Five Reasons why Healthcare is so Expensive

Posted: September 13, 2009 by administrator in Uncategorized
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If you like the health care delivery system in the United States, you are part of a shrinking minority. The growing disenchanted complain to whoever will listen. Most don’t want to hear it, unless it is an election year. Then that which wants us to believe it loves us most, lets its engine be heard – our government. Currently the campaign for a government run, single payer health care system is pulling out all the stops using statistics permissible only in a political arena, but would never cut mustard in a clinical one. The only conclusion a thoughtful person can be sure of is that Americans pay more for medical services than others in developed nations. I can give you at least five reasons why that is.

• The government cartelized the medical industry at the turn of the twentieth century

In 1847, the American Medical Association is founded which, in and of itself, was not a bad thing, but the AMA quickly began to act as a powerful lobby affecting many laws and regulations which drove up prices. Now some might say that regulation protects the public and I would not argue that here and now, but would say that it makes the medical professions one of the highest paid professions, especially in the United States.

• The government created the “3rd party payer” system around 1940

Scrabbling to correct the economic crises of the 1930’s, the government introduced a number of laws to stabilize the economy. One such policy of the era was wage controls. Industry desperate to attract better workers started offering paid health insurance benefits in lieu of higher wages. Insurance has existed for thousands of years. Health insurance began to appear in this country as early as the late 1800s, but was only intended to cover catastrophic events. Then, sometime during the 1930s health insurance appeared that was offered to cover more generalized care. In all these prior cases, however, the individual paid for the health insurance. Now employers become the “3rd party payer” and medical prices began a steep climb as supply is unable to match demand. What is rarely debated anymore is this was the single worst event to occur in our health care system, but government encourages it by offering tax incentives to businesses to do so.

• The government created Medicare in the 1960’s

By the late fifties many began to complain that healthcare had gotten so expensive that many of the elderly and the underprivileged (neither have employers to provide insurance and it was no longer attractive for insurance companies to put forth much effort in policies marketed to individuals) cannot afford care. Congress creates Medicare in 1965. This subsidy pushes demand even further and costs skyrocket.

• The government creates the HMO in the 1970s

Shortly thereafter the creation of Medicare, the then young senator Ted Kennedy suggested that the government should provide care for everyone, so in 1973 President Nixon signed the Health Management Organization Act. Workers were pushed (almost forcibly), generally by the vehicle of their union, into HMO and PPO plans. This, with Medicare, was supposed to guarantee that healthcare was available to everyone. The real effect was that the government killed the already infirmed market for individual health insurance and the costs for health services begin to outpace the rise in healthcare costs in other countries.

• The government discouraged medical savings accounts prior to 1990’s

By the 1980’s healthcare costs were rising so quickly that the debate over what to do got angry. Doctors are blamed for their large salaries. Medical research and pharmaceutical companies are disparaged because, even though they are making more breakthroughs than ever before, they are also spending more on marketing than ever before. Insurance companies have become these government inspired über-companies spending billions of dollars influencing politicians and losing equal amounts of dollars in bad real estate investments and have introduce the doctrine of denying coverage of care. In spite of all the blowback from government interference in the market, it continues to deny the individual the privileges that it had been providing big business for decades – tax incentives for individuals to save for medical expenses. That has recently changed, but it may be too little too late.

I have little doubt that before long we will have a single payer system as is currently being exalted, but am equally sure, like with any fad, excitement will wane as reality maintains its grip. Even so, the system will remain and the debate will continue to rage. What I do find curious is that so many of us continue to look to that thing for help, that hurts us most – the State. We cling to the fallacy that with more and more centralized state control, it will correct course. I’m afraid I have long lost my faith in Oz. If you’re upset with your corrupt and greedy HMO, just wait until the federal government steps in.

  1. Before any of these reasons listed is the fact of government licensing of healthcare practitioners of most types – though there appears to be partial alluding to it in the first. (AFAIK, Chinese herbalists have not obtained licensing privileges in any state, though acupuncturists are in most.) Government licensing was the method physicians of the mid-19 century used to eliminate low cost competition – spurred by the newly formed American Medical Association. Medical and osteopathic physicians are government licensed gatekeepers for obtaining chemicals that the government has declared as off limits to anyone but these 1st class citizens – this extends to obtaining many health related devices and most radiographic exams and laboratory testing. These regulatory practices by government greatly reduce the choices of individuals to interact on health related matters to mutual benefit and also limits the innovations that would come about without such restrictions. Both the reductions and the limitations add up to increased cost for the individual who seeks to improve, regain or maintain his/her health.h.

    Good alternative to AMA is Association of American Physicians and Surgeons, founded in 1943 as “voice for private physician” and has as a goal the elimination of 3rd party payers –

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