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CAN THE FREE MARKET RESCUE THE AMERICAN HEALTH CARE SYSTEM?
10/18/2007
PART ONE: THE AMERICAN SYSTEM OF HEALTH CARE
This is the first in a series of five essays that will attempt to explain the problems in the American health care system and offer some possible solutions. Part I will lay out the components of the American health care system. Part II will explain why the system is in crisis and why it needs to change. Part III will discuss conservative rhetoric on health care. Part IV will explain why the free market not only cannot solve the problem, but is actually part of the problem. Finally, Part V will offer some possible solutions, and comment on those offered by the 2008 presidential candidates.
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Join a discussion about the health care situation in this country today and you are likely to get bombarded with two very different opinions.
On the one side are those who have serious concerns about the 47 million uninsured Americans and the increasing costs of health care, and who see the necessity of changing the system. Many of these citizens have had one or more negative experiences with the American health care system: having services or payment denied by their HMO's; losing a job and employer provided health insurance; or being unable to afford private health insurance because of pre-existing conditions or risk factors.
On the other side are those who insist the system is "the best in the world" and scream "socialized medicine" any time a Democrat proposes a change in the health care system. These citizens usually are in good health, and have good health insurance, provided by their employers, or by Medicare if they are over 65.
You are liable to hear more of these conversations today because we are entering a presidential campaign, and also because of the president's veto of the S-CHIP legislation that would provide insurance coverage to poor and middle class children who don't qualify for Medicaid and whose parents cannot afford health insurance for them.
This veto, however, and the argument against changing the system, will not stop health care reform indefinitely. Even the many corporate contributors to the GOP are complaining of the exorbitant cost of insuring their workers. It is no longer just Democrats who want to do something about health care; many reliable Republican supporters want something done too.
Before we venture into the reasons why we need health care reform, however, it is important to survey the landscape of the American health care system as it exists today, look at all the players and participants and their vested interests in maintaining or changing the system.
AMERICAN HEALTH CARE 2007
Unlike most western democracies, the United States of America does not provide a universal system of health care, nor does it provide access to health care for all of its citizens. Canada, Britain, France, Germany, and many other European countries all have some system of universal coverage which seems to be working well for them. Here in the United States, however, we do not have universal coverage. Instead, we have a crazy quilt of privately purchased and government sponsored health insurance plans.
Medicaid, government insurance for the poor, covers 52 million Americans, and Medicare, government insurance for the elderly, covers another 44 million. (Some of the elderly poor are covered by both Medicare and Medicaid, so there is some overlap.) The rest of us are covered by a variety of private insurance plans, either individually purchased or employer provided. However, 47 million of us are uninsured, a number that has risen by 6 million during the Bush administration.
The reason why we have 47 million uninsured is not, as George W. Bush and his administration claim, because these people are young and healthy and simply do not want to spend money on insurance. The reason is that, for most of them, it is simply too expensive. It is expensive for a variety of reasons, starting with the number of players, with their competing interests, involved in America's health care system.
THE PLAYERS
We start with the two main players, the only ones involved in health care for thousands of years, and until the early 20th century, the only ones in America.
These are, of course, the providers of medical care: doctors, hospitals, clinics, etc. and the patients, the consumers of medical care.
Now we move to what we might have once considered the adjunct players, those who assist the doctors and patients. Today, however, they have become far more powerful in managing the system than the providers and patients. These are:
The insurance companies that act as intermediaries or gatekeepers between the patients and the providers.
The employers who purchase group health insurance.
The pharmaceutical companies that develop and market new medications.
The variety of companies that develop new medical technologies.
The paper pushers for the providers and the insurance companies. The paper pushers in the offices of doctors and hospitals are paid to manage the huge number of medical claims, request approval for medical procedures, and fight with insurance companies for payment. The paper pushers in insurance companies work on the one end to accept or reject applicants for insurance policies (based on their health risks), and on the other end to pay or reject claims based on any number of factors from legitimate to ridiculous.
The lobbyists for providers, insurance companies, pharmaceutical companies and others in the health care field, who work to influence Congress to write legislation favoring their ability to make a hefty profit.
And finally, there are the elected officials who are influenced by the lobbyists in the form of money donated to or withheld from their political campaigns.
HOW THE PLAYERS STRAIN THE SYSTEM
Each of these players contributes to the health care system, but each puts its own strain on it and each is a part of the problem we face today.
Let's start with the "adjunct players" and conclude with the providers and patients. Here I will provide a simple overview and save the details of how these players have contributed to our health care crisis for the next essay.
The insurance companies are the main route through which most Americans access medical care. Insurance companies are not charities, and are in the business of making money. They make money not by covering as many Americans as possible, but by denying coverage to as many high risk (in terms of health problems) individuals as they can, and finding as many ways as they can to deny claims from their policy holders. In order to continue to be profitable, the insurance companies must raise rates as medical costs go up.
The employers are the largest purchasers of health insurance in the country. Starting in World War II, when there was a labor shortage and employers were prohibited from using high wages to lure new workers, employers began using health insurance as a benefit. That practice continues to this day, although the increased cost of health insurance is leading many employers to find ways to reduce the cost, either by asking for more cost sharing from employees, purchasing less desirable policies, eliminating it altogether, or laying off workers so that the remaining workers can still be covered. This contributes to the number of uninsured or underinsured Americans.
The pharmaceutical companies are relatively new on the health care scene. As biology and chemistry have advanced, pharmaceutical companies have found chemical ways to treat disease. Each year many new drugs come on the market, and each new drug has patent protection for up to seventeen years from the time the patent is issued. This means the company has a monopoly on the sale of the drug and can charge whatever it wants for the new treatment. In addition, as companies develop new drugs, rival companies develop copy-cat drugs, with enough of a chemical difference to allow for a new patent. Then the rivalry takes off with marketing to both physician and patient, in the form of expensive advertising. Physicians start prescribing more drugs, and patients start demanding them. All of this raises the cost of medical care.
Along with advances in medication come advances in medical technology. Expensive scanning machines to detect tumors and other diseases are purchased by hospitals and clinics. CT and MRI scanning equipment, dialysis machines and heart monitors, new surgical tools for less invasive procedures, ventilators, pacemakers and other medical technologies all increase the overall costs of health care.
Employees of either providers or insurance companies, the paper pushers add an extra layer of expense which is about as far removed from actual medical care as you can get and still be employed by the health care industry. Millions of employees work to administer the paperwork at both ends of the system. At the insurance end, the paper pushers screen applicants for individual health insurance policies(this is called underwriting) and accept applicants if they are relatively healthy, reject them if they are unhealthy, or charge extremely high fees if they have some risk or pre-existing condition that puts them in an intermediate category. Other paper pushers for the insurance companies process claims and pay them or deny payment, often based on technicalities that require paper pushers at the provider end to spend time making things right. At the provider end, the paper pushers assist in requesting permission from insurance companies for non-routine procedures, file insurance claims, and fight with insurance companies when they deny or delay payment. These paper pushers, while they may appear polite, function as adversaries, each trying to get the other's employer to assume responsibility for the medical bills.
The lobbyists work for the medical associations, pharmaceutical companies and medical technology companies. Their role is to influence members of Congress to write legislation that will favor their ability to make a profit and to intimidate members of Congress not to write legislation that might eat into their bottom line. They do this by making generous campaign contributions or threatening to withdraw contributions. They make passing any kind of health care reform nearly impossible, especially reform that might create a government sponsored single payer plan.
Congress is the other side of this equation and they are the ones who allow themselves to be influenced by lobbyists to put the wants of special interest groups and corporations before the needs of the American people. It was the collaboration of lobbyists and Congress that wrote the Medicare prescription drug bill that prohibited negotiating for lower drug prices. This has provided a windfall for pharmaceutical companies and thus added a layer of expense that was not necessary.
Those who are least to blame for the current problems with the health care situation are the providers and the patients, but even they have made contributions. Some providers too readily succumb to the advertising of the pharmaceutical companies and prescribe new medication when over the counter or older, cheaper medications work just as well or when no medication is needed at all. (The over-prescribing of antibiotics, for example, not only adds to health care costs, but has created many life threatening, drug-resistant strains of bacteria.) They also recommend tests and procedures that may not be necessary because they want to play it safe and avoid mistakes, but also because they know the insurance company will pay. Last, of course, are the high fees doctors charge, and the relatively good income they receive in comparison to what doctors receive in other countries. However, doctors are generally not millionaires, and compared to many other American professionals, have relatively modest incomes, especially when you consider their years of training and the long hours they work.
For their part, patients engage in many unhealthy lifestyle habits related to diet, exercise, smoking, drug abuse, and sexual behavior, each of which contributes to health problems. They also demand new drugs and procedures, even when it is not clear that they are necessary. However, any unnecessary expenses caused by patients and doctors pales in comparison to the necessary and life-saving expenses to treat the 20% of very sick patients who account for the 80% of all medical expenses. These are the patients with cancer, heart disease, kidney disease, and other catastrophic conditions, brought on by complex factors including genetics, environment, pollution, old age, and just plain bad luck.
The competing interests of the players is definitely the main reason why health care and health insurance are so expensive in the United States. In the next segment I'll look in detail at these and other factors driving the current crisis in American health care. In addition, I'll look at the consequences of allowing the system to continue as it is.
-Ellen Terich
All content © 2005 outragedcitizen.com
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