Sunday, January 24, 2010

On Healthcare and Capitalism

(I started this to respond to a series of posts between extended family members I care about to give them some ‘inside’ information on the true aspects of reforming our health system. I wanted to dedicate maybe an hour to this…alas, there is so much to it that I could write for a week. So, I apologize for barely scratching the surface of this important topic. I can and will take the time to answer specific questions regarding the various aspects of reform. To do so here would result in a book).

To all concerned: I’m sure that my forthcoming comments will serve to irritate both sides of the fence. However, I feel I’m qualified in this area (health care financing, not irritating people). Most of what follows is based upon 20 years experience in the health care financing arena-with a smattering of opinion thrown it. I actually wrote a column regarding socialized medicine that stated it (socialized medicine) is ‘not inherently good or bad’—it just is. It doesn’t mean that the people who took part in this debate are right or wrong. Rarely is either extreme 100% correct. The answer oftentimes is in the middle between the two.

For people familiar with socialized medicine that like it, changing America's system is (thankfully) not as easy as saying, “well it (socialized medicine) works over in other countries”. Which is good, because as with anything, sometimes the grass is not always greener. As an example, while France's system is rated as having the best health care in the world by the WHO, a full 70% of people that live in other socialized medicine countries say their system needs to be overhauled. The argument that we spend more on health care than other countries and have less healthy people has more to do with lifestyle than anything else. The #1 disease in America is heart disease and related illnesses. Obesity accounts for the majority of this rather than any genetic predisposition. Same with diabetes and any number of illnesses in America- it's what we choose to do that's killing us, not the lack of health care. Freedom cuts both ways.

Any health care, whether it's in France or America, has to be paid for somehow. In France there is a mandatory tax on all people to pay for their healthcare--even on their pensions, capital gains and gambling winnings. French doctors also make about a third what American doctors make-in fact, they make roughly the amount it takes to pay for malpractice insurance in the United States, around $55,000. The bright spot is that France pays for it's doctors to go to medical school. A point of commonality between the two countries is the overprescribing of tests and procedures, usually associated with defensive medicine (see below) in the US, but France's docs utilize it (as many US doctors do as well) to pad their income. I'm getting ahead of myself here; let's take a look at why the US system, while not perfect and in need of some common sense reforms, cannot be summarily dismissed and replaced with socialized medicine.

Freedom...Just the word itself is burned into the American psyche. And nothing defines freedom to those Americans that were born here than Capitalism. Those naturalized US citizens who weren't born or brought up here may think otherwise, but "Socialism" for all intensive purposes, is equated with less freedom and more government involvement. Indeed, America was founded on a 'freedom' from the 'tyranny' of a monarchy--to this day Americans celebrate 'Independence Day'. While no on alive today has first hand knowledge of those days, a majority of people can remember World War II, either firsthand or via their parents, where patriotism, the American way, and freedom, went hand in hand and the enemy was anything that infringed upon that. Capitalism is as much entrenched in American's minds as apple pie. The capitalistic nature of America is designed to reward the best and the brightest. At the turn of the 20th century, immigrants arrived in droves because of the opportunities in America that weren’t available anywhere else. While ‘the streets are paved with gold’ may have been a bit exaggerated, immigrants still flock to the US in record numbers (although there has been a slight decrease of late of Hispanic workers due to the economy and an increased scrutiny on undocumented workers). Healthcare is no exception. How does that help with health care ? There are more reasons than space, but the biggest one is: INNOVATION. Since the mid-1970's, all but 5 Nobel Prizes in Medicine were won in whole or in part by Americans. The top 5 hospitals in the United States perform more clinical studies than all hospitals in any single country combined ! Health care in the US is among the best in the world--if you can afford it (or you have someone else pay for your care-i.e. an insurance company). Such is the nature of a system that rewards the "able" that actually "do".

Now there ARE political systems out there that seek to have all citizenry be egalitarian. However, real life is different than ideological principles and most of those systems have collapsed or are rife with corruption and human rights violations (Communism). Even in countries where that seems to work, the profit motive is recently being recognized for what it is…an incentive. Cuba relies on expensive imports to feed their people, which is ludicrous considering that Cuba’s fertile soil is among the richest in the world. Cuba’s government agrees and is experimenting with a system that gives partial ownership of farms to farmers and rewards them for successful harvests. As one farmer put it, “if you work hard you will be rewarded”. Just don't call it 'capitalism'. And so it is with America…the only barriers to success is largely due to personal determination, ingenuity and genetics. However, opportunity for success is not the same as ‘guaranteed’success.

Generally speaking, those without health insurance want changes in the law; those that have health insurance don’t. In fact, 87% of people that have health care insurance are happy with it…they are just not happy with what they pay for it. When reform was first started, the goal was to “reduce the cost curve of health care” and get the uninsured covered. Examining the 46 million uninsured (representing 15% of the population), it was found to be closer to 11 million (representing 8%) when you took out the illegal immigrants, people that could buy insurance but choose not to, (wealthy families that self-insure and young ‘invincible’ males aged 18 to 29 who think they don’t need it) and people eligible for public programs but for whatever reason don’t sign up. Somewhere along the way, health ‘care’ became health ‘insurance’—the two are quite different. Regulating health insurance (which is the financing mechanism for our health care) will do nothing to bend the cost curve of care. It is precisely the cost of health care that affects the cost of health insurance-not the other way around. Contrary to general belief-everyone has access to care in the US-the EMTALA act passed in 1986 requires health care providers to treat, without regard to citizenship or ability to pay, anyone needing emergency care. For non-emergency care, treatment is available—like any other service, however, someone has to pay for it. Because of EMTALA, roughly half of all hospital care is now done for free. Well, it’s not really free; the costs are shifted to everyone else either through increased taxes or increased insurance premiums. The threat of lawsuits has led to doctors practicing ‘defensive medicine’. Basically it means that unnecessary tests and procedures are performed so that ‘no stone is left unturned’. Just one of the many ‘true’ costs that can be affected by correct reform.

I recently spoke with someone who was born in Europe regarding reform. She stated very plainly that she understood that her socialized healthcare wasn’t ‘free’ and she paid extra taxes to finance it, which she was fine with. Therein lies the rub; people in the US generally don’t want any more taxes.

What of those people that aren’t successful ? Should we just let them waste away ? No. That’s why reform is needed. However, focusing on the wrong things to reform is worse than no reform at all. The health care industry is being unfairly maligned. Whenever you give something to someone it has to be taken from someone else. A doctor puts in years of time, and effort in pursuit of their chosen field, only to be saddled with large debts and soaring malpractice insurance costs. One doctor in a socialized medicine country when asked what our ‘problem’ was replied like this…”here doctors are content with one nice home and one nice car”—the imposition being that American doctors have numerous cars and homes. A pharmaceutical company spends billions developing new drugs to treat the myriad conditions that we find ourselves beset by, only to have those same drugs be recreated by other companies after 7 to 10 years. Not a long time to recoup your money. Many drugs fail and the threat of class action suits abound thanks to our litigious society-not a word about tort reform however- in other countries, citizens laugh about our lottery-style lawsuits. How about price caps on drugs ? The rest of the world has them. And that’s the problem-because the rest of the world has price caps, the drug companies look to America to make up the difference.

It’s easy to blame the insurance companies and the drug companies. What people miss is that we all are, indeed, people. Behind the corporations, there is a face—the people that are employed by them, the people that run them, the investors who finance them. I’ve heard said, “how much profit is too much profit ?” That question was asked of Senator Ensign at a recent health care roundtable I was part of. His response ? There’s no such thing as too much profit. Which I agree with. How do you limit creativity ? Talent ? Effort ? …that’s the beauty of a capitalistic system…in theory, the sky’s the limit. It’s why I got into sales…you’re limited only by your own personal dynamic. There used to be a time when being a doctor meant you were automatically ‘rich’. The reality is that successful salespeople routinely make more than doctors-without the requisite education required of doctors. It’s exactly because of government interference (and insurance company’s in response to that interference) that suddenly it’s no longer lucrative to become a primary care physician. Is it any wonder that only 17% of medical school grads choose primary care ? We are facing an unprecedented shortage of primary care physicians. Proof that, doctors (or CEO's, or any number of people) will go into other fields or industries as the opportunity to live the American dream is stifled by regulation. Since we mentioned CEO's and insurance companies, did you know that on average, insurance companies make 2% profit (the largest, United Health Care, made a little over 6%--not much better than a long-term CD). Speaking of profit, what if all of the insurance companies’ profits were somehow able to be put back into the system or CEO’s ‘exhorbitant” multi-million dollar salaries and bonuses were given back as charity to the needy ? It wouldn’t make a difference—the $13 billion in profit that insurance companies made in 2007 (before the recession hit) represents .6% of total healthcare spending. CEO’s total compensation represents even less- .005% of total spending. People hate that which they don’t understand.

Lest you think I agree wholeheartedly with the Republican side of things, know that I questioned Senator Ensign regarding his opposition to a ‘personal responsibility’ mandate during a conference call. Or as most people know it-“being forced to buy health insurance”. The auto insurance analogy is correct, but not for the reasons you think. True, you ‘choose’ to drive and you don’t choose to get sick or have an accident. However, the concept of why you have auto insurance is the same. If you’re in an auto accident, and it’s your fault that you injure the other party, the other party is entitled to have you pay for their damages or healthcare bills. Since many (most) people don’t just have the funds lying around to pay for this, insurance (that grand old financing mechanism for things we can’t afford) steps in. It’s to ‘protect the other guy’. Same thing with health insurance…if you’re a young 25 year old guy and you blow out your knee for example—an emergency room visit can cost you thousands. How many 25 year old guys do you know that have thousands laying around to pay for the care ? Taking it one step further, a heart attack in Nevada runs around $200,000. Can you predict 100% that you won’t have a heart attack ? Kind of hard when you consider an American has a heart attack every 29 seconds. How about any of the millions of other health emergencies ? Mandated health insurance protects the ‘taxpayers’-who ultimately pay for uncompensated care. It also serves to reduce premiums. It also could help save a life…Consider the following.

This past summer Senator Reid was canvassing the country with a former CNN correspondent whose twenty-something brother died due to his inability to have a heart transplant. She stated that “because the insurance company denied him, he died”. Listening to more of her story, she related how she applied for Social Security disability which would give her brother Medicare—and that he was denied twice. She then had success in getting her brother on Medicaid-the state’s care for people who make less than $12,000 a year. However, Medicaid wouldn’t pay for the transplant. Why not ? Because he was older than 19, the maximum age that Medicaid would pay for a transplant. Now why would Medicaid have an age limit ? Reason: cost. Now what is sad is that both Medicare and Medicaid are GOVERNMENT (read Public) plans. This is the reality with government health care…it’s still not free care and when revenue is less than expenditures something has to give (rationing, bureaucracy and poor service). The really sad thing is that if this young man had purchased health insurance before he got sick, in all likelihood he would be alive today. At his age, his premiums could have been had for less than $30 a month.

For those that can afford it, US health care represents the pinnacle of excellence. As costs have risen, insurance premiums have risen to keep pace. The US system has been around for 80 years, employs hundreds of thousands of people, and represents one-sixth of our GDP--this cannot summarily be dismissed without cataclysmic-ally affecting our economy. As President Obama stated sometime in July, (paraphrased)The best time to have started socialized medicine was at the beginning. It's too convoluted and entrenched to start now.

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