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Is Private Health Care Squeezing the Life Out of Us?

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Respectfully submitted by Lawrence E. Rafferty(rafflaw)-Guest Blogger

If you have had any medical procedures lately, you may already be aware of the enormous prices being charged by hospitals.  What you may not be aware of is just how expensive this medical treatment is and how relying on private health care may just be reducing our lifespans.  I apologize in advance on the length of the following examples, but they are necessary to understand the enormity of the issue.

“Brill’s article begins with the story of a 42-year-old Ohio man named Sean Recchi, who traveled to MD Anderson Cancer Center in Houston for treatment of non-Hodgkin’s lymphoma. He and his wife Stephanie had paid $469 a month, or about 20% of their income, for insurance that covered $2,000 per day of hospital costs. His financial troubles started when MD Anderson told him, “We don’t take that kind of discount insurance.”  But he had to go to the hospital. His wife recalled that he was “sweating and shaking with chills and pains. He had a large mass in his chest that was..growing. He was panicked.”

Stephanie asked her mother to write a check for $48,900.  Sean waited for 90 minutes while the hospital confirmed that the check had cleared. He was also required to advance MD Anderson $7,500 from his credit card. The total cost for the initial treatment and chemotherapy was $83,900, including a $15,000 charge for lab tests for which a Medicare patient would have paid a few hundred dollars, $283 for an x-ray that Medicare categorizes as a $20 charge, and $1.50 for a generic version of a Tylenol pill.”  CommonDreams 

Those charges were just the start of the enormous costs that Mr. and Mrs. Recchi would be subjected to while dealing with his illness.  His total bill for the beginning of his treatment for cancer was $83,900!  If Mr. Recchi had been treated under Medicare for the same procedures and blood tests his cost would have been much less.  “Had Recchi been old enough for Medicare, MD Anderson would have been paid a few hundred dollars for all those tests. By law, Medicare’s payments approximate a hospital’s cost of providing a service, including overhead, equipment and salaries.”  Time

The hospital in this example is a non-profit division of the University of Texas, but its profits are enormous.  ‘ “The hospital’s hard-nosed approach pays off. Although it is officially a nonprofit unit of the University of Texas, MD Anderson has revenue that exceeds the cost of the world-class care it provides by so much that its operating profit for the fiscal year 2010, the most recent annual report it filed with the U.S. Department of Health and Human Services, was $531 million. That’s a profit margin of 26% on revenue of $2.05 billion, an astounding result for such a service-intensive enterprise.1

The president of MD Anderson is paid like someone running a prosperous business. Ronald DePinho’s total compensation last year was $1,845,000. That does not count outside earnings derived from a much publicized waiver he received from the university that, according to the Houston Chronicle, allows him to maintain unspecified “financial ties with his three principal pharmaceutical companies.” ‘   Time

Not only is this hospital reaping huge financial windfalls on the backs of its patients and their insurance companies, the compensation of the hospital’s CEO, as noted above, is astronomical.  And that compensation does not even include the “unspecified financial ties” with pharmaceutical companies.  Does that mean that the CEO is allowed to receive kickbacks from some of the companies that his hospital may be using for their medications?

This is just one example, but the Time magazine article linked above delves into other examples of this type of outrageous medical costs charged to patients.  If the patients noted in the examples were able to take advantage of a Medicare for all  plan, the costs would be a small fraction of what Mr. Recchi was subjected to.  It is interesting to note that the Administrator of Medicare for the entire country made a small fraction of what this one hospital CEO took home.  “The Medicare administrator made a base salary of approximately $170,000 in 2010.”  TheNation

Just what do we get in terms of service and results for these extraordinary charges?  “Our private health care system has indeed failed us. We have by far the most expensive system in the developed world. The cost of common surgeries is anywhere from three to ten times higher in the U.S. than in Great Britain, Canada, France, or Germany.” Common Dreams  Our expensive private health care system does not even produce better medical results than the results achieved under Medicare.

“We now have a shorter life expectancy than almost all other developed countries. A National Research Council study placed the United States LAST among 17 high-income countries.

It wasn’t always this way. Since 1960 there has been a close parallel between worsening life expectancy and increased health care costs as a percentage of GDP. Most disturbing is our growing infant mortality rate relative to other countries. A UNICEF study places the U.S. 22nd out of 24 OECD countries in “children’s health and well-being.”  In startling contrast, Americans covered by Medicare INCREASED their life expectancy by 3.5 years from the 1960s to the turn of the century.”  Common Dreams

That last factoid on life expectancy is amazing.  We are paying far more than any other country in the world for our private health care system, but we are not getting the world-class results for those high prices.  Why do we as a nation continue to allow the medical industry to charge these exorbitant rates?  The answer is the lobbying money spent on our politicians in Washington and in state capitals all over this country.  We have to take over the for profit health care system and replace it with a Medicare for all type system or we will continue to overpay for less.  Will Obamacare help this situation?  It may, but we won’t know for a few more years if costs are controlled and results are improved.

Will Obamacare start us down the road to a single payer system?  One can hope, but I am not holding my breath.  Does it make sense to cut Medicare services and push back the eligibility age in light of the huge national costs incurred in the private health care system?  What do you think?

234 thoughts on “Is Private Health Care Squeezing the Life Out of Us?”

  1. Rafflaw, me too but supposedly 85% of all med. mal cases are lost regardless of the proof. I think a lot of this is because the medical community refuses to police itself so why not feel entitled?

  3. Riesling:

    Germans are very competent people.

    What is your unemployment rate? How many people as a percent of total population receive what we call social services, welfare, etc. What percentage of your GDP goes to such things?

    “Germany Prepares for Fewer Social Services, Higher Taxes

    Dec. 25, 2012

    Recommendations by the German Finance Ministry point to a drastic increase in taxes and a cut in social services, an analysis says.

    Although the government and the opposition in 2013’s elections are pledging higher benefits for pensioners, families and the long-term unemployed, Finance Minister Wolfgang Schauble is planning cutbacks to prepare for a weakening economy, the German magazine Der Spiegel reported Tuesday.

    The European debt crisis is prompting the planning of an austerity budget, and finance officials are scrutinizing subsidies, entitlements and other welfare benefits worth tens of billions of euros, the magazine said.

    Schauble’s team envisions encouraging Germans to work past the official retirement age of 67 to counter a labor shortage, and intends making retirement less attractive by removing “inappropriate incentives” — the advisers wrote in a position paper — by reducing pension payments.”

    “Germany is one of the countries with the best medical care. A wide range of hospitals, medical practices and institutions guarantees medical care for everybody. With over four million jobs, health care is the largest employment sector in Germany. All in all, 10.4 percent of the country’s gross domestic product is spent on health – 1.5 percent more than the average in the OECD member countries. As a result of the so-called cost-cutting law introduced in the wake of the reform already undertaken to the health system, Germany now makes the lowest per capita increase to health spending of all OECD countries: Between 2000 and 2007 spending rose in real terms by 1.4 percent per annum, while the OECD mean was 3.7 percent.

    In 2007 a reform of the healthcare system was passed. Its key pillar is the Health Fund: Since 2009 all the contributions paid by employees and employers to the statutory health insurance scheme flow into this Fund. This is supplemented by tax revenue. Ever since there has been a standardized contribution set by the Federal Government for health insurance. For each insured person the health insurance companies receive a flat rate from the Health Fund. Companies which insure a particularly large number of old or sick people and low earners receive a subsidy. The Federal Government’s long-term aim is to enable more autonomy with regard to contributions and greater regional differentiation. In addition contributions are to be introduced that are not based on income, but which are to be balanced out through social security payments. To enable health costs to be almost entirely de-coupled from wage ancillary costs, the employers’ share of the health costs is not to rise any further.”

    “Fundamental changes have also been made to provisions for old age. Although compulsory pension insurance remains the single most important pillar of income in old age, in-company and private pension schemes are becoming increasingly important. The so-called “Riester pension” and the “Rürup pension” for the self-employed are models already in existence, enabling by means of tax concessions private pension schemes covered by capital contributions. The Owner-occupied Property Act also encourages residential property. Part of the reform involves raising the mandatory retirement age from 65 to 67: Between 2012 and 2035 the initial retirement age will rise by one month a year.”

    “As a result of demographic trends the traditional ”cross-generational contract“ is less and less able to be financed, such that private individuals are having to supplement it by making their own provisions for old age. In addition, family-related measures to increase the number of children, such as raising child benefit and increasing the number of kindergarten and crèche places, are also being implemented.”

    It seems to me as if Germany is moving toward a market solution to its social services. While we are moving to a state solution which will fail as all such systems do by their nature. I wonder when people are going to admit that socialism just doesnt work and that freedom is a much better concept?

    1. “As a result of demographic trends the traditional ”cross-generational contract“ is less and less able to be financed, such that private individuals are having to supplement it by making their own provisions for old age. In addition, family-related measures to increase the number of children, such as raising child benefit and increasing the number of kindergarten and crèche places, are also being implemented.”

      Bron,

      Wouldn’t it be helpful if you supplied the link for this article, so we could assess the veracity of its statements and thus the conclusion you draw from it?

  5. Nick S.: Here is some new anecdotal information on “socialized” medicine for you…..our family of 3 pays about 500 Euro a month for the state-run insurance. This is matched by my husband´s employer. Our neighbor with 7 children pays the same. Our bachelor friend with no children pays the same. None of us have had to wait for any emergency health care. I had my gall bladder removed, an absolutely routine procedure on an otherwise healthy patient. I stayed in a modern, newly-renovated hospital in a double room for 4 nights (my roommate was an unemployed woman – also covered). When I told my doctor that in the States it would have been an out-patient prodedure his reply was: “We don´t do McDonald´s Drive Thru medicine here.” I did have to pay for some of the expenses out-of-pocket. I think the total was 30 Euro. My daughter broke her leg. Same excellent service. Total recovery. Same out of pocket expenses. We live in Germany.

  6. leejcaroll,
    I would hope that the doctor you mentioned is an exception. I would believe that most doctors would not be as entitled as he seems to be.

  7. Darren,
    We can look at Medicare now and how it is much more efficient than private health insurance as a guide to what a single payer will bring to the table.

  8. Interesting I wrote a post on my blog about a sign in doctor’s office, all new patients must pay $100.00 regardless of their insurance coverage, apparently to ensure payment of some amount in case they were trying to cheat the doctor.
    The post was essentially about patients being a doctor’s employer and we need to not be supplicants but an equal partner.
    Someone who claimed to be an anaesthesiologist and trained pain specialist posted a comment about his paying hundreds of thousands of dollars to go to med school and “become your employee”. He (she) was very put out that I would ever suggest it is a partnership.
    (He also said he was ‘lied to” and BS’ed everyday by pain patients trying to get oxycodone as opposed to doing what he wanted, diet, end a bad marriage,change your job, TENS units (a pain device), etc)
    The sense of entitlement and patients are out to scam me was palpable. He is a perfect example of why the system needs to be changed.

  9. One thing I might be concerned about one payer system, or any other system in that regard, is that it opens up the possibility of a “single point of failure.”

    Any system whether it be software or an organization that has single point of failure risk, is prone to catastrophic failure due to one cause. It is something that can be mitigated by multiple systems one of which could take over in the event of failure. That is a risk i would watch for.

  11. “If there is a single payer, doesn’t that mean that all doctors must work for the that single payer?”

    No. It means doctors work for their patients, the hospital and/or themselves. The only change is that their payment comes from one source instead of many that require redundant paperwork and staff to manage that redundant paperwork (which costs them money) and different procedures and standards of care allowed or disallowed by those many sources (which causes them to defer to insurance companies practicing medicine without a license instead of using their judgement and the informed consent of the patient to determine a course of treatment).

  14. Irafflaw,
    The difference, as I see it is that in the current system now if a doctor doesn’t like Insurance Co. X, Y, or Z Cross she can stop taking that insurance and stay in business, but if a doctor doesn’t like the single payer and stops taking “it,” how could she stay in business?

    Let me ask my question without the metaphorical hyperbole: If there is a single payer, doesn’t that mean that all doctors must work for the that single payer?

  15. Good column.

    I am not a stupid person, but I have received so many conflicting “facts” that I cannot make an informed decision on what we should do.

    I do however know that our current system is failing us.

  16. mahtso,
    your concerns about the government owning the hospitals is unfounded as is the concern about a form of serfdom. The hospitals and doctors are paid by insurance companies now so do they own the hospitals?

  17. I have posted this before:

    I really don’t know what the term “single payer” means, but this 2005 Canadian SC opinion shows that each province had its own system, so I assume Canada did not have a “single” payer system.

    http://scc.lexum.org/en/2005/2005scc35/2005scc35.html

    Bearing in mind that this is an old opinion and things may have changed, the opinion shows that system in Quebec was so poor that people were dying from lack of treatment while on waiting lists and that waiting lists are “a more or less implicit form of rationing …. Waiting lists are therefore real and intentional.” See paragraph 39.

    Paragraphs 112, 113, and 114 are also important (to me) in making a determination as to the quality of care in Quebec (at the time of the opinion.)

    With respect to a true single payer system:

    I assume that all medically necessary services would be covered and paid for by the government, leaving only electives and treatment to “tourists.” [If the Medicaid system is instructive, I see that there would also be need for doctors to argue that denied-services are medically necessary.] I can’t see how that would pay enough to allow many health care providers to stay independent of the government.

    Wouldn’t that mean that virtually all health care providers would be working for the government? Would the government effectively own the hospitals? Would this become a form of serfdom?

  18. rafflaw, I neglected to say thank you. We disagree, but you are a person w/ whom I disagree who I know has a good heart. Makes a huge difference in my book.

  19. rafflaw, My information about socialized medicine from people who have lived under it and hated the poor service. They are from a US attorney who moved to the UK after her Brit husband graduated from Harvard law. Most of my info comes from Canadians. I had several clients from Canada. That makes it anecdotal which is scoffed @ here so I’ll leave it that. Regarding the reimbursement, my brother-in-law is just not the type to fight. He was devastated. I offered to help but he has tried and now has just said, “F@ck it.” And, as you know that is their game plan.

    leejcarrol, Thanks. I know you have actually written a book on this which I am going to buy.

    Bron, A car is as needed as medical and legal services. I want the govt. to build and maintain autos for all Americans.

    1. Nick, ((*_*)) Just so you’re not disappointed, it is about my experience with fighting against and living with trigeminal neuralgia. You can read the excerpted first chapter online http://bookstore.xlibris.com/Products/SKU-0018435003/A-Pained-Life-A-Chronic-Pain-Journey.aspx (there is click in middle of page) so you’ll have an idea.
      I have been asked to write one about my med mal experience but since it ended, more or less, in 1995 it seems too late to write it.
      Thanks.

  20. Bruce, if intent entered into it then, for instance, my doctor had to go into the OR (where he apparently actually wasn;t, and has admitted to this practice in his biography where a young woman who just gave birth died on the table when a resident operated instead of Jannetta) saying “I am going to paralyze this woman’s face.”
    I guess you could say there was intent when he decided not to do the operation, (circumstantially). When you injure someone it can be accidental but just as you have to pay when you injure someone in say an auto accident a doctor needs to here. An ‘accident’ does not negate liability and responsibility.

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