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The health care system in the US ranks first in the world in cost and 35th in the overall efficiency, according to World Health Organization surveys. In 2001 national health care expenditure totaled $1.4 trillion and accounted for 14.1% of gross domestic product (GDP). In 2003 it reached $1.7 trillion at 15.3% of GDP. In Switzerland it accounted for 10.9% of GDP, in Germany 10.4%, in Canada 9.3%, in Australia 8.4%, in New Zealand 7.6% and in the UK 6.7%. In all those countries, the infant mortality rate is lower than in the US and life expectancy higher. In Japan, where life expectancy is highest among the developed countries of the world, health care expenditure is nearly one-half as a percentage of GDP compared with the United States, where this expense is likely to keep on rising and reach 18.4% of GDP.
The very high and rising cost of health care in the US is basically related to excessive utilization, excessive profits and 'maladjusted capitalism'.
Excessive utilization results from practice of defensive medicine due to fear of law suits. This alone raises the total cost of healthcare by about 10% without improving its quality. The medical liability system is unique to American medicine. It does not significantly cut down medical errors. Nor does it improve the quality of medicine. It helps legal and insurance industries divert huge sums of healthcare dollars into their coffers. Adopting MICRA of California and making it a national law makes sense to the fullest. It is equally important to lower the limits of malpractice insurance from $1,000,000/3,000,000 to $100,000/300,000 by changing the hospital bylaws. This will remove the incentive for frivolous law suits. The moneys saved by the doctors will go into their special accounts named MICALSA (Medical Injury Compensation and Legal Savings Account) and these will be used to pay for the medical injury caused by them, in a timely fashion. Their liability and the amount of compensation will be determined by independent medical experts and presented to all parties concerned to help them resolve the issue. They will still have the option to go to court if needed.
Excessive utilization also occurs when terminally ill, many in vegetative state, in their last days or weeks or months are kept alive with artificial means for a variety of reasons, including lack of advance directive, family's demands and/or confusion. Terri Schiavo is one example, most Americans are familiar with. HEART (Humane, Ethical and Rational Therapy) is the answer and does full justice to the patients, their families and healthcare expenditure.
Other causes of excessive utilization include device and drug makers' direct and indirect methods of pushing their products, doctors' desire to make money or habits to keep on ordering extra tests. All these add significantly to the cost without any significant improvement in quality. These can be ameliorated by once again bringing the doctors back in the loop, paying them adequately for their time and service and encouraging and demanding the practice of good and cost effective medicine. Independent medical experts can play a useful role in this, especially when fear of unnecessary and frivolous law suits has been removed.
Excessive profits by HMOs, health insurance companies, hospitals, drug and device makers add very substantially to the cost of health care. Extremely highly paid CEOs of these entities have, over the years, devised ways to charge high premiums on one side and pay as little as possible to the healthcare providers on the other. To sustain this practice they create layers of costly administrative bureaucracy and very expensive legal cover both adding to the cost of healthcare only to make themselves and their attorneys richer. I call this, capitalism without conscience (c-woc) verses capitalism with conscience (c-wic) which should always be the right thing to do. The c-wic / c-woc or i:o ratio would determine the good or the bad that they are doing to society or humanity for that matter.. With the excessive amount of money in their coffers they hire very expensive lobbyists in Washington to make sure that no meaningful reform would ever occur and status quo will continue. Then they make heavy donations to election campaigns to keep the cooperative congress persons and senators in office, who on the surface claim to represent the interests of their constituents but in reality remain loyal to these special interest groups. The practice of c-woc (capitalism without conscience) is not just limited to healthcare industry. It is rampant and part of corporate culture. It is the root cause of recent financial and economic crises.
The plight of 47 million uninsured and another 25 million under-insured is related to this phenomenon. The former are above the federal poverty level but do not make enough to be able to buy health insurance in the market and the latter have insurance coverage which is inadequate, sometimes with, but most times without their knowledge. When their insurance company finds an excuse not to pay for hospitalization for a sudden illness or other medical services, then only they realize how they have been kept in dark all these years by their insurance plan to which they have paid premiums all along.
Forty seven million uninsured people can be very easily insured by enrolling those below age fifty into Medicaid and those above fifty with Medicare, at rates which are fair, reasonable and competitive. These rates can be subsidized if family income is low. For example, a family of three or less making one-half of the median income or less should be allowed to join at 5% of their gross income and a family making between one-half and full median income at 7% of their gross income. For a family of four or above these percentages should be 4% and 6% respectively. All premiums will be tax deductible. Additional costs resulting from these subsidies will be offset by savings from instituting recommended reforms in Medicare and Medicaid. Full premiums paid by individuals whose incomes are higher than the average median income will also financially supplement these programs. There are a lot of people (perhaps in millions) who are self employed as small business owners or their employees who fall in this category.
At present when someone without health insurance becomes acutely sick and is taken to the hospital emergency room, full medical care is provided until they are stable to be transferred to another facility or well enough to go home. Thanks to the Emergency Medical Treatment and Active Labor Act (EMTALA) of 1986, the practice of dumping by the hospitals has stopped. Hospitals get some compensation for providing free care through some direct and indirect methods but physicians do not. In EMTALA, US Congress should have included mandating hospitals to pay physicians at least at Medicare reimbursement rate for these services. Although late, this mistake must be corrected. Once everyone has been insured this will become a moot point.
Although Medicare and Medicaid have been in existence since 1965 and have stood the test of time and served their beneficiaries well there is much room for improvement, especially in bringing the cost down. Excessive utilization especially near the end of life is the main cause of high cost among Medicare beneficiaries and this can be controlled with ease utilizing common sense measures and help and recommendations from independent medical experts. Medicare otherwise has a good business model, although some modification will be useful. Medicaid's business model in Georgia and presumably in other states is helping the private care management companies get rich at the expense of taxpayers and healthcare providers. This must be changed. Administration of Medicaid program and its administrative cost should be similar to that of Medicare.
After absorbing all uninsured people and making both programs cost effective, they should be made open to public for voluntary participation at premiums competitive in the marketplace. At this point Medicare should become a quasi government organization and operate in a manner similar to US Postal Service under the guidance of CMS, and Medicaid should start operating in each state like a public university system under the guidance of CMS. The competition between Medicare and private health insurance plans will be along the lines of US Postal service verses United Parcel Service and/or Federal Express. Every state's Medicaid program will compete with other health plans like public and private universities do all over the country. This competition will bring down the cost of healthcare and improve its quality.
In the US prescription drugs cost two to three times compared with other developed countries with over $200 billion being spent annually. A large part of this expense is born by seniors who use multiple medications for multiple ailments for long and extended periods. At the inception of Medicare in 1965 hospitals were paid at "cost plus basis", which meant their cost (which they could inflate as much as possible) plus profit which must be reasonable (or look reasonable on complicated accounting forms to be filed each year). Physicians were allowed "current prevailing" charges with permission for reasonable increase each year to develop individual profiles. Medicare expense for hospital and physician services started going up rather rapidly with no end in sight. In 1983 Medicare introduced DRG/PPS to control hospital costs, and in 1992, RBRVS to control physician costs. Medicare should have done something similar to control the cost of medicines. Just the opposite happened in 2003 when Medicare part-D was being developed to help seniors with the cost of prescription drugs. In anticipation of Medicare Drug Improvement and Modernization Act (MMA), which became effective in 2006, drug companies started raising prices to take full advantage of the new law guaranteeing $40 to &75 billion a year of taxpayer money on behalf of seniors. This law needs to be repealed in favor of a new law requiring pharmaceutical companies to bring down the retail prices of prescription drugs for Medicare beneficiaries to the level of average prices in other G-7 countries. This new law which I have named Medicare Fair Drug Pricing Act (MFDPA) or Medicare-DII must include prohibition of direct to consumer advertising, and introduction of drug discount cards for seniors with limited incomes to qualify for 25% to 75% discount depending on their financial status. Medicare beneficiaries with good incomes will not qualify for drug discount cards but will benefit from lower prescription costs resulting from MFDPA.
Over 41,000 people are killed and 3 million injured in the US due to traffic accidents each year. Economic losses resulting from these accidents add up to over $230 billion, and health care costs over $50 billion. More than one-third of fatalities are related to alcohol consumption. Statistics about gunshot wounds is equally dismal-an estimated 70,000 injuries and 30,000 deaths each year, with staggering medical, legal and emotional costs. In order to minimize these injuries, deaths and expense we must start and require intensive and extended educational programs for safe driving for kids, and safe use and safe keeping of guns for gun owners.
Medicare and Social Security are somewhat related. They both serve our seniors and are funded with federal tax dollars. Both must remain sound in order to serve present and future seniors, but both are in trouble, the former due to ever increasing healthcare costs and the latter due to irresponsible fiscal practices of Washington politicians. According to the trustees of Social Security and Medicare the federal government will need an additional $155 billion in 2010 to pay for the expected benefits for these programs. In 2020, when a little over half of baby boomers will have joined these programs, the deficit will be $780 billion. In 2030, with all baby boomers on board, Medicare and Social Security will run a shortfall of over $2 trillion. For decades Social Security has been taking more money in than its share of expenditure. The US government instead of safekeeping it, has been spending it every year, leaving an IOU for the amount taken. These IOUs are being stored in filing cabinets in Parkersburg, West Virginia. Their paper value in 2005 was $1.6 trillion, which would be more than enough to carry this program into the imaginable future without any difficulty. The sad fact, however, is that these IOUs have no dollar value. The government must stop this practice of borrowing from Social Security fund for other purposes and also bolster it with what I have named Social Security Insurance Fund by levying small amounts (at ½ the rate of Social Security tax) on incomes over $200,000 a year. This small contribution by high income earners must be regarded as an essential patriotic sacrifice. On behalf of the people this fund will be invested safely and wisely to help it grow. It will help reduce the budget deficit and national debt which needs to be curbed with sound fiscal discipline to be shown by political leaders in Washington. We must demand from them to always maintain a Fiscal Responsibility Index (FRI) of 100. FRI can be calculated with an easy formula that I have devised. FRI of 100 or above will make the nation stronger, and less than 100 will make it weaker and problematical for future generations. The policy of borrowing and spending that the US government has adopted for many years, especially at an accelerated pace lately is likely to bring economic disaster as it did in Mexico in 1982 and 1995, and in Argentina in 2001, when the country defaulted on its debt. If that happens here, it will be extremely embarrassing and painful.
Healthcare engine, in its first gear, runs slowly, consumes about 3% of gross domestic product (GDP) and provides adequate care to the rich and some members of upper middle class. In the second gear the cost goes up to 6% of GDP, but now it covers a much larger population including middle and poor classes, although services to the poor might be somewhat limited. In this gear all essential health services like immunizations and care for acute and catastrophic illnesses become available to all, but coverage for chronic illness, log term care, and some other services remain the property of upper and middle income groups. Now let us shift to the third gear. The cost is 9% of GDP and everyone is covered. The speed and efficiency is adequate but not great. If you need magnetic resonance imaging (MRI) or a mammogram, you may have to wait for a few weeks or even months. The same perhaps would be true for coronary bypass surgery if you are stable. If you have a hernia, several months of waiting might cause some inconvenience, but you will be eventually taken care of without sustaining any undue harm. Go into the fourth gear, the speed becomes enjoyable and efficiency remarkably good, and cost goes up to 12% of GDP. In the fifth gear, the speed goes up along with the cost to 15% of GDP. Efficiency goes down and the engine vibrates and rattles. In the US we are slowly trying to shift into the sixth gear, one with turbo charge and overdrive and this will cause more stress and strain to the engine, raise the cost to 18% of GDP and bring the efficiency down further. In Europe and other developed countries they seem happy to run their healthcare engine in the third gear. America's personality, and its psyche is different. The speed and efficiency of the fourth gear along with its cost of 12% of GDP, are fully justified and help innovation and progress, but driving in the fifth gear is stressful and going into the sixth will be risky and into the seventh, suicidal.
Is there a link between the forces responsible for the ills of our healthcare system and those causing ills of economy and politics? Yes, it is an ailment that has infected Adam Smith's "invisible hand". Understanding it and treating it with a thoughtful approach including a public campaign will offer the best hope for a cure. This will require readers to send a million copies of the book to Washington to line up the hallways of the White House and the Capitol. This will become the people's lobby representing people's interest and it will be heavier than all other lobbies combined. It will educate and give necessary strength and support to the political leaders so that they may stand up to the pressure of special interest groups, and do the right thing. Then only substantive and meaningful reform will take place.