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The Deadly Secret About the Fiscal Cliff Charade

Let's stop repeating failures of austerity and move toward solutions that can restore our Federal budget – and us – to health.

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Gypped

The question becomes, Why? Why do we pay so much and get so little for our money?

Part of the answer lies in the fact that, despite the high cost of private-insurance premiums, our health plans don’t provide enough coverage. According to survey data, Americans were unable to meet their medical needs because of cost more often than citizens of ten comparable countries ( OECD , Table 6.1.3).

That statistic applied to lower-income Americans, as might be expected. But interestingly, it was also true for higher-income Americans – those that are most likely to have private health insurance. 39 percent of Americans with higher-than-average income had an unmet medical need due to cost in 2010. For the runner-up, Germany, that figure was 27 percent. (It was 12 percent in Switzlerland and 4 percent in Great Britain.)

Higher-income Americans also led the pack in reporting out-of-pocket expenditures of $1,000 or more per year, along with their lower-income peers, with 45 percent in the higher-earner category spending that much or more per year. The figure was 37 percent for runner-up Switzerland. It was 2 percent in Sweden. And in much-reviled “socialist” Great Britain the figure was effectively zero.

These results reinforce the findings of studies on medical bankruptcies by Prof. Elizabeth Warren, which showed that medical costs were a dominant reason for bankruptcy even for people with health insurance. (She was officially sworn in as Senator Warren today – congratulations!)

Mistreated

Where does all the money go? Much of it goes to profit margins for private insurance companies, of course. (They’re experts at understanding their margins, which are much higher than most observers believe.)  There are also profit margins for a number of health providers, including for-profit hospitals, medical imaging companies, and physician practice management groups.

Underlying much of our explosive cost growth is the phenomenon we described in “ Sick Money“: Investors like Bain Capital buy up health care companies, load them up with debt, and demand highly aggressive profit margins. Many of them respond to the problem the way the Bain companies did in our piece: through fraud.

But many other providers overtreat, subjecting the population to a barrage of needless (and sometimes invasive) procedures while other basic health needs go unmet.

Here are two more OECD statistics that illustrate the point:

The United States is second only to technology-crazed Japan in the prevalence of high-cost (and high profit) MRI and CT devices for medical imaging, both in hospitals and in free-standing facilities. Many American facilities were financed by physicians who send their patients there, which poses a significant conflict of interest and which both public and private insurers have been attempting to limit. Many others are owned by sales-driven chains. Unsurprisingly, studies suggest there is significant overuse of this equipment in the United States.

And let’s not forget drugs. When it comes to per-person pharmaceutical costs the United States is off the charts, spending $947 per person on average. That’s nearly twice the OECD average of $487.

And remember: Congress won’t even let Medicare negotiate with the drug companies.

Fixable

Pharmaceutical corporations, for-profit hospital companies, private insurers — our system is sick. The diagnosis: Corporate greed.

Our “sick secret” can be fixed. In our next piece we’ll discuss how to attack it — and what it will take to shift the debate away from a “consensus” plan to adopt the miserly failures of austerity and toward real solutions that can restore our Federal budget – and us – to health.