I've told my story before, in a different context, but in today's climate, maybe it's worth repeating, especially the parts that bear on our current debate.
In the early hours of May 13, 1991, as I was preparing to move my family to another state where I had taken a new job, I awoke in the night with an uncomfortable sensation of pressure in my chest. Barely an hour later I was in the hospital emergency room where doctors determined that I was in the middle of a heart attack. I was just six weeks past my 42nd birthday
I was lucky. We got to the hospital promptly and I got good, timely care. I was given a relatively new (read "experimental", in the insurance company's determination) clot-busting drug, TPA. Eventually, a skilled surgical team cracked my chest open, dumped a pitcher of ice water into the cavity, and performed five coronary artery bypass grafts on my stopped heart. On Memorial Day, two weeks after the initial event and two days before we were to close on the sale of our house, I was released from the hospital.
We had already bought a new house in the state where I was working, borrowing on the equity in our old house to make a minimum down payment, and planned to plow the rest of the equity into the new house when we closed on the old one. We walked out of that closing with a check for twelve thousand dollars in hand.
Under the circumstances, we thought it would be prudent to delay re-investing the equity until we saw how the costs of my hospitalization and surgery would shake out. We didn't expect it to be a problem -- I had good, employer-subsidized insurance through the best-known name in the health insurance industry, with a $300 deductible, then eighty/twenty up to a maximum $1,500.00 out-of-pocket limit.
I didn't know I was about to enter into a year-long education in 'reasonable and customary' fees, ineligible charges, excluded procedures, annual limitations, and a host of other ways -- many now seem practically quaint in this era of PPO and HMO out-of-network exclusions, rescission, and the like -- that insurance companies use to dodge payment of claims.
A year later, that twelve thousand dollars was gone. All of it.
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Don't get me wrong. I was very lucky. I got to the hospital promptly and received immediate treatment and excellent care in the hands of highly-competent professionals.
And perhaps most of all, I had a check for twelve thousand dollars in my hand.
In retrospect, that check prevented my family from becoming one of the statistics of both healthcare and bankruptcy. Today, the threat is much worse. A recent Harvard study found that not only were over 60 percent of all bankruptcies healthcare-related, but a staggering seventy-eight percent of those people had health insurance at the onset of their treatment.
Two years after I suffered my heart attack, the Clinton administration tried and failed to implement a national health insurance program. Part of the argument against the Clinton plan was that new, market-based paradigms just being introduced would lead to savings far greater than anything an inefficient government program could deliver, if only the market were allowed to work its magic.
That year, the United States spent $912 billion on health care. Had that $912 billion simply increased at the rate of inflation, the 2007 cost would have been $1.1 trillion. Instead, in 2007 we spent $2.2 trillion according to the Centers for Medicare and Medicaid Studies (pdf), and are estimated to reach $2.5 trillion this year.
That is double what the cost would have been had it simply increased at the rate of inflation. That calculates to over six times the rate of inflation, although critics would argue that overstates the increase since the population also grew and newer, more expensive drugs and procedures (though not necessarily more effective) replaced older, cheaper ones.
A better measure might be per-capita costs. In 1993 that was $3,499, versus $7421 in 2007, a 112-percent increase. That $3499 per capita cost in 1993 would have been only $4435 if increasing by inflation alone; the actual increase was still over four times the rate of inflation.
Annual healthcare costs are projected to hit $4.3 trillion (pdf) in less than a decade, 2017. That is why Medicare is expected to be in trouble, not some fundamental flaw in its concept, not the inevitable end of a Ponzi scheme, but simply out-of-control, run-away healthcare costs. And it will cripple far more than just Medicare. Any company struggling to stay in the black is going to be looking at those exploding costs and see an expense they can no longer afford to bear. Any state-level attempts to provide coverage for the uninsured will be steam-rolled by a combination of soaring costs and millions of desperate people, having lost their employer-based coverage, flocking to the overwhelmed programs.
In the early nineties when we last debated healthcare, insurance companies were predominantly non-profit, paying out in the neighborhood of 95 percent of every premium dollar in claims. Today, as those companies have shifted to publicly-traded, for-profit models, that figure is less than eighty percent. In the decade-and-a-half since the insurance, healthcare, and pharmaceutical lobbies shot down the Clinton proposals, an additional 15 percent of every premium dollar is taken from providing care and applied to stockholder dividends, executive salaries, lobbying against reform, and the like.
Between 2000 and 2007, profits at the country’s 10 largest publicly-traded health insurance companies rose 428 percent. Their chief executives averaged almost $12 million annual compensation. The companies' increases in profits were plowed into buying back stock and rewarding shareholders and executives, not in improving service or lowering premiums.
In 1997, at the insistence of a Republican-dominated Congress, Medicare Plus Choice, now known as Medicare Advantage, was created to give private enterprise the opportunity to compete against traditional Medicare. After a less-than-stellar start, the government had to offer reimbursement rates 12% higher than traditional Medicare to entice insurers to participate initially. This was supposed to be temporary until companies had their plans up and running and the natural superiority of the free market brought down costs. Over a decade later, the enhanced reimbursement still continues unabated as, according to the GAO, "the plans earned profits of 6.6 percent, had overhead (sales, etc.) of 10.1 percent, and provided 83.3 percent of the revenue dollar in medical benefits. These administrative costs are far higher than traditional fee-for-service Medicare "
To the Republicans who object to the Democrats' health insurance reform proposals, arguing that they favor a "market-based" solution, this is your "market" at work. This is your plan to bring down healthcare costs?
They deserve all the ridicule that can be heaped on them.