Our healthcare system today really comes down to a simple choice between two mutually exclusive alternatives: profits or viable healthcare. It is a choice that has evolved over time, as research has steadily increased the potential effectiveness (and cost) of diagnostics, treatment options, seminal discoveries and hyper-accelerated technology. In the 1950s, before any global push for universal healthcare gained traction, we used iron lungs to treat polio (until the preventative vaccines came along), anesthesia was still primitive, antibiotics and antivirals were most basic and many invasive surgeries were often considered too risky to attempt. Health insurance, where it was even a good choice, was relatively cheap and mostly provided by private insurance carriers, as an increasingly standard employment benefit, and Medicare.
When the United States was in post-WWII growth mode, most of the rest of the developed world was still struggling with rebuilding war-damaged cities and infrastructure. In those days, American travel to Europe and the more modern nations in Asia was dirt cheap. The US dollar soared in value. The GI Bill poured money into advanced education. While American compensation soared, especially for educated professionals, Europe’s pay scales stagnated in favor of their rebuilding process. The American capital markets focused on domestic growth, which accelerated in the post-Sputnik era (a Soviet first: satellite launch). While substantial research remained funded by government subsidized institutions and grants to universities, Wall Street discovered healthcare.
With this “investor” foray into a domestic marketplace that already paid far more for almost everything than any anywhere else on Earth, US healthcare began a very swift cost-price escalation. Not elsewhere. Today, the United States is the only developed nation without universal healthcare. Our investment institutions, by that time, had moved heavily into all the domestic financial aspects of healthcare, from facilities and insurance carriers to medical hardware and pharmaceuticals. Our policymakers simply assumed that capital investment in healthcare was the driver of innovation and, given our obsession with containing “socialism” and “communism,” the marketplace was our permanent placeholder in healthcare.
So, by the 1970s, with major deficits from the Vietnam War, government was reluctant to consider the same universal healthcare (in less expensive economies) the rest of the developed world had adopted or were about to adopt. We made a societal choice, just as the cost of medical care was soaring into unaffordability, that our system was better based on market forces. It was as to potential, but not in practice. Profits were clearly prioritized, even as millions of Americans were suffering and dying for lack of access to healthcare.
The United States has never been good at changing older governmental social programs once they are legally enabled. Social Security, for example, is still funded the same it was at inception – tax contributions from vastly more workers than a relatively small number of retirees – even as the relative number of retirees has long since skyrocketed with an insufficient number of workers to support it.
But at some point, the profit motive and protecting the mega-billion-dollar capital markets that now run American healthcare, no longer served society. Too many people were no longer capable of paying for their own healthcare – whether individually or by reason of insurance premiums, caps and exclusions, co-pays and deductibles. The gaps in insurance coverage, even under the half-measure of the Affordable Care Act, have widened. Writing for the June 21st The Morning New York Times newsfeed, Reed Abelson and Rebecca Robbins, explain why cost-savings plans have actually resulted in the reverse: “You probably already know some of the reasons prescription drugs are so expensive. Drugmakers charge as much as the market will bear. Health insurers and the government haven’t reined in prices.
“But there’s another reason: middlemen known as pharmacy benefit managers, or P.B.M.s. Your employer or a government insurance program like Medicare hires these companies to negotiate a price with drugmakers and to pay pharmacies. P.B.M.s are supposed to save money by haggling favorable terms with those businesses in exchange for sending them large numbers of patients. But in their quest for higher profits, they are quietly driving up prescription drug costs.
“Your pharmacy benefit manager is often invisible to you unless you’re having trouble filling a prescription. (You probably rely on one of the big three: CVS Health’s Caremark, Cigna’s Express Scripts or UnitedHealth Group’s Optum Rx.) We spent the past year trying to understand them… At a number of points along the way, your P.B.M. may be overcharging. It might steer you toward pricier drugs or charge your employer much more for your medicine than the wholesale cost. Added up across more than 200 million Americans, that means big profits for the largest P.B.M.s and higher costs for the system.” The quantified research result: from 2018 to 2022, fees paid by drug manufacturers have doubled. This is just one small symptom of a system gone wrong.
As investment fund managers looked for more opportunities, private equity has also changed the healthcare landscape. Their standard “buy, cut costs dramatically, borrow against the acquired asset to pay for the asset and flip it back onto the market” does not work well for healthcare acquisitions, as the May 30th David Wainer Wall Street Journal article illustrates: “When a business gets bigger, it forces mom-and-pop players out of the market, but it can boost profits and bring down costs, too. Think about the pros and cons of Walmart and ‘Every Day Low Prices.’ In a complex, multitrillion-dollar system like America’s healthcare market, though, that principle has turned into a harmful arms race that has helped drive prices increasingly higher without improving care.
“Years of dealmaking have led to sprawling hospital systems, vertically integrated health insurance companies, and highly concentrated private equity-owned practices resulting in diminished competition and even the closure of vital health facilities… Belatedly, state and federal regulators and lawmakers are zeroing in on consolidation, creating uncertainty for the investors who have long profited from the healthcare merger boom.”
Private equity has left a trail of healthcare facilities closures in smaller markets where healthcare access has always been challenged, or simply resulted in reduced capacity to treat local emergencies because of a reduction in hardware and the necessary inventory of necessary medications. So, who pays for the higher interest private equity shoves onto its quest for more profits… and even those increased profits? We do.
With higher taxes, higher insurance premiums, and for companies that offer employee healthcare, a new study, published June 24th as a National Bureau of Economic Research working paper says, by reducing staffing. “As hospital prices went up 1%, so did the percentage of people who ended up out of a job. The layoffs dealt a blow to their communities. Income-tax revenue dropped and payments for tax-funded unemployment insurance increased 2.5%.” Wall Street Journal, June 23rd. Technological advances and the efficiencies generated by mergers and acquisitions can increase quality and contain costs. “That isn’t the case following many hospital mergers, studies find. Quality doesn’t get better, but prices nonetheless rise.” WSJ. Who’s paying to make rich investors richer without improving anything? Guess.
How can the richest nation on Earth live with a declining life expectancy, a rise in medical bankruptcies and a healthcare system with an average per capita cost that is more than double that of any other developed nation? That’s what happens when profits trump healthcare.
I’m Peter Dekom, and our political practice of not reevaluating governmental policies and their underlying assumptions to reflect a changed reality (ground-up) … just might be killing millions of Americans… or making their lives intolerably miserable.
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