I hear a lot of misinformation about the Affordable Care Act (ACA or Obamacare), ranging from “it is the reason insurance premiums and healthcare costs have skyrocketed” all the way to “it is paving the way for universal healthcare”. Most of these tidbits and talking points have little basis in fact, and all they serve to do is tell this voter or that voter what they want to hear to get them to the ballot box the next election cycle. If we are going to unbreak this system, if we are going to change the way we treat healthcare in this country we have to break away from the talking points and examine where we were, what happened, where we are now, and where we want to be. This is the only way we can figure out what we need to do to get there.
For the first thing, we need to stop blaming Republicans or Democrats for the problems with healthcare, it is everyone’s fault, from lawmakers, to healthcare workers, to big pharmaceutical companies, to insurance companies, and everything in between. This is not a simple problem that happened because of “Obamacare” and it won’t be fixed by selling insurance across state lines. These are talking points, not reality.
In the 1960s, healthcare costs were significantly lower than they are today. In fact per person healthcare spending was around $1,200 per year, when we adjust prices then to prices now. In 2015 per person spending was around $12,000 per year, almost 10 times the amount it was in the 1960s. Hold on though, have prices really increased that much? The answer to that is yes and no.
In 1960 about 50% of Americans were uninsured altogether, and 65+% of elderly Americans had no insurance. This means that a significant amount of the population had no healthcare coverage, and many of these individuals went bankrupt when they had to go to the hospital. Many just wouldn’t go to the doctor at all because they couldn’t afford it. What happened in the 60s, the government decided they had to create programs to help these people, especially the elderly, get the care they needed. This was the beginning of Medicare and Medicaid. So the math in healthcare is off we are really only paying about four to five times as much per person, because we are now covering more than twice as many people. If you need the math, comment below and I will explain it.
Some people will point to this chart and say “see, government programs ballooned the healthcare costs out of control”. I said it was more complicated than that, and I will get there, so bear with me. Well when looking at causes an old adage rings true “Follow the money”.
As more people got covered, there was more money being spent in healthcare, which allowed for medical companies, especially the pharmaceutical industry, to research new drugs and treatments. These new treatments cost a lot of money to develop and get approved, so of course they needed to cost insurers something as well. This was where the cycle of healthcare inflation began. More people getting help meant more money in the system. More money in the system meant more money for research and development. More R&D means more expensive treatments, which require more money to pay for them. More money to pay for them means more money for R&D, which means more treatments, which means more money, which means more treatments and on and on.
What is one thing we know when amounts of money get large enough? Someone, or a lot of someones, will believe that they need a bigger piece of the pie. This is where the real era of big money lobbyists in healthcare began as well. These lobbyists did everything in their power (read budget) to get congress to enact laws that made the system ever more and more complicated and tilted in their favor. So who has gotten the biggest piece of this pie that has increased more than 10 times since 1960. Did it go to the people who are actually providing care?
Physicians in 1960 made approximately 130,000 a year in today’s dollars. Physicians today make approximately 130,000 a year as a median salary. I am not saying feel bad for doctors, but they make exactly the same amount of money they did in 1960, and work many more hours on average. So they are not the beneficiaries of the increase in healthcare costs. Nurses, mental health professionals, medical assistants, and all manner of medical field jobs have even worse numbers, so where is all the money going. In fact their percentage of total medical costs has gone down significantly. Is it any wonder that the number of graduating physicians hasn’t gone up in years?
To put it in perspective, the pharmaceutical industry had about 21.8 Billion in total revenue in 1960 (adjusted to today’s dollars) in 2015 they had almost 400 Billion in total revenue in the United States. That is almost a 20x increase. So while physicians are making the same average income they were in 1960, drug companies are making 20 times what they were at the time. Why bother to be a physician when you can go work for a drug company and make more money for less work. That is what we call “Big Pharma”. They are a massive industry that has made an incredible amount of money. They still have a lot of overhead, in fact a large majority of their money goes to research and development (not as much as it should and not always in the right areas, but that is a discussion for another time). Big Pharma CEOs median pay has increased from 750,000 (adjusted) in 1960, to 18.5 Million in 2015, so we know where a lot of that money is going that is about 25 times as much money as they were making in the 60s. The private insurance industry is in much the same numbers category as the pharmeceuticals.
When we are talking this kind of money it is easy to lose perspective, the numbers are just too big, but let’s put it another way. The average doctor has seen no real increase in their annual income since 1960. In 1960 a big pharma CEO made about 5-6 times as much as a physician. Understandable, and reasonable. In 2015 an average big pharma CEO made over 100 times (more in some cases) than what an average physician made. If you don’t see a problem here, then you need to look again, and check your own motives.
So we know who is making the most money out of the rising healthcare costs, and we know who is paying the bill. CEOs make the money, and the American people pay the bill. What about doctors? Why are they making so little? This is where this entire thing starts to go crazy and we find out why costs have gone up so much. As insurance companies have gotten bigger and bigger, they have gained more and more leverage over doctors and patients. They are able to tell doctors how much they will reimburse. They are able to tell us how much they are willing to cover. They choose when to raise our premiums. They dictate prices, both how much they pay, and how much we pay them to pay for us. Does this seem a little unfair to you?
Try this yourself, walk into your doctor’s office, tell him that you are going to pay cash from now on, and you want to negotiate his fee. Next go to a hospital and try the same thing. Now go to your barber or hair stylist. Lets play this the other way. You go to your gym, you have a membership that is $30 a month. They tell you out of the blue that your membership now costs $45 a month. Will you just take that? Why will you with your insurance? The reason they get to do it and you don’t is because they have all the power, both legally and because they are so big. How about the pharmaceutical companies? They have the drug that might save your life, but you only get it if you have the cash in hand, or you have the money to pay whatever your insurance tells you, so they can pay less to the pharmaceutical company than you would have on your own.
Now let’s get to doctor’s billing. Did you know if you go see an in network doctor and he thinks you are healthy, he gets less than half as much money from insurance as if he send you for a lab. He does the same amount of work, but he gets less money, because the insurance companies have decided that him keeping you healthy isn’t worth as much money as him having to write an order for lab work you may or may not really need. He needs to do his, otherwise he makes next to nothing for the visit. What’s even worse is that many doctor’s have been trained to do this. They are told do the test, because if they don’t and something is missed, they will get sued. Oh I forgot to mention, now the doctor has to carry medical malpractice insurance (guess who he pays) to practice medicine. The insurance companies get money from the doctors too. This is just one of a hundred legitimate reasons a doctor might order tests that probably aren’t necessary, and we aren’t even touching on the shady individuals who are trying to scam as much money as they can out of the system.
A thousand page textbook can be (and has been) written about each of these topics. I am merely illustrating a few of them to give an idea of how complicated and messy all of it is. I am simplifying many things as I go so that I can make sense of them as well, and I work in this field. What the biggest takeaway from all of this is simply: Healthcare was having problems before the affordable care act, and will continue to have problems until we fix the root causes, repealing the ACA and replacing it with more private sector insurance won’t fix it, there is too much money, and too many people with too many interests.
How the heck am I supposed to change any of this? It is too much! There is no way anyone can fix it. You are correct, no person as an individual can fix it, but maybe all of us together can. From my perspective there are five main things that need to change, and I will talk about them in more depth in my next article. These five are:
- Focus on and incentivize health instead of healing, it is cheaper to keep someone healthy than to treat them while they are sick (addendum use actual science, not pseudoscience to do this)
- Allow doctors to do what they were trained to do, they studied for years to be able to help people
- Get insurance out of the medical business (we need Universal Healthcare)
- Be completely transparent about medical prices, across the board, and have everyone pay the same for the same service or drug
- Pay doctor’s more, and administrators less, the bloated administrative costs are out of control
Thanks for reading and there will be a couple of follow ups here in the next week or so.
– Jeremy Larsen
Speaker, Author, Progressive
Now who do you think has the power to decide how the district lines are drawn? It is usually the party in power in the state where they are redrawing the lines. That means that after the Republican party spent the 1980s on “Operation Red State”, which was a plan to take control of as many state and local legislatures as possible so that they could redraw the lines to give them as much of an advantage as possible. They did this because they saw the country moving more and more ideologically away from their positions. Instead of changing their values to more accurately reflect their constituents, they used what power they could to take away the power of people who disagreed with them.
Pragmatically Progressive 