Posts Tagged ‘Health Care System’


The U.S. spends today more than 17%% of its GDP on health care—more than $2.7 trillion and rapidly rising. That is nearly double that paid by other advanced economies that typically pay 10% of their GDP for health care—health care services that are also generally superior in quality than that received by the average American. That $2.7 trillion means the U.S. wastes more than $1 trillion every year on ‘middle men’ in its privately insured system—i.e. an excess $1 trillion that accrues mostly to insurance companies and other ‘paper pushers’ that don’t deliver one iota of patient health care services.

The fundamental causes of runaway health care costs in the U.S.—costs that are undermining economic growth long-term in the U.S.—are not overuse of healthcare services by the vast majority of Americans. The health care cost run-up for two decades now is a direct result of government tax subsidized corporate mergers and acquisitions among health insurance companies, government price-subsidization of drug companies, and tax-encouraged for-profit hospital industry concentration—all three of which today drive health care costs all along the health care services supply chain.

Government policies for decades now have encouraged monopolization in the industry that is the fundamental force driving health care costs. Health insurance companies once earned 5% returns, distributing 95% of every dollar to pay for health services. They now earn 22% returns, distributing only 78%, with much of the difference paid to obtain Wall St. for loans for health insurers and for-profit hospital chains with which to buy up their competitors. Government has aided and abetted health industry concentration, and thus monopolization and runaway prices, since the Clinton administration with its policy of exemption of health insurance companies from anti-trust laws and tax incentives that encourage industry concentration.

As health costs have escalated for more than two decades now, the solution of politicians to the growing cost crisis has been to ‘socialize’ more of the costs of health care while privatizing more of the benefits. Working and middle class Americans have been required to pay more and more of the total cost of private employer health insurance and/or receive less coverage, or have been forced simply to go without coverage. Health care costs for retired Americans with Medicare have been increasingly ‘socialized’ as well: Part B Medicare doctor costs are paid increasingly out of government general budgets and Part D prescription drugs totally out of such budgets. Medicaid costs similarly come out of government budgets. However, this system of perverse ‘socialization of costs’ has reached its limits as health care cost escalation has become unsustainable. Other ways are therefore now being considered to continue the health care cost inflation benefiting companies’ and investors’ profits, while introducing new ways to ‘socialize the costs’. Obamacare is just the latest experiment in such new methods to continue ‘socialization of costs’ on behalf of health care services corporations.

Politicians have cleverly pitted the general taxpayer against the bottom 80% households who are the victims of the system of rising health care costs for declining coverage and quality of care. The Obama administration’s 2010 health care law, the Affordable Care Act, continues this problem by failing to provide any long run solution to runaway health insurance and health care costs, by instead subsidizes health insurers and drug companies at public expense, by encouraging employers to dump their health insurance coverage for their workers, by promoting self-rationing of health care services, and, most importantly, by requiring middle and working class America to subsidize 30 plus million of the currently 50 million without any health insurance coverage. The main beneficiaries of the Obama health care act are the health insurance and drug companies that will get the 30 million plus new paying customers.

Admittedly, the insurance companies will have to cover the cost of coverage for dependents to age 26, won’t be able to refuse coverage to customers with pre-existing conditions, will have to provide coverage with no lifetime limits, and all the other positive provisions of the Affordable Care Act that were necessary to buy votes on the cheap from liberal Congress members to ensure its passage. But in exchange for these benefit improvements, the health insurance companies will get 30 million new customers. The companies will enjoy a revenue windfall yearly of about $300 billion (assuming monthly premiums of about $850 on average and $10,000 a year for 30 million). Given that windfall for insurance corporations, it is not surprising that U.S. Supreme Court Chief Justice Roberts recently voted to uphold the constitutionality of the act. It wasn’t because he suffered from a temporary affliction of liberal angst. Roberts has consistently voted in favor of corporate interests on virtually every Supreme Court decision while on the court bench. His vote should be viewed simply as a pro-corporate interest vote, in this case worth $300 billion a year for health insurance companies.

But massive subsidies to health insurance companies is not the only—or event greatest–legacy of the Obama health care act. Continued escalation of health insurance monthly premiums—now rising at around 13% a year once again—is another. So too will be the forthcoming attacks on Medicaid and Medicare that will immediately follow the November 2012 elections. The retired (Medicare) and the working poor and disabled (Medicaid) will be asked to use less and/or pay much more directly for even lower quality health services.

The greatest negative legacy will be a historic collapse of employer provided health insurance coverage that will commence in 2014. Beginning that year, with the activation of mandated individual health insurance required by the 30 million now uninsured, companies will begin to dismantle their employer-provided health insurance plans—leaving their workers either to be driven into the privately obtained health insurance system created by the recent health care act for the 30 million uninsured, or else forced into the even lower quality/reduced coverage Medicaid system. The Obama health care act will thus set in motion, circa 2014, the rapid unraveling of the employer-provided health insurance system that has been in effect since the late 1940s.

What has been underway since the 1990s, in various forms, has been a drive toward privatization of health care by another name: from Clinton’s ‘managed health care’ system to George Bush’s ‘health savings accounts’ to Obama’s individual health insurance exchanges now coming in 2014.

This new, more individualized and privatized system will not result in health care services absorbing a lesser share of GDP, but a greater share. US households and consumers will thus eventually pay even more than 18% of GDP for health care services, resulting in a still further decline in disposable income with which to purchase other goods and services and support economic growth.

The only solution long term to the broken health services system in the U.S. is a true ‘socialization’ of the crisis—not a socialization on behalf of insurance, drug, and other for-profit companies. A socialization of benefits as well as costs in which everyone pays a fair share, not where wealthy investors and corporations are subsidized at pubic expense for what is a right to health care. A solution based on a system of ‘Medicare for All’ funded by a reasonable tax on all incomes—both earned (wages) as well as all capital incomes alike. An elimination of health insurance companies and other middle men from the US health care system saves a minimum $1 trillion a year. Add a reasonable tax of 3%-5% on all forms of income in addition to the $1 million a year savings, and funding a


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