I should have known what would happen. Three cities in three days, each with a pre-dawn start to my schedule, culminating with my arrival on Saturday in Rochester, NY where the temperature was 6°F. So, I caught a head cold.
Well, at least I know it was a cold now. But, at the time, I thought it could be anything. “It’s either the flu or pneumonia,” said the doc. Even in my Robitussin induced stupor, the idea that I might have pneumonia scared me a bit. People my age die of pneumonia all the time.
“Your lungs sound clear but I could take an X-ray to be sure it’s not pneumonia. Do you want to do that?” she asked. Now, I suppose if my head were clearer I might have asked, “If my lungs are clear, why do you think I have pneumonia?” But, I didn’t. But, because I was asked and said yes, I’ll get a whopping big bill from the radiology department. So, why am I telling you all this? Because it’s a microcosm of the challenge we have reforming healthcare. (No, Obamacare didn’t reform healthcare.)
In the not too distant future, I will be eligible for Medicare. Then I won’t sweat this stuff at all. After all, the government is a bottomless pit of money, right? Of course, being a fiscal conservative, I wonder what might happen when the Medicare fund runs out of money, which should happen in 2024 according its Trustees.
But then, why worry about that? The country shows no sign of slowing its production of new money to fund government deficits. And, no one in Washington (or anywhere else) seems to care.
So, how do we wrestle this beast to the ground? And, why bother?
I think economist John Mauldin phrases the problem statement best: “In the US, the real question we must ask ourselves as a nation is, ‘How much health care do we want and how do we want to pay for it?’ Everything else can be dealt with if we get that basic question answered. We can substantially change health care, along with other discretionary budget items, or we can raise taxes, or some combination. Each path has consequences.”
The cover story in this Week’s edition of Time magazine, “Bitter Pill, Why Medical Bills Are Killing Us”, digs deep into the challenges we face. Before reading the article, I thought of the medical insurance companies as the Evil Empire in this quagmire. But, the economic power is shifting to hospitals, particularly non-profit hospitals, according to the article’s author, Steven Brill.
Hospitals are buying up physicians’ practices and aggregating services to control the entire medical supply chain. In some rural areas, they are the only game in town serving the community much like a utility company – except there is no public service commission to control prices. Brill goes into great detail examining why the so-called non-profits have higher net margins than their for-profit brethren, on which they pay no taxes of course. The nation’s second largest non-profit hospital, The Cleveland Clinic, nets over $570M and pays its CEO more the $2.5M per year. Does that sound like a non-profit to you?
To make matters worse, the hospitals grossly overcharge for everything. How do we know? Well, hospitals are required by law to submit their actual costs to Medicare, which pays cost plus a standard profit margin. The net of it: Medicare pays only about an eighth of the average hospital’s full charge. So, the huge “profits” of the non-profits are the result of them grossly overcharging their non-Medicare patients.
A few weeks ago (in a fit of whimsy) I used the popular TV show Downton Abbey as an example of how entrenched interests -- the lords and ladies of the British aristocracy -- hampered the economic progress of Great Britain, the pre-eminent economic and military power of the 19th Century.
Now, the US has its royals – the lords and ladies of the healthcare system --absorbing 20% of GDP, spending it inefficiently and undermining the financial security of the middle class. The entrenched power of these institutions – represented by lobbyists that outnumber members of Congress 7 to 1 – are hampering the economic progress of the US, the pre-eminent economic and military power of the 20th Century.
It makes me wonder… WHO WILL LEAD?