, the Americas and Pacific region. Naturally, there are a vast number of countries that aren’t represented. The purpose of using OECD nations as a benchmark is because the organization itself is a collection of countries with so-called market economies. There are corollary OECD working groups that draw data from non-participating or full member countries but that goes a little further than necessary for our purposes.
I bring it up because the BRIC economies for example—Brazil, Russia, India and China—aren’t full members but that doesn’t mean their systems and outcomes aren’t relevant to us. Like, it might be surprising to know that China has a market based insurance system. It works differently and nearly every citizen has what’s called Basic Medical Insurance, or BMI, but it’s important to understand there is parity in other places we don’t think of off the bat.
The other comparative area to explore is with respect to outcomes. And as I mentioned in the prior episode, we’re relying on World Health Organization data because it has the most consistent 50 point benchmarking strategy over the longest period of time. Those are enough individual data points to be statistically meaningful and the key element is, of course, a consistent trend line.
Assuming I’ve covered my ass enough, let’s get on with it.
All of which is to say, there’s no perfect way to go about this. The inputs and measurements matter. And no one country, just like no one patient, is the same. But if we’re to rely on global metrics, there are a few unmistakable signs that we’re on the wrong path here in the United States. Beyond the emotion and the politics, we have major structural issues. Not the least of which is spending for care per capita.
Despite spending the most per capita on healthcare by a wide margin, we have comparable to less favorable outcomes. (We’ll talk more about that a bit later.) And outcomes and satisfaction are two different things. In terms of satisfaction, how satisfied overall a country’s citizens are with healthcare access, affordability and quality, the U.S. really has a problem. When you compare it to a country like France, which regularly ranks at the top of the list in terms of satisfaction, we spend double the amount per citizen. These are the gaps that drive policy makers and medical professionals nuts. And yet, when policy measures are introduced we seem incapable of asking the hard questions. Unless it’s Bernie.
But other politicians, like this guy running for office in 2008 recognized the problem using this very comparison:
“We spend more than other advanced nations on healthcare by a substantial amount. We spend about 50% more than France does on healthcare and yet they’ve got universal healthcare. A doctor will come to your house at 3 o’clock in the morning and prescribe you for what you need and you get it for free. Now, yes, you’re paying higher taxes but what’s also happening though is they get a much more efficient system because they have more prevention and as a consequence, regular check-ups, regular screenings, they save money and improve quality over the long-term.” -Barack Obama on the campaign trail in 2008.
What’s fascinating about this particular excerpt is how little of the candidate’s understanding of the problem actually made it into the proposed White House solution once he became President.
Because precious little actually came from the Obama White House.
Because it wasn’t his plan.
Because he didn’t have a plan.
The plan that is today known as Obamacare was originally known as Romneycare in Massachusetts and had, in fact, been circulating in conservative policy circles as early as 1989 by a Heritage Foundation associate named Stuart Butler. In fact, here’s Butler explaining the essential part of what he was trying to solve:
“It seems to me that until we get serious about a budget in the publicly supported—through tax or direct expenditures—the publicly supported parts of the healthcare system, we will never exert the pressure to make the tough decisions on how we actually get healthcare that we really need to do.”
Again, we’ll get to this when we talk about how the ACA came to be, but I want to recognize some of the language as we continue here. That direct tax he’s talking about is what became the so-called mandate. You know, that thing that caused Republicans to try and repeal and replace Obamacare countless times and the very thing that the Roberts court in fact determined was a tax.
Now, importantly, Butler was trying to solve this not to expand coverage or improve outcomes but ultimately to contain costs. He was attempting to devise a way to tax citizens and provide them with direct funds to manage their own healthcare needs. Very much akin to Uncle Nippledick’s (Milton Friedman, of course) idea of catastrophic insurance for all with individual spending accounts. Whereas Democrats ultimately embraced the plan along with every other for profit provider in the country, the original conservatives were trying to dismantle the entire system, especially entitlements like Medicare and Medicaid. Same inputs. Vastly different desired outputs.
All the seats at the table
It would have been impossible to do this series without a book I mentioned last time that an Unf*cker recommended titled The Social Transformation of American Medicine by Paul Starr. At the very least, this would have been different. I want to share a passage that perfectly illustrates the tension that we discussed last piece because it will help us set the table for the two main areas that we’re going to focus on today and that’s insurance companies and hospitals. Here’s Starr:
“The dynamics of the system in everyday life are simple to follow. Patients want the best medical services available. Providers know that the more services they give and the more complex the services are, the more they earn and the more they are likely to please their clients. Besides, physicians are trained to practice medicine at the highest level of technical quality without regard to cost. Hospitals want to retain their patients, physicians, and community support by offering the maximum range of services and the most modern technology, often regardless of whether they are duplicating services offered by other institutions nearby. Though insurance companies would prefer to avoid the uncertainty that rising prices create, they have generally been able to pass along the costs to their subscribers, and their profits increase with the total volume of expenditures. No one in the system stands to lose from its expansion.”
This last point, the idea that everyone in the system stands to gain from expansion is tantamount to understanding how our system developed over time and why the ACA codified and in many ways bolstered the standing of profit oriented organizations. As far as the “who” that Starr refers to, the “no ones in the system,” we gave a partial list last time but let’s zoom out a bit to really drive this point home.
Again, not a complete list but a much more comprehensive view of stakeholders in the system derived from a list of SIC codes or the Standard Industrial Classification system in America. These are the ones who benefit from expansion and they all had a seat at the table in designing the system even further under the Affordable Care Act.
Skilled nursing facilities
Assisted living facilities
Chronic disease specialists
Health care apparel and supplies
Inpatient and outpatient rehabilitation services
Obstetrics, osteopathy, oncology, ophthalmology
Pediatrics to podiatry
Medical malpractice attorneys
Dental supply companies
The Catholic Church
Tribal health services
Wheelchairs and accessibility devices
Hearing aids and eyeglasses
Plastic surgery, cosmetic surgery
Hyperbaric oxygen chambers
End of life care
Electronic medical record companies
Mental health care providers from psychologists to psychiatrists
Medical device manufacturers
Pharmacy benefit managers
Emergency care providers like EMTs and ambulance drivers
Medical contracting and construction firms
That doesn’t include agencies like the VA or the myriad regulatory bodies that oversee each level of care. Or the FDA. USDA. Social Services. Medicare. Medicaid, etc. These are just the organizations largely incentivized by profit. The ones who only stand to gain from expansion. And every single one of them had a seat at the table when designing the system.
Chapter Two: The Insurance Class System
Insurance exists in other countries. Canada has private insurance you can buy to layer on coverage. China, as I mentioned before, has an insurance industry. Germany has private insurance to fill in gaps. But the most common thread among these other nations is that the baseline insurance is federal. Government insurance subsidized through taxation that automatically enrolls every citizen to cover preventive and routine care, emergency medical procedures and even long-term and chronic care.
In most other countries, private insurance can potentially cover elective procedures or low coverage areas like vision and dental. Employers and employees pay into the systems through deductions and the government supplements funding by taxing certain industries like alcohol and pharmaceuticals. Costs are primarily contained by the government setting the price of procedures, visits, prescriptions and the like. If you need a solid example to wrap your head around how it works, here’s one:
This is essentially how Medicare works, although the government has slightly less control over the cost of certain items like pharmaceuticals. That’s why it was such an important move to include negotiating power for prescription drugs and a cap on out-of-pocket expenses to seniors in the Inflation Reduction Act.
But to keep things really simple, when we talk about universal healthcare in this country it is not always the same thing as Medicare for All. I know that sounds obvious but it’s a really important point.
Universal healthcare is what the ACA was driving at through a complex network of coverage schemes cobbled together to provide varying levels of coverage that differ from state to state. Medicaid for low income individuals and families. Medicare and its different parts for seniors. Employer based insurance. Exchanges for seasonal workers, gig workers, part-timers, freelancers or the unemployed to purchase healthcare. Special considerations for veterans. Tribal health services. Social services and nonprofits that receive federal aid and stand in for government programs, especially in areas concerning mental health.
All of which leaves the citizens of the United States in a rather precarious position. Depending upon your level of employment, station in life, age or occupation, it’s all different.
The insurance coverage scheme has created a class system in America. To address this we have to talk about the Affordable Care Act.
While the ACA brought millions of Americans into coverage, gaps remain. As of right now, however, the percentage of uninsured Americans dropped from persistent double digits to around 9%. Not bad. Except that the number of underinsured is still much higher. And that 9% equates to 26 million people. (That’s the size of Australia’s population.)
Medicare is treated like a trophy in this country. Something you get for crossing the finish line of 65. And maybe that was a little more appealing before our fucking mortality rates started rising. (For a little context, countries like Japan didn’t see a rise in mortality during COVID and every comparable nation recovered after initial drops. But not us.) So now we’re in a situation where we’re dying younger and finding it harder to afford quality care.
Another unique feature in the United States is the phenomenon of bankruptcies due to medical costs. A Kaiser Family Foundation report in collaboration with The New York Times conducted a qualitative analysis of medical debt and found that many who struggle with medical debt and file for bankruptcy had insurance. But the costs beyond their coverage placed them into debt.
Dead Kennedy and Dennis Kucinich
Despite attempts as early as the Bull Moose Party under Teddy Roosevelt and several administrations from FDR and Truman, Kennedy and even Nixon, the pursuit of a universal system of healthcare coverage has eluded the political class. Despite the overwhelming popularity for some form of universal coverage from a public option to Medicare for All, the political class has been unable to muster the momentum to pursue it.
First off, as we’ll examine below, there are practical reasons why a public option within the current structure isn’t really viable. And to be clear, there are more in favor of this route than a Medicare for All. To understand the distinction between them, it’s instructive to look at the circuitous path the ACA took to becoming settled law in the United States. It’s ugly. And fascinating. And frustrating.
Hillary Clinton, Joe Biden, Chris Dodd, John Edwards, Barack Obama and others were vying for the Democratic nomination in 2008. The real race was between Clinton, Obama and Edwards from the beginning with most candidates withdrawing in January, including Edwards, and former Alaska Senator Mike Gravel pulling out in March. Only one candidate among all the democrats running that year publicly endorsed Medicare for All. Dennis Kucinich.
But healthcare was a hot topic and no one was more prepared than Hillary Clinton, who had the most time in the game from attempting to devise a universal coverage plan during her husband’s tenure in office.
The only candidate who didn’t have a plan, like at all, was (ironically) Barack Obama.
This is where Steven Brill’s detailed account of the ACA in his book America’s Bitter Pill really shines. He recounts the 2007 primary debate in Las Vegas where the candidates were pressed on healthcare saying:
“The other candidates were crisp, knowledgeable, and specific, especially John Edwards, who freely acknowledged that he would end the Bush-era tax cuts for both the middle and upper classes in order to pay for expanded healthcare. And then there was Hillary Clinton. The New York senator stole the show. Her standing, strolling presentation was a tour de force of personal stories, sophisticated detail, easily understandable data, and great one-liners…Barack Obama, the former Harvard Law Review president and boy wonder senator, was not used to not being the smartest guy in the room.”
From this point forward, Obama would commit himself fully to understanding the magnitude of the healthcare problem and committing to many of the policies enumerated by his competitors, much to their great annoyance.
And yet, upon taking office something remarkable happened. Full acquiescence. Once officially the POTUS, Obama had a stimulus package to work through Congress to save the imploding American economy. For better or worse, Congress was shockingly prepared to take the ball and run with it and the new president was all too happy to let this happen.
Brill provides a brilliant, almost minute-to-minute breakdown of what happened from this point to the passage of the ACA, the bill then Vice President Biden called a “big fucking deal” on a hot mic. (Actually, it wasn’t even a hot mic. My man was still at the fucking podium and said it with an Irish whisper to Obama.)
Anyway, while Obama was busy plugging holes in the economy, a few stars were aligning in the Democratic Party. First off, Ted Kennedy was dying. That sounded terrible, sorry. But this too was a big fucking deal because he was determined to make expanding healthcare his legacy.
Another senator, Max Baucus from Montana, was also interested in solidifying his legacy as a reformer after a lackluster career as a conservative democrat. Baucus was critical, as he was the chair of the powerful finance committee.
The big question on everyone’s mind was whether or not any reform would be filibuster proof. In the end, this technicality didn’t matter and we won’t get into the specifics of it today. But it was important at the outset because the Democrats came into office with 58 senators. Two away from being filibuster proof. Then, a miracle happened. Arlen Specter switched parties and Al Franken was finally elected after a contested recount. With Bernie that made 60.
But first the democrats had to develop a plan. And then, herd the cats.
Chapter Three: Making the Sausage
As we dig into the considerations during deliberation over the ACA, just a couple of quick definitions.
MLR, or Medical Loss Ratio
This is essentially a way to cap insurance company profits. As Steven Brill notes, “The MLR is the ratio of claims insurers pay out to hospitals, doctors, and other providers of medical care compared to the premiums they receive from customers who buy their insurance.”
On Wall Street a low MLR was considered a badge of honor. A reason for investing in insurance companies. One of the most outspoken members of the newly formed administration was shit head Larry Summers who worked behind the scenes to eliminate any talk of capping profits because, well, he’s a fucking asshole.
This is an equation that determines how much older people could be charged relative to younger insured members.
Another important distinction in America. In most other countries, coverage is coverage. Even though it certainly costs more to care for seniors, most nations use the law of large numbers to spread the costs among the healthy population.
Ah, yes. The requirement to have coverage. This became the fulcrum of the debate. Forcing Americans to do anything doesn’t exactly land well in the court of public opinion. The idea here is to compel people to carry coverage or to tax them, which is ultimately what we wound up with. But in the beginning, it was absent from any White House talking points. And it was this element of the ACA that had its roots in the Heritage Foundation plan to essentially punish so-called freeloaders in the system.
Of course, this would inspire two things: 1) Upholding the ACA in court battles because it was considered a tax. And, 2) it would become a rallying cry for the burgeoning Tea Party and all subsequent opposition to Obamacare.
The reason for the mandate is something economists refer to as “adverse selection.” Essentially, young, healthy people don’t feel the need to sign up for health insurance and those are exactly the type of people that a plan needs to limit exposure and build numbers. Otherwise, exchanges would be filled with seniors and sick people.
This is how other countries are able to avoid things like the Age Band. And how they’re able to contain costs and negotiate rates. With everyone in the system, there’s enough money to go around to fund care and offer coverage. Everyone at the table understood that any plan would have to include millions of new “customers” in order to make the numbers work.
This is a tricky one because it’s often confused with Medicare for All. Instead of the government taking over healthcare it would provide a consumer option for a government run insurance plan.
The reason this never got off the ground is because it’s impossible to square with the private insurance industry. The only reason you would provide a public option is to allow people to buy into a system that purchases healthcare services at the same rate the government, basically Medicare, already enjoys. This would make private insurers completely uncompetitive. So fucking what, right?
So fucking this: Everyone from Baucus to Obama left it off the table in the initial negotiations because they knew too many of their colleagues who were in the pockets of insurers would balk at the plan. In the end it was actually Connecticut Senator Joe Lieberman who killed it once and for all when advocates insisted on including it. As Brill writes:
“The Connecticut senator finally got rid of the public option, including a version that allowed individual states to choose to implement it or not. Lieberman also shot down an alternative that would have allowed people 55 years old or older to buy into Medicare so they could be protected but pay lower premiums from 2010 until 2014, when the exchanges, with their premium subsidies, would kick in.”
With some definitions and understanding of the scope, let’s recap a little.
At this crucial point in history when Democrats had 60 votes in the Senate, control of the House and a president who was embarrassed enough by Hillary Clinton and John Edwards to make universal coverage a lynchpin in his agenda, the stars were more aligned than they had been for decades. From the start, however, save for Bernie yelling from the wings and Dennis Kucinich proposing it from the fringe, no one was talking seriously about Medicare for All.
The only question now was how the Democrats would wrangle compromise from within its own party. And the person in charge immediately threw it to the herd to figure out. That meant the Senate primarily with all of the special interest groups and state level interests would be coming up with the plan alone. Even Nancy Pelosi and House Democrats were essentially shut out of the process. Time was of the essence and the Senate began closing ranks. And the litany of self inflicted wounds was only just beginning.
Of course, there were external factors at play.
There is a now infamous story of a dinner where pollster Frank Luntz, Newt Gingrich, Mitch McConnell, Eric Cantor, Paul Ryan and Bob Corker among others gathered to devise a strategy to kill Obamacare right out of the gate, an insurance plan literally modeled on Romneycare, which was crafted and conceived by their beloved Heritage Foundation. Luntz and Gingrich were there because they were the authors of Newt’s successful Contract with America, the ten point plan devised to derail the Clinton presidency. They were experts at tanking public agendas.
They devised a public relations strategy with now familiar talking points and framing that would sit sideways in the ass of the American public. Phrases like “government takeover.” “Protecting the sacred doctor-patient relationship.” “Death tax and death panels.” And the ever popular “socialized medicine.”
“Keep government out of my healthcare” became a familiar Tea Party rallying cry happily stoked by Luntz and crew. And it was working. Every rally, every town hall that was interrupted, every angry Fox News commentator that hammered away at these points made a dent in the public psyche. And the longer the negotiations went on in the Democratic caucus, the more fearful the members became.
Senate democrats, meanwhile, had a host of considerations on the table each with a special interest group attached. Some would make it into the final bill. Many would be killed by said special interest groups.
Options like providing Americans the ability to purchase prescription drugs from Canada.
Giving Medicare the ability to negotiate drug prices
The public option
Cadillac tax on expensive plans subsidized by corporations?
A medical device tax?
Insurance company profit tax?
No, no and…no. But thanks for playing!
There were other considerations like patent protection on certain drugs and therapies. What role the states would play in rolling out exchanges or providing their own plans. Whether abortion or contraception would be covered on plans sold through the exchanges. What was to be done about the Age Band, medical loss ratio and what would the character of the federal mandate be?
There was also the question of getting this thing paid for. Almost every candidate, and certainly the Obama White House had run on the theory that expanding coverage through insurance exchanges would be budget neutral and eventually save the country money because so many new customers would be competing for healthcare the market would respond by cutting costs in a more competitive environment.
How’s that working out?
There was also the question of subsidies. Setting up public exchanges didn’t mean that everyone could afford to buy into it. So they had to agree on a formula. Whether it would kick in for incomes 300% or 400% above the poverty line became a huge sticking point. And it made a huge difference in the high cost of living areas. Senate democrats knew from the modeling that setting the limit at 300% above the line would still prevent millions from qualifying for subsidies. So initially they set it at 400%.
Then there was the political reality of getting it through Congress. For most of the negotiations, Senate democrats operated under the assumption that they required all 60 votes to pass a comprehensive bill. In reality, this didn’t turn out to be the case because the ACA was ultimately considered a reconciliation bill and it didn’t require the 60 vote, filibuster proof threshold. This single point of view, taken as gospel from the beginning, meant that all of the special interests were able to negotiate favorable carve outs. And by the time it was understood that 60 votes weren’t needed, the plan was so far along in the process that it was unfathomable to start over.
On top of this, there was bad news coming and challenges out of left field the team faced. As Brill writes:
“On July 17 , the Congressional Budget Office announced what one of Obama’s healthcare aides called ‘a bombshell’...The CBO had just scored the House bill and declared that it would not result in any significant long-term healthcare savings.”
This was a disaster for Democrats who were stunned by the CBO findings. Those intimately involved in the process went from using scalpels to hatchets to work the CBO estimates down to something resembling cost neutral. The longer the process went on, considering the economy was still in free fall, the less tolerance politicians had for spending. They were already about to propose a nearly $800 billion bailout plan. Anything more seemed like a bridge too far.
To complicate matters further, Obama had an unfortunate exchange at Ted Kennedy’s funeral of all places. Again, Brill:
“One of the Catholic bishops in attendance bent his ear about abortion: The president risked the opposition of the church (and, by inference, legislators, particularly conservative Democrats in the House) if he didn’t make sure that no one got subsidized premiums to buy insurance that included coverage for abortions. There was even, he was told, strong opposition to insurance that paid for birth control.”
And we can’t forget about the Republicans. As a semblance of a bill began to take shape, Mitch McConnell introduced a poison pill by signaling their support for an amendment sponsored by liberal Democrats that would allow consumers to buy drugs from Canada. Fucking devious and brilliant. As Brill notes:
“On the merits, most Democrats loved importation. It would save consumers—and cost the drug companies—$400 billion over the next ten years…[Harry] Reid spared the dilemma of voting against something they favored. He refused to let it come up for a vote at all.”
In the end, the Senate would deliver a massive spending bill to the House with so many twists, turns, caveats and carve outs that Nancy Pelosi didn’t know what to do. She had been perturbed all along that the Senate was running roughshod over the House, but by the time the bill was sent she had little choice but to corral her members and sign on, even admitting to the media that it was too long to read but that they would work out any details when the bills were paired. If you don’t recall this brouhaha, you can imagine how that went over in the conservative press.
Profits, profits everywhere.
Almost everyone in for-profit care got what they wanted. All except the doctors and the patients. In our final installment next week we’re going to talk about hospital systems and comparative outcomes, but I want to finish with a few thoughts about insurance companies and the Frankenbill that is the ACA.
The reason a for-profit insurance based system is fucked from jump street is because of misaligned incentives. All the caps we talked about related to MLRs or Age Bands, or taxes on Cadillac plans and equipment, mostly went out the window in return for support from insurance companies.
To be clear, they did agree to a couple of important things. The insurance companies would have to pony up billions of dollars to compensate for the flood of new customers. Hospitals and pharma companies would as well. But as many observers on Wall Street keenly noted at the time, no matter the size of these givebacks, the amount of new customers into the system was going to be a massive win for all the for profit companies, bar none.
Eventually, the bill took so long to negotiate the Democrats actually lost their majority when Ted Kennedy passed away and Scott Brown upset the apple cart to win the open seat, campaigning primarily against the pending federal mandate. This would prove to be a useful blueprint for Republicans in the midterms.
In fact, so many crucial financing portions of the bill had been cut by special interest groups along the way that legislators quietly changed the poverty subsidy threshold from 400% to 300% to protect the neutral CBO score.
While there were a lot of winners in private industries, there’s no question that the insurance companies made out the best. All along they had the most to lose and they knew it. It’s why they were so early at the bargaining table and so willing to ultimately fork over $102 billion over ten years to help fund implementation of the ACA.
An insurance company isn’t incentivized to pay for patient care. As a for-profit entity it has two incentives. Enroll as many people as it can at the highest cost possible and pay as little as possible for their care. It all goes back to this. Costs are almost meaningless. It’s what the so-called market, or several markets actually, will bear and who has the most leverage within the system.
For example, the entire underpinning of medical billing is an elaborate system of billing codes. Prescribe a drug. Take a urine sample. Order an MRI. Give out an aspirin. Take blood pressure. Perform open heart surgery. Do a hip replacement. Everything has a code and that code has a cost. Except it’s not the cost. It’s a starting point. Like an MSRP for a new car. In a hospital they call it a chargemaster, which has been a huge source of controversy ever since Steven Brill began writing a series of New Yorker articles before he published America’s Bitter Pill.
So your doctor—or the team in charge of your care in the hospital—will tally up every little thing that happens from room and board for pre and post-op recovery days to the nurse that takes your vitals. Then the negotiation begins. In a hospital setting or in a large physician practice group or specialty group, there are tiers of strength. Big New York, New England, Chicago and California hospital systems get paid a lot closer to enumerated costs on the chargemaster than a small non-profit hospital in the midwest.
A physician specialty practice group has more power than an independent doctor. A group of doctors can command more than a sole practitioner, and so on.
Though on the general practitioner side of things, even the groups are finding it nearly impossible to compete, which is why so many practice groups are being swallowed up by hospital systems. And when hospitals themselves consolidate, it usually means a reduction in the amount of beds. In fact, the number of hospital beds has declined precipitously in recent years. A reality that came back to bite us in the ass when COVID filled beds all throughout the country. But beds distributed throughout a region are difficult to manage. And expensive. So if you can consolidate the big stuff under one roof on a primary campus and convert outlier hospitals to glorified emergency rooms that can transport serious care needs by ambulance or helicopter, it’s a lot more cost effective for the hospital.
And that’s the name of the game. Get big to get small. And charge the fuck out of the patient for everything under the sun.
We’re going to dive deep into the hospital systems in the next episode, but this gives a sense of where the problem really begins. With insurance and reimbursements.
Recall from our primer essay that profits in the insurance industry are extremely healthy. We gave examples of three of the big ones out of the nearly 1,000 registered providers in the country:
UnitedHealth Group posted $17 billion in profit for 2021.
Humana posted $3 billion.
And Anthem posted $6 billion.
All told, revenues for the health insurance industry topped $1.2 trillion dollars in 2021. (Those are yours and my premiums.) What’s important to recognize is that the profit margins aren’t exorbitant. In fact, margins overall range from 1.5% to 4% over a multi-year period. That’s not the issue. The issue is that they’re guaranteed.
They can’t lose because they set the rates and the hospitals and physicians are incentivized to keep charging higher and higher costs to fuel their growth. It’s a vicious cycle that will be unstoppable, barring extreme intervention into the perverse market based system that only the United States operates under.
So the final installment of the series will look at the cost drivers in hospitals themselves along with some caveats for Big Pharma. While profits are greater in pharma as a percentage of revenue, the revenue picture is half that of the insurance industry for some perspective. Overall, Big Pharma accounts for only 10% of total healthcare spending in the United States. So we’re going to save the pharma analysis for another time when we unf*ck PBMs, patent protection issues and pricing of key drugs that strain a significant portion of the population.
For now, we’re going to stay focused on the two biggest drivers of cost—insurance and hospitals—because they feed off one another in a self perpetuating cycle of madness that will know no boundaries unless and until we someday get serious about Medicare for All. And in the conclusion of the series next week, we’ll talk about a handful of necessary but Sisyphean steps that must be taken to get there.
The ACA wasn’t a bridge. It was a wall.
There’s no profit in a healthy population.
COVID should have been the catalyst.
Here endeth Part Two.
The New York Times: U.S. Life Expectancy Falls Again in ‘Historic’ Setback
Health System Tracker: How does health spending in the U.S. compare to other countries?
The Henry J. Kaiser Family Foundation: The Burden of Medical Debt: Results from the Kaiser Family Foundation/New York Times
UnitedHealth Group: Annual Report
Humana: 2021 Annual Report
Anthem, Inc: Annual Report
National Association of Insurance Commissioners: U.S. Health Insurance Industry Analysis Report
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Patient Testimonial 2: “For years I thought I was losing my mind. Then I realized that it was the rest of the country that had lost its mind. Thanks UNFTR!
UNFTR reduces the pressure on the cerebral cortex, the part of the brain responsible for reason, language and learning. By exposing your mind to consistent bombs of truth, UNFTR works to reduce those “why is this happening?” moments and allows you to see clearly what’s really going on in the world.
IMPORTANT DISCLAIMER: The clinical name for UNFTR is Unf*cking the Republic. Do not take UNFTR if you have a history of listening to conservative talk radio or alt right programming including Rush Limbaugh, Dennis Prager, Ben Shapiro, Michael Knowles, Candace Owens, Sean Hannity, Laura Ingraham, Tucker Carlson, Glenn Beck, Mark Levin, Dave Ramsey, Michael Savage, Charlie Kirk, Bill O’Reilly, John Stossel, Bret Baier and Sean Spicer. Mixing UNFTR with right wing propaganda may cause severe side effects like spontaneous combustion or explosive diarrhea. Studies have shown that consuming UNFTR over a long period of time may also result in an irrational hatred for Chicago School economists. Avoid UNFTR if you’re allergic to profanity or facts. Serious side effects may include screaming at your relatives over holiday meals, unfriending most of your high school friends on social media platforms and profound feelings of isolation and rage.
To help see the world clearly and meet people where they are, I take UNFTR. Ask your doctor if listening to UNFTR is right for you.
Thank you as always to our “Unf*cking Overcaffeinated” show sponsors:
Krin G., Jennifer S., GWookie of Ohio, Gaute, Eric Wagner 101, David MJ, Corey S., Cindy S., Brian, Asim A., Aisokh, Asshole, WJeremyD, Specker, Sam C., Ryan F., Rodrigo G., Rob Nasby, Prof G, Pete M., Nathan S(irst), Nathan E., Michelle H., Matthew, and the memory of Nettie McGee.
Additionally, today’s essay is sponsored by “Unf*cking Pro,” Jim M.
To learn more about UNFTR Membership Levels and how to sponsor the show, visit buymeacoffee.com/unftr.