Here is bonddad's outstanding diary. Based on a week of research (which earns him my personal gold star award), bonddad laid out the realities of the healthcare crisis for a typical single individual or a family. He said he had no idea what the solution to the problem is. I'm not sure either, but I do know where a lot of the increases in health care costs are coming from and I know some things that have been done by President Bush that made the problem worse instead of better. In this first diary in a three part series I will point out some specific problem areas and address the first of three that I will cover.
As mentioned
here, the biggest expenses are administrative costs, insurance industry profits, and prescription drug costs and health service costs:
About 50 percent of health care spending is eaten up by waste, excessive prices and fraud, according to a report by Boston University researchers.
Major sources of unnecessary spending include administrative costs and profit in the insurance industry, high prices of prescription drugs and health services and, to a smaller extent, theft and fraud, according to the study released Wednesday.
The report also found that U.S. health spending per person is twice the average of such spending in Canada, France, Germany, Italy and Britain -- countries that guarantee healthcare for all their citizens. "Current U.S. spending should be adequate to cover all Americans," it said.
An interesting graph on page 15 of this pdf breaks costs down by category. It lists drugs, physician services, and administration as disproportionately contributing to the overall increase in health spending. I will specifically address insurance, prescription drug costs (in diary 2), and administrative costs (in diary 3). I will leave physician services and health services to others like dallasdoc to explain.
First, I want to address insurance costs. As if to drive home one point from the first article linked to above, the "related news" box at the link has as its top story Aetna profit jumps 21%; health insurer boosts 2005 outlook. Elsewhere, a recent Weiss Ratings, Inc news release said Profitability Continues to Surge for the Nation's HMOs: Industry Earns $9 Billion in First Three Quarters of 2004. But even though 9 billion is a lot for just three quarters of earnings, it looks small compared to the approximately 1.4 trillion the Bureau of Economic Analysis says was spent on heath care in the US last year (link). Even if we ratioed it up to 12 billion in profit for the year and then subtracted that from 1.4 trillion we would be still be close to 1.4 trillion in total expenditures.
President Bush has indirectly addressed insurance costs. He did promise to address challenge the insurance industry when first running for president (link):
"If I'm president, people will be able to take their HMO insurance company to court. That's what I've done in Texas, and that's the kind of leadership style I'll bring to Washington."
After gaining power President Bush and the Vice-President actually worked as shills for the insurance industry (link). And President Bush's calls for tort reform are basically a sop to the insurance industry (details here). Furthermore, President Bush's made the false claim that small businesses were most concerned about tort reform (link) when what they were really most concerned about was health care (pdf link).
One reason for businesses both big and small to be concerned about health care is that benefits costs, of which health insurance is the major component, are outpacing salaries:
While I remain convinced that insurance rates are higher than they need to be, the profits of insurers are a major contributor to health care price increases but are not the major contributor. I will address prescription drug costs in the next diary and administrative costs in the third diary in the series.
An important part of the insurance discussion is finding out exactly how much insurance companies pay of total health care costs. Lots of good data as of 2003 can be found here. Pages 7 and 8 have breakdowns of spending by federal, state, private (private is mostly insurance) and other. Page 9 has a chart comparing private vs public spending on various health care categories. Page 10 has an interesting chart showing out-of-pocket expenses vs insurance payments for various types of services for 2003. According to page 16 of this pdf, private insurance pays 46 % of prescription drug costs, out-of-pocket payments amount to 30% and public funding covers the other 24%.