Why America’s Healthcare Policy is Failing

“Leadership is about solving problems. The day soldiers stop bringing you their problems is the day you have stopped leading them. They have either lost confidence that you can help or concluded you do not care. Either case is a failure of leadership.” General Colin Powell

Here is our problem. Healthcare in America is broken and ObamaCare is, indeed, having material problems. Depending upon which Party you favor, you may have varying views regarding either of these statements but I do believe they are fairly stated.

Personally, however, I’ve lost confidence that those in Washington can help and as I’ve stated before, I’m quite confident they don’t care about you or I as individuals.

The Democrats, for all of their complaining, do not have a solution to healthcare. While Bernie Sanders would argue that a single payer plan is the solution and California is moving in that direction as well the cost is going to be enormous. That’s because the healthcare system is a for profit model and there are insufficient checks and balances to control cost increases.

Robert Frank, a Columbia University economist argues that I’m wrong and that Bernie and company are right. He writes that, “in many other countries … the total cost of providing health coverage under the single payer approach is actually substantially lower than under the current system in the United States.” He cites several reasons; first that Administrative costs are far lower at 2% rather than the 20% that our insurance companies charge. That point is absolutely accurate as proven out by Medicare Administrative costs which are also roughly 2%.

But then his case fails because as he notes, “the most important source of cost savings under single payer is that large government entities are able to negotiate much more favorable terms….” A coronary bypass averages $73,000 here and only $23,000 in France. But, the French and the rest of Europe have far more socialism baked into their econometric and political models than anywhere in America perhaps other than California. Capitalism is simply more expensive than socialism in this context and free market forces will always seek to maximize profits. That’s why you own stock in your retirement accounts.

So to be honest and clear, the Democrats do not seek to lessen health care costs. Rather, they seek to allow the health care industry to profit endlessly and either raise taxes materially or increase our national debt in order to insure everyone.

But, make no mistake, the Republicans don’t have a solution either. The Republican House and the Senate bills want to provide less benefits to seniors and the poor while returning those tax dollars to those who are higher wage earning citizens. At a time when the wealth gap is widening they want to continue to increase that gap. As we’ve already seen their plan uninsures more than 20 million Americans!

Moreover, and frankly I’m tired of hearing it, they want to allow the free market to have more control under the unfathomable lie that this will be a more efficient and less costly system. Honestly, I can’t even find the words to describe how much of a lie that is but the following chart does a much nicer job than any words I might have:

Screen Shot 2017-07-09 at 11.03.05 AM

 

We’ve had more than fifty years of free market medicine and while the insurance companies, drug companies and medical equipment companies are minting money and hospitals are famous for overbilling nothing has become more efficient with one exception which I will come to later. The fact is that Republicans want to allow their corporate donors even more profit opportunity at the expense of the poor, the unemployed and our seniors. In short, they are not looking to benefit the American voter, this is about making more money pure and simple.

If you want one simple example of that they want to reinstitute caps on insurance policies i.e. the maximum amount the policy insures as if somehow the person who is deathly ill is at fault and does not deserve medical care at some point.

That is not leadership. It is a bald faced effort to insure that health care corporations are able to maximize their profits to the best of their ability. It is about power and greed on the part of corporate industry, their lobbyists and the willingness of both Parties to line their pockets just as deeply as possible.

And let’s not pretend that health care corporations are hurting. The fact is they are raking in record profits! IF we are going to have a government of the people, by the people and for the people that government must first do no harm to its citizens.

When a Nation’s leadership cares more about itself and its donor base than its citizenry the very fabric of that society will eventually get torn apart. When leadership is so devoid of answers that it’s citizens suffer as a result of decisions made the end state is more likely than not to be chaos.

If you don’t believe that, I share with you one small story to make that point. In the last fiscal crisis there came a point in time where the largest corporations in America were concerned they could not make payroll. Congress’s first step, as told to me by a U.S. Congressman at the time, was to insure that the 82nd Airborne could protect the Capital.

You get to those points when you are in denial. We are at that point now. We are pretending that healthcare corporations are good and its really our citizens who are the problem with healthcare expenses. Thus, rather than solve the problem of 14% average annual increases in existing drugs or what hospitals pay for medical equipment and what they charge for procedures we are going to gloss over all of that and pretend that by insuring less people or charging others more we are ‘fixing’ the problem. BULLFEATHERS!

Anyone can cut expenses by hurting people. That ain’t leadership! Cutting expenses without hurting people is where true fiscal leadership begins. It requires seeing reality as it really is and dealing with it. It is hard detail oriented work made harder when you seek to do no harm to others.

I know of what I speak because that is how my team led Penfed. Granted, we were a tiny microcosm of America but I believe the concept still applies.

We cut expenses as a percent of assets under management in half. We did that, without taking benefits away from the existing staff. There are very few companies in America that operate that way and it made us different.

Sure, there were politics and disagreements and it wasn’t perfect but we all worked together to get the job done.

What got me thinking about this was a CNBC interview where one speaker was opposed to the Senate healthcare plan and one was in favor. It was actually the fellow in favor who got me thinking. They were talking about raising the multiple for what seniors would have to pay from three to five times what a young person would pay for coverage. He made the point that if you solely look at today’s seniors, yes, they were going to be hurt by these cost increases but that young people would pay less for a long time and when their costs finally rose they would still likely be even at the end of the day.

He didn’t have any math to support that but it made sense to me and got me thinking. We made numerous changes that affected future employees but we protected everyone that was currently on board. In short, we left no person behind.

If our elected officials were real leaders they would do what President Trump said when he was candidate Trump and insure that no one is worse off than they are today in terms of coverage or cost.

I don’t honestly know if we can pull that off in its entirety but that is a leadership goal that Americans as a whole can get behind. To accomplish that our politicians would have to own up to the fact that it is the underlying costs of healthcare in America that are out of control and that is what is driving the problem. We need to see reality as it really is.

Here also courtesy of the CBO is another chart showing the NET profit margins for 2015 for most of the players in the healthcare industry:

Screen Shot 2017-07-09 at 11.10.52 AM

What is glaring is that drug manufacturers who have the least pricing pressure make the most while physicians whose pricing is tightly controlled by Medicare rules which are quickly adopted by private insurance companies actually make the least. That is, where America has come closest to what Professor Franks noted above regarding other countries we have seen the most cost control here in America.

The fact is that once you fully embrace a capitalistic medical system without sufficient checks and balances on costs pricing simply runs amuck. So, you can draw a line on the chart above wherever you wish but above some point the market based capitalism that drives these sub segments of the healthcare industry is literally killing us financially.

To be clear, it is killing us as citizens. It is not killing those firms. They are making a fortune, record profits in many instances across the system. And what about those insurance companies that are withdrawing from ObamaCare because they are getting killed financially. It is a crock of lies.

Aetna has announced that they are withdrawing from ObamaCare completely in 2018. Yet, according to their own press release for, “Full-years 2016 and 2015 net income(1) for Health Care were each approximately $2.4 billion.” They did lose $350 million in their individual health care segment but the fact is they made one hell of a lot of money even taking that into consideration.

Their CEO, Mark Bertolini, was the highest paid healthcare insurer CEO as well earning $17.3 million in 2015 and $18.7 million in 2016 before additional stock awards in excess of $6 million for each year.

I would also point out that Aetna’s failed merger attempt with Humana cost the company $1 billion in break up fees in 2016, three times what they lost on the individual health care segment! Do you see them announcing that they will no longer attempt mergers? You do not.

Nor are they the only ones. United Healthcare, also exiting ObamaCare, saw record profits for both 2015 and 2016 as well. These insurers are not leaving ObamaCare because they are in fiscal trouble. They are playing politics to insure that they get what they want in whatever legislation comes forward which is to maximize profits for the corporation and its leadership  all the while averaging 20% administrative costs versus Medicare’s 2%.

Look, I believe in capitalism as a general proposition. Our Nation has demonstrated over a long period of time that this economic model works. But, let’s also recognize that it isn’t a perfect system and left to their own devices Corporations and their leaders will do everything in their power to make more money. Those that are public companies are charged by law to do that.

That’s OK when they are manufacturing and selling a car or a home. But, when we apply capitalism with virtually no controls to healthcare eventually we get to a system where an Epipen that costs $10 is priced at $300. We have systemic problems with hospital overbilling and innumberable medical tests that may or may not be necessary to pay for equipment firms chose to purchase.

The insurers, drug companies, medical equipment manufacturers. their CEOs and their lobbyists get rich while we are left holding the bag. And when it all gets too much for people our ‘leaders’ perpetrate a grand lie that the problem is not them but our seniors and the poor!

We saw this movie here in America a long time ago when Teddy Roosevelt went after the railroad robber barons who were doing the same thing in their day. It is time to do the same in healthcare.

Because, when getting rich becomes the sole motivation and making money is more important than taking care of our citizens then capitalism itself becomes devoid of any moral compass. That, in my view, is where we are at presently and that is a risk to President Trump’s plan of making America great again.

I don’t say that politically. I happen to believe that is a terrific goal. But to do it requires a commitment to protecting all Americans, not just those who make money.

Absent that, we are going to continue to destroy the underlying glue that has bound our Nation together for a great many years.

 

 

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