Health Care: How in the World Did We Get Here?

One of the difficulties in fixing our healthcare system is that the problems have been going on so long that they seem normal. How can we identify what’s wrong when it’s been this way since before most of us were born? And then the complexity! Something’s wrong; add a fix; something else is wrong; add another fix; the fix broke something; add another fix; why does the industry do that, it’s stupid; add another fix…

We have literally been adding fixes since 1942, when FDR was trying to “fix” the potential problem of labor strikes during World War II by issuing Executive Order 9017. That created the National War Labor Board to settle labor disputes. Which set wage limits. Which made it hard to retain good workers. Which incentivized companies to offer non-wage compensation like health insurance. Which the IRS declared wasn’t taxable income on the part of the employee. Which linked health insurance to employment. Which, along with a bunch of other fixes, is why the individual health insurance market was in such bad shape when the Affordable Care Act came to town to save the day. Which instead gutted the market; so few insurers are left in the individual market that a large number of counties only have one left.

And then there’s the damage modern insurance coverage has done to the payment relationship between patient and doctor, which has helped cause medical costs to skyrocket…

And none of that explains why we don’t have enough doctors, which also goes back decades and has its origins in laws meant to increase the number of doctors…

Yes, the Law of Unintended Consequences sucks. And backtracking the consequences to their origins isn’t easy.

But don’t worry, Friend. All is not lost. Strange people (like me!) exist who enjoy delving into the minutiae of regulations and tax laws and government subsidies and–oh, are your eyes glazing over? I’ll skip to the good part.

Let me give you the results of over ten years of research into the problems that plague our healthcare system. I wrote this list on February 6, 2016, and it hasn’t changed.

Here, at least in part, is what was wrong with our system pre-Affordable Care Act (ACA):

 The wage and labor laws from the 1940s are responsible for the uneven playing field between the corporate and personal health insurance markets.
 The federal government’s subsidy of doctors’ internships at teaching hospitals muscled out alternatives, leading to a de facto ceiling on the number of doctors getting their licenses every year, a number too small for the growing US population. This is the crux of our medical problem on the supply side.
 The federal government’s Medicare/Medicaid pricing structure skews the market toward artificial price controls and away from what is actually needed in the market, leading to, for example, fewer geriatric doctors. This pricing structure is used as the basis for negotiations between insurance companies and corporations, further skewing the market and giving the federal government even more indirect control over prices.
 State insurance laws and most states’ overall refusal to allow their citizens to buy health insurance across state lines are responsible for the patchwork health insurance system that increases costs and decreases competition. They also make it hard to create co-ops based on mutual interest (say, the Rotary Club or a church denomination) to reduce insurance prices and increase competition on the insurance side.
 The laws of other countries that require pharmaceutical companies to provide medicine at very low prices is a factor in higher prescription prices in the US, since those companies then raise prices here to compensate.
 Student loan subsidies allow colleges to raise prices, leading to more student loan debt at the beginning of doctors’ careers, pushing them into more lucrative fields and exacerbating the supply problem in lower income fields. This also impacts their ability to volunteer their services.
 US medical malpractice laws and the high cost of malpractice insurance directly impacts the fields doctors enter and (added to all of the above) whether or not they can even make it as an individual practitioner.
 Given all of the above, the logical but dysfunctional move toward nearly all medicine falling under the health insurance umbrella (rather than cash) has separated the consumer from the cost of medicine and medical treatment, allowing prices to go even higher.

Enter the Affordable Care Act. It was going to bend the cost curve, save families $2500 a year, get tens of millions affordable health care, and let you keep your plan and your doctor.

And which of those promises did it keep? Not one.

The ACA is the straw to the overladen camel, the loud noise to the avalanche area, the last bit of pressure on the dam’s weak spot in these areas.

The ACA is directly responsible for the trend reversal from PPO to HMO and so-called narrow networks, the evisceration of the personal health insurance market outside of the exchanges (less demand leads to fewer choices on the supply side along with higher prices for those who remain), the flight of insurance companies from the personal health insurance market even within the exchanges, the noticeable and rapid shift away from private practice, and the rise of concierge medicine among those doctors refusing to go corporate. And it doesn’t address in any way, shape, or form the two biggest issues: not enough providers and the transformation of the Medicare rate system into de facto price control.

If the ACA continues as is, it will ultimately destroy first the personal health insurance market and then the corporate market. It will ensure the demise of the small provider who takes insurance and leave only the largest players desperately struggling to stay on top of all the regulations. Truly, I couldn’t come up with a better way to destroy the health insurance industry and send doctors and prospective doctors fleeing if I tried.

So that’s where we are, and that’s where we’re going. It’s a dismal prediction, but denial won’t make it better, and there is still hope. There is still time to fix things before it all goes boom. But in order to do that, people need to know there are alternatives to our current system and what those alternatives are so that they can make good choices and pressure their politicians to do the same at the various levels of government.

 

Those were my predictions back in 2016. Now it’s February 1, 2018. Do we have fewer providers? Yes. Is the Medicare rate system still de facto price control? Yes. Are insurance premiums still working to achieve escape velocity? Yes. Are insurers fleeing the exchanges? Yes. Are the smaller providers selling out or going Direct Primary Care/concierge? Yes.

But all is not yet lost!

In a later post, I’ll talk possible solutions.

Comments

  1. Helen Cook

    And guess what it all does to the nurses who staff the hospitals? Nurses save lives every single day inside every single hospitals in this country. As the health care system reimbursement is so skewered, it hurts nurses and therefore patient safety because hospitals tend to cut back on nursing care in these circumstances. Patient to staff ratios go up and nurses cannot handle everything that needs to be handled. I have been a nurse for 26 years I know exactly what I am talking about. Recently the facility I am working for tried to eliminate a full department of very specialized nurses who go throughout the facility with what is called the Rapid Response team and for codes. The Rapid Response team comes when the primary nurse has a patient who suddenly has a significant change in status, be it difficulty breathing, new onset chest pain, new confusion etc… last week the nurses that are a part of this time literally did CPR on a patient who had their coronary arteries block off from a left main artery that closed during a heart cath, from the cath lab on the ground floor to the hospital suite on the 5th floor. That means they were doing CPR on what was essentially a dead patient on a moving bed. They continued CPR while the surgeon prepared to open this man’s sternum and do an emergency bypass. This patient survived and is currently on the floor I work as a charge nurse. He is slowly recovering. Yet the facility I work for one week after this incident told our nursing union they intended to eliminate this department, on the same day the news announced that the facility was putting $35 million into brand new surgical suites.
    On January 31st we had a patient leave my floor who had been in our hospital since the end of September. She had had open heart surgery, went to our cardiac intensive care unit following that surgery as is the norm and then 4 days later to my floor. Her recovery was very rocky, and approximately a week later she coded. Those specialized nurses were there and assisting that code. The chest compressions that saved her life opened up the sternum that was not healed. The wires that hold the sternum together had to be removed and the wound became infected even with the physician starting antibiotics. This patient was brought back to the cardiac surgical ICU following the code, where she received care from a nurse who had either only her or one other desperately ill person. Later she again came back to our floor, where she again coded a couple weeks later after her transfer. Once again nurses were the first to take care and control of the situation, including those specialized nurses. This scene of coding and going the the cardiac ICU then back to our floor occurred one more time. Through it all she had her sternum debrided and then a wound vac placed to assist in healing three times a week. Her kidneys failed and she had to then go to dialysis three times a week as well. She went through significant mental confusion and every time she was scared because she didn’t know where she was it was a nurse or an aide who was there with her, including when we had to keep an aide in the room with her 24/7 for over 2 weeks to ensure she would not fall. This patient survived, a miracle in so many ways, to go home. Not because she had open heart surgery to revitalize her heart, but because of the nurses who took care of her, who coded her repeatedly, who turned her and bathed her and sat with her. Who did more than give her meds and pain medications. The nurses who cared for her sometimes had 6 patients each, when our staffing grid calls for a charge free of patients and nurses with no more than 5 patients. Yet over and over and over we are at more than that and I have 5 patients as the charge nurse, and no one to man the desk and field multiple phone calls from lab, pharmacy, patient placement to get new patients into waiting beds, and of course family and friends trying to either call their loved ones or to talk to the nurse to find out how that patient is doing. Particularly in these circumstances those specialized nurses, called SWAT nurses are even more important. They come put IVs into patients who the floor nurse can’t start, the SWAT nurses have an ultrasound machine that allows them to visualize vessels we can’t see otherwise, and because they go to all the rapid responses and codes they are really, really good at getting IVs under difficult circumstances. They are trained to put PICC lines in when a long term IV is needed for IV antibiotics, or other venous access including being able to do blood draws so we know how the kidneys are working, or other essential labs.
    I cannot stress how vital bedside nurses are, or even adequately explain what we do day in and day out for the patients we take care of and ensure their safety except to explain that nurses do their job and everyone else’s too. We have to ensure that every aspect of our patients care is being done correctly, from their diet to their therapy to what the physicians are doing or not. Every single aspect of the care the patient receives is the responsibility of the nurse.
    Yet my facility was going to not only eliminate the SWAT nurses, they are proposing to lay off some 70 nurses. When we already do not have enough to fill our patient to staff ratio grids as it is. So perhaps they won’t lay off those nurses but will instead change the grids so every single floor except for my own will have nurses taking care of 6 to 7 patients each. There is absolutely no way that we can do this and provide adequate care, let alone good care. My floor will be designated officially a stepdown unit and we will be given one additional nurse per shift, while the acuity of our patients will increase, this because our ICUs are being overwhelmed. None of our floors have nurse educators on them anymore, those positions were eliminated a couple years ago. So how will my newer nurses, some of whom cannot read cardiac rhythms yet, learn what they need to know to take care of these fragile patients? Good questions isn’t it? The responsibility I am already carrying as a charge nurse who has patients more often then not anymore will escalate, especially because I am literally the only nurse from either shift who has any ICU experience, and mine is over 15 years old. There is no plan in place to educate and assist the nurses who will be responsible for someone else’s life. And no, my facility is not unique is any of this. The responsibility I feel towards not only patients but my new nurses with less than a year experience is almost more than I can bear right now. And that extra nurse they will give us hasn’t been hired, we have 5 open positions on our night staff, the shift I work. So what good is it to increase the grid when we don’t have the nurses to fill our needs right now? If the layoffs occur that the hospital is threatening some of those who will lose their positions will be nurses who work away from the bedside and have for years in care management, research etc… they will be forced to take open positions like the ones on my floor. I will get nurses who have not done patient care in many years, so they will fill a hole, but they will not be able to fill their new role adequately for months. Those nurses will also not stay, they will leave as soon as they find another job away from the bedside because they didn’t want to be there to begin with. Bedside nursing is a highly stressful job that is not suited to everyone who calls themselves a nurse. Forcing people from one niche to another will not be the long term solution. A couple months ago our Chief Nursing Officer proudly informed me at a meeting where she was seeking to tell us what she was doing to get nurses in to our facility, that our facility was doing better on getting new nurses in than the other Michigan hospitals that are part of our hospital system, only 43 days! 43 days to fill a nursing position. Since our new grid is supposed to take place on March 4 I have little hope that we will have the staff necessary to take care of the patients being pushed out of ICU to us. We no longer have on site human resources see, instead it is a mid west hub that is out of state, HR at the facility being eliminated except for a couple people whose job could not be terminated.
    Nurses also could not do what we do without nurse aides. My floor is 46 beds, all privates, so it is a long floor to walk. More times than I can count in the past year we end up with only 2 aides on the floor at night. We are supposed to have 4, and the vast majority of the time we have no open beds, something that has been going on since the baby boomers hit the health care system. 2 aides cannot come close to taking care of 23 patients each, so the tasks these young people do fall to the already overwhelmed nurses also. Large numbers of the aides in my facility are going to nursing school, at least they are learning what they are really getting into.
    The reality is that the health care system as it stands now could not operate or function on any level without nurses and the unlicensed aides that take care of the patients. We could have plenty of physicians in this country but without the nurses to carry out the actual care it would mean nothing. And without us people die, from neonates born far too early to the young person in a car accident to the elderly patient with the flu. Nurses want everyone to be able to access care, I know not one nurse who doesn’t feel that way. In my little micro environment I know few nurses who still believe we can do that under single payer or through what Obamacare has wrought. It is primarily academic and management nurses who believe otherwise. A major revamping has to take place. The question regarding that though becomes, will CEOs making millions be allowed to do so while nurses are laid off? The CEO of my hospital system took home 17.6 million last year, the highest paid non profit CEO in the country. I begrudge no one their money, I am not a flaming liberal, I am not liberal in anything, but I do find it obscene for this to be the truth when it is lives of real human beings who have other human beings who love them.
    It was only through push back from our nursing union and our members as well as from members of the community who were alerted by the local media that we were told we will keep the SWAT nurses, but the patient to staff ratios changes the hospital will not back off from. Understand that new $35 million dollar surgical center for physicians to practice in is being built on the backs of patients and nurses. Nurses will put up with just about anything but unsafe staffing that is not simply temporary. A clash is coming and unfortunately those who will lose will not be management but the patients who can’t get basic care because the least sick will get the least care, and the nurses who voluntarily have made it their life to take care of them. It’s a crying dirty shame. And its a story almost no one outside of nursing ever sees or talks about.
    There is no health care system without us.

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      Author
      Dawn Smit

      I just realized I hadn’t thanked you for writing this, Helen. So thank you, thank you, thank you so much. People need to know what you’re going through.

  2. Jeff H

    Top 10 Biggest Problems with Our “Healthcare” System:
    1. Calling it “healthcare”, when in fact it’s “medical treatment”
    2. Calling it “healthcare”, when you actually mean “the insurance industry”
    3. Government regulation
    4. Government regulation
    5. Government regulation
    6. Government regulation
    7. Government regulation
    8. Government regulation
    9. Government regulation
    10. Government regulation

  3. Rich S

    To the everlasting delight of the statists, the accumulative unintended consequences will lead to the inevitable (false) conclusion that the market has failed and the only thing that will save us is a complete nationalization of healthcare. And the people will buy it. Ignorance of basic economics and a total lack of a historical perspective are the twin pillars upon which nationalized healthcare will succeed.

    Please tell me I’m wrong.

  4. christopher fountain

    “Truly, I couldn’t come up with a better way to destroy the health insurance industry and send doctors and prospective doctors fleeing if I tried.”

    To be fair, that was its intended purpose. ObamaKare was designed to fail, so that a single-payer system could be ushered in. That was my suspicion back when the plan was being discussed, and everything that’s happened since has only confirmed it.

  5. Ty Greaves

    Smit’s article is a well structured indictment that, based on my studies, captures the most significant problems: 1) the artificial coupling of employer to health care insurance access, 2) decoupling of the consumer from the price of care, 3) disincentives for people to seek MD’s, and, most importantly, 4) the collage if government mandates, rules, prohibitions, and regulations. Smit also highlights the overuse incentives of zero marginal cost the patient, malpractice risk minimization for the doctor, and bureaucratic incentives for expanded control. I would add the inefficiencies of hospitals competing for the doctor’s service by buying everything (CAT, MRI, helo pad, emergency room, transplant facilities) even though usage rates don’t justify the expense. I look forward to the promised corrective actions.

  6. Doctor Mist

    This is a masterly depiction of our situation; I have not seen it all laid out so clearly and succinctly elsewhere.

    The situation with pharmaceuticals must be a little more complicated than you state in your fifth bullet point, though. In general a manufacturer does not have the ability to just jack prices up — the market finds the equilibrium between what the producer can get and what consumers will pay. You would expect them already to be charging Americans as much as they will pay, in which case the effect of price caps elsewhere would be that merely marginally profitable drugs would stop being produced, not that prices would go up in America.

    There are a couple of confounders to this analysis, of course.

    First, the cost of a drug is very heavily front-loaded — it’s all in the development, after which the marginal production cost is comparatively small — so if a drug is already in production, it’s usually still profitable to sell it overseas cheaply rather than discontinue it. The effect you would expect to see from overseas price caps is that potentially useful drugs would not be developed at all because the potential return doesn’t match the development costs.

    Second, the consumer rarely pays for the drug directly, if they have an employer health plan. So the feedback that produces the equilibrium between producer and consumer is disrupted. The producer can raise the price higher than a consumer might be willing to pay, because the incentives on a health plan are more complicated than just price vs benefit. But that’s more an artifact of the disconnect between producer and consumer than of the price caps overseas.

    I’m still trying to puzzle out just what the incentives are on an employer health plan. That’s who pays for the drugs, so you’d expect them to provide at least some back pressure on prices. But their main incentive is to make the employees happy with their employer — from the viewpoint of employers (most of which are self-funding, hiring insurance companies to administer the plans rather than literally paying for employee insurance) the money spent on health care is fungible with money spent on employee salaries. If a drug gets more expensive, it slightly depresses the salary the employer will offer — but this is aggregated over all employees, so nobody has any ability to decline a prescription in favor of slightly higher pay.

  7. Dubious Patriot

    I read the entire article and the very illuminating jeremiad by Helen Cook with keen interest and more than a little horror. If even the best nurses in the country flirt with despair, then I’d ask how just far the medical system in this supposedly advanced country is from the utterly dysfunctional nightmare that is the so-called medical system in, say, Venezuela.

    I don’t quibble with the details of either what led to the current gigantic mess nor even with upcoming ideas how one might “fix” the system. I’m sure I’ll be as impressed with the suggested solutions as I was with the clear outline presented herein of the evolution of an unnatural, shambling beast of a health-care system that couldn’t ever have been born in a sane universe.

    The big question is this: How the hell do you get through to the man on the street that the mess is just that bad and in need of a drastic overhaul that abruptly discards decades of growing, now almost incomprehensible complexity? How in the world do you overcome the well-funded, lobbyist-enforced wailing unto the heavens from encrusted layers of existing financial interests? Those fellows will fight like mad dogs to keep their little gravy trains rolling. What chance do we ordinary mortals stand? -_-

  8. Robert Arvanitis

    tl;dr — Hippo gets in the bathtub. Water everywhere. Hippo nationalizes all the towels.
    Ms. Smit mentions unintended consequences. The consequences may be hidden, but but they are quite deliberate – to gather political power; to play “Sim City” with our lives.
    As tax payers catch on, dirigistes must use ever more deceptive means to hide the take. The steps are clear enough to be numbered.
    1. Tax and spend.
    2. High nominal rates with unequal deductions.
    3. Deficit spending; tax the unborn.
    4. Slices. Personal income tax. Wage tax (FICA) Corporate income tax turns businesses into tax collectors. Sales tax turns retailers in tax collectors. Excise tax makes importers tax collectors, Real estate tax et al. Death of a thousand cuts to hide aggregate amercement
    5. Unfunded mandates.
    6. Inflation.
    7. Actuarially biased insurance schemes. Social Security is a vertical Ponzi scheme, plus horizontal redistribution. Obamacare was pure redistribution, and builds on the pretax sleight of hand with fringe benefits.

    In particular, the entire healthcare project is about arrogating the power to allocate a scarce resource. It properly belongs to the individual, but that is unacceptable to the statists.

  9. Jay Dee

    The auto industry suffered under the fix mentality for years. Something didn’t work. Add another drawing requirement, add more engineers, add more quality people, etc. Designing new cars became so unwieldy that the car was out of date by the time it reached market and messes still happened.

    The answer was to reduce the administrative cost of designing cars. Reams of paperwork were replaced with a couple functional requirements.

    The hidden cost in health care today is the cost of administration. Look at how many administrators oversee a single doctor. This extends from government to insurance to employers.

    The second hidden cost is insurance against civil suits. Families will sue doctors for anything including successful treatment. One may believe that doctors can afford this but you and I pay for this.

    The answer is to reduce the cost of administration and adjust the balance on civil suits. In most countries, the loser pays for the cost of the proceeding.

  10. Pingback: Canada’s government considers its doctors to be a cost source – The EclectiSite

  11. DocJim

    One major missed factor: changing from health insurance, meaning hospital costs, esp. surgery, to paying for all lab tests and radiology tests, plus “office visits.”
    This change shielded the patient from costs that were immediate to be paid by employer. It also made the new procedures that were developed more easily paid, when the cost was “hidden” from the consumer. Charges then “spiraled out of control.”

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      Author
      Dawn Smit

      Are you talking about the change from catastrophic health insurance to prepaid health care, DocJim? I thought I had mentioned that (putting everything under the umbrella of insurance), but if it was unclear, I agree with you completely.

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