06 January 2007

Down the Rabbit Hole

Dave Hogberg writes in the National Review online that Democrats typically promise to make healthcare more affordable but that their record shows them expanding government involvement in healthcare — and that's why healthcare is so expensive in the United States.

What planet is he living on?

Isn't healthcare more expensive in the United States than anywhere else in the world?

Isn't the government less involved with healthcare in the United States than anywhere else in the developed world?

Our friend Jack Long says two separate drives power people's politics: either fear of government or fear of rich people.

I live in America — so sign me up for fear of rich people. I've sure seen the damage unbridled greed can do. Can't say the same about government — I think our democracy was designed to protect us from that.

Hogberg's examples run from speculative to ludicrous, beginning with the 1944 Supreme Court decision that insurance was interstate commerce and making it more difficult for state governments to regulate it. So Congress passed the McCarran-Ferguson Act in 1945, giving states back that ability. Hogberg claims that because people can't purchase health insurance across state lines competition has been hogtied.
Bringing to mind the survey of 2,500 people or so in Seattle who had some 750 insurance plans that doctors and hospitals had to sort through.
How is that limited competition?

Hogberg then cites the institution of Medicare in 1965. Medicare, a spectacularly successful and popular program, did add to the cost of healthcare, in part because it stepped in to care for people who had before not been covered. And it mostly used a cost-plus system that matched the one that insurers were using for decades. That's the same system that Halliburton loves in Iraq. They pay whatever for what's needed, with little or no cost controls, and then get a profit on top of that. "Plus," you could say.

So Hogberg pins the beginning of healthcare inflation to Medicare: "Since that time, [1965] healthcare spending in the U.S. has risen dramatically."

Except that healthcare spending actually began its dramatic rise in 1955, ten years before Medicare. In Severed Trust, Why American Medicine Hasn't Been Fixed and What We Can Do About It, George Lundberg, M.D., former editor of JAMA, writes:

"The United States began measuring the costs of healthcare in 1929; from that year until 1955 there was little real change. As a percentage of gross domestic product, costs barely inched up and stayed confined to a range of 3.5 to 4.5 percent during that twenty-six-year period before shooting up to today's 14 percent of GDP. Yet even in the 1930s, when costs were low, national commissions were created to study the excess costs of medical care. People were tearing out their hair because healthcare was so expensive. Looking back, it's clear that they were reacting to a change in the environment of medical care: a charitable activity had been transformed into a professional activity."

Lundberg posits that about 40 percent of the increase in costs is general inflation; 10 percent the increased number of elderly in the population; 16 percent is economic inflation on health-related goods:

"Why is a hospital mattress different from any other? What is so special about the truck base of an ambulance? Why do they all cost so much more than comparable products sold outside of hospitals? There is only one reason: the manufacturers have charged more because they can get away with it. In the cost-plus environment created by Medicare and Blue Cross, third party payers promptly paid for whatever the provider billed. There were no negotiations. A bandage for $16? Why not — the insurer will pay."

Lundberg finds the remaining 34 percent of healthcare inflation accounted for by the "volume and intensity of services offered by providers responding to everything from the AIDS epidemic and gunshot wounds to open-heart surgery and organ transplantation."

Most economic analyses also single out administrative duplication caused by our myriad of insurers, and the need for hospitals and doctors to create entire departments that keep up with the hundreds of insurers.

Estimates are that a single-payer system could immediately knock off 20 percent or more from our national healthcare bill. And we'd cover everyone.

Hogberg is probably partially right about government involvement increasing costs — but only because government has been so devoted to keeping big business molified. The problem in healthcare is the for-profit, free-market ideology. Recent polls have shown that Americans believe that government should step in to ensure that everyone receives healthcare. That is the solution.

On a completely different note, here's my Technorati html paste:
Technorati Profile
Now if I only knew what it meant. Steep learning curve here.

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