A History of Health Care Costs in America

With the debate about Health Care reform in the mainstream I have noticed that we really aren't getting the straight story on the cause of rising health care cost. So instead of waiting around and hoping somebody would get the facts together for me, I decided to compile the facts for myself. I am also doing this so everybody else can get the facts too, because when it comes to this debate the facts is one thing that is severely lacking.

This is not about private vs socialized medicine and which system is better. This is solely about tracking down the facts leading to the exorbitant increase in Health Care costs in America.

First, I will present two time lines on the history of Health Care in general. One will be a general overview and the other will be a history of the law and health care. I'm going to link to them because they are both web pages and not images.

General Overview of the history of Health Care in America

Overview of the law of Health Care in America

One thing you will notice in both of these time lines is that it wasn't until the 70's and 80's when the cost of health care costs literally took off. So lets take a look at some of the reasons for this.

One reason for this is the cost overruns of the government providing Medicare.

The Medicare Monster, A Cautionary Tale

At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion.

So now lets take a look at how Medicare works. Basically, Medicare sets a cap at what a procedure should cost. For a basic run down, if the doctor charges $200 for a procedure, Medicare says, 'no the procedure should only cost $100.' So then Medicare pays 80% and you pay 20% of that $100. It is a little more complicated than that but there is more at the link. ( Medicare - How it works. ). So what happens to the other $100? It gets passed on to the consumer or written off.

So now we need to look at the source of these cost overruns. Assuming you looked at the two time lines posted earlier, you see that in the 70's new technology, high inflation are attributed to some of the causes. Rightly so, as we all know high tech equipment is expensive, so it isn't unreasonable to pay a little more to be diagnosed with the top of the line equipment. What isn't talked about though is the HMO act of 1973.

Well what is the HMO Act?

Health Maintenance Organization (HMO) act of 1973

federal legislation requiring employers with traditional health plans to also provide an HMO to its employees. The act also makes it mandatory for employers to contribute as much to the HMO as they did to their regular plan. The requirement that employers offer an HMO alternative was repealed in 1993. In 1988, the act was amended so that the employer gained greater flexibility in determining its HMO contributions

Now it seems like we are getting to the crux of the issue, the government made it mandatory for employers to match the costs they paid for regular health plans to the now mandatory HMO's. Well we all know what happens when you increase the cost overhead of a business, either people get laid off or people get paid less. There is another issue though at the time of this legislation there was only one HMO.

The HMO Plan A History of the Insurance Industry

Only Kaiser Permanente was an HMO in 1969

Let's take a look at Kaiser Permanente. This following except is what they do from the History of Kaiser Permanente.

Kaiser Permanente is a not-for-profit integrated health care organization based in Oakland, California that serves as an umbrella for a federation of for-profit medical groups. The organization was founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield.

Okay well they are a not-for-profit group that serves as an umbrella for a federation of for-profit groups. Interesting. A little further down on the page, we find this:

Perhaps the best introduction to the Kaiser HMO and Kaiser Permanente Medical Care Plan is the summary by Mr. Edgar Kaiser that the less Kaiser does for patients the more money it makes. To get the full context one can go to the University of Virginia and review the presentation Mr. Edgar Kaiser (then Kaiser CEO) made to President Nixon through Mr. Erlichman – the less we do the more we earn. This convinced President Nixon to go forward with the HMO Act of 1973 with Kaiser as the template. The conversation is recorded below within the Nixon Whitehouse Tapes.

John D. Ehrlichman: "On the … on the health business …"

President Nixon: "Yeah."

Ehrlichman: "… we have now narrowed down the vice president's problems on this thing to one issue and that is whether we should include these health maintenance organizations like Edgar Kaiser's Permanente thing. The vice president just cannot see it. We tried 15 ways from Friday to explain it to him and then help him to understand it. He finally says, 'Well, I don't think they'll work, but if the President thinks it's a good idea, I'll support him a hundred percent.'"

President Nixon: "Well, what's … what's the judgment?"

Ehrlichman: "Well, everybody else's judgment very strongly is that we go with it."
President Nixon: "All right."

Ehrlichman: "And, uh, uh, he's the one holdout that we have in the whole office."

President Nixon: "Say that I … I … I'd tell him I have doubts about it, but I think that it's, uh, now let me ask you, now you give me your judgment. You know I'm not to keen on any of these damn medical programs."

Ehrlichman: "This, uh, let me, let me tell you how I am …"

President Nixon: [Unclear.]

Ehrlichman: "This … this is a …"

President Nixon: "I don't [unclear] …"

Ehrlichman: "… private enterprise one."

President Nixon: "Well, that appeals to me."

Ehrlichman: "Edgar Kaiser is running his Permanente deal for profit. And the reason that he can … the reason he can do it … I had Edgar Kaiser come in … talk to me about this and I went into it in some depth. All the incentives are toward less medical care, because …"

President Nixon: [Unclear.]

Ehrlichman: "… the less care they give them, the more money they make."

President Nixon: "Fine." [Unclear.]

Ehrlichman: [Unclear] "… and the incentives run the right way."

President Nixon: "Not bad."

Well now isn't that interesting. I really don't think I need to say anymore about what the true purpose of the HMO's were when the legislation was written, introduced, and enacted into law. The whole purpose was to increase profits. Then take into account the strong armed tactics used by the HMO's

The HMO Plan A History of the Insurance Industry

In the 1970's, doctors where strong armed into joining with the HMO plans by being told that the insurance company would get their own doctors and take all your current patients away. Since a great many of people now were on HMO due to their work, there was reason for doctors to be concerned. Doctors joined so they would not lose their patients out of fear the insurance company would ruin their practice. The Insurance company would add more and more rules each time the doctor's contract was to be renewed, and since the majority of the patients had HMO plans they accepted the conditions. If the doctor refused the new terms they were at risk for losing their patients as well as their income all at once, so they agreed to see more patients, to confidentiality agreements, and for more services requiring pre-approvals.

Subsequently the other thing adding to the cost of medical cost is the increase in mal-practice claims against doctors. More mal-practice claims the more the mal-practice insurance costs.



Of course there are other things that have led to the cost increase, but I specifically focused on the 70's and 80's when it really shot up. What I have found though is that, once again, it is the fault of government and special interest that has caused the mess that we are in today. I encourage you to do your own research on these issues and see for yourself I will conclude by leaving some other links to check out.

Health care in the twentieth century: a history of government interference and protection
Health Care Spending in the United States and OECD Countries
Medicare and Medicaid

Thanks for your time!

[edit on 17-7-2009 by Hastobemoretolife]

Great post.

Well thought out and researched.

I learned from this one.

Bob

Thanks for the nice overview of the system, pehaps a comparison with the ones on other developed countries should be in order, to see how the one been proposed by the Obama is nothing but to become a burden on the tax payer of the nation.

reply to post by Hastobemoretolife


Kaiser is one of the options where I work.

My colleagues that go to Kaiser because Kaiser deals with medical issues in an expedient manner. If you don't have something persistent and just need to see a doc Kaiser works well.

If I had a persistent condition, I might want to go elsewhere.

reply to post by Wildbob77


Thanks.

That is the thing too, is that not all insurance companies are bad, there are still some that serve the interest of the patient, the problem is though with the way the laws are set up you can't cross shop insurance plans, Since I live in SC I can't go get a plan from Florida.


It really sucks, we're subject to whatever insurance is available for the state.

reply to post by marg6043



For sure, that is a good idea, the second link from the bottom the one about Health Care spending, it shows that our cost per GDP was right on part with the rest of the develop nations.

And that he has, we keep hearing about how it's going to save us money, but there is no details associated with it. The only line we are getting is it's going to save money, but nobody is asking the question on how it is going to save money.

______________

Thanks for both your reply's!

reply to post by Hastobemoretolife


One of the problems on the health care bill proposed by the Obama administration and backed by the Democratic party is that will not save any money on the tax payer, actually the way is redacted with 1 thousand pages that we know our congress has not read at all will be riddle with pork and loopholes.

The health care will punish those in the nation that makes money the so call rich.

But at the same time it will also punish the rest of the working class because it will be penalties if you don't want to get into their version or none version at all, but the unemployed will not have any coverage because right now the targeting group is the workers as they are easily traceable. If you don't work you will not have coverage at least for years to come until whatever programs starts working.

So you are saying that medicade in the 70s hurt the health care system and cause job layoffs, though in the 90s and early 2000s we had the largest economic boom ever.

Hardly think think medicaid had anything to do with the healthcare crisis.

reply to post by marg6043


Yes, that it will.

It is going to tax everyone to death is what it is going to do. It isn't actually going to decrease cost. It is actually going to increase the cost, per the CBO.

This bill is just going to make everything worse. Then up to a 1,000 dollar fine a month for not having insurance? What a crock.

Then they harp back to the 50's about how the tax rate was 91% of the "rich". You know for the party of "progress" they always seem to have no problems rehashing old out dated ideas.

Also what I found out doing my research, the whole thing about the politicians wanting a single payer system for 40 years is a big fat lie too. They have wanted a single payer system since the Great Depression.

Here is the reason it costs so much:

link

We don’t ration care Unlike citizens in the U.K. and Canada, we don’t have to wait weeks for elective surgery or an MRI. But when researchers from the Johns Hopkins Bloomberg School of Public Health looked at the 15 procedures and tests that account for the majority of waiting lists in other countries, they found that they amounted to just 3 percent of costs in the United States, not nearly enough to explain the huge difference in spending. Malpractice is the culprit Doctors say their worries about lawsuits drive them to order costly tests and procedures that their patients do not actually need. Malpractice reform will help save money, but not as much as some people believe. The Congressional Budget Office estimates that while tort reforms could lower malpractice-insurance premiums for physicians by as much as 25 to 30 percent, the overall savings to our health care system would be a minuscule one-half percent. • Inefficient insurance companies are to blame We devote nearly a third of our health care dollars to administrative costs—paper pushing, in effect. (Canada’s single-payer system, by contrast, is a model of efficiency, spending only about 16 percent of its health care dollars on administrative overhead.) If we could be as efficient as Canada, we could save $360 billion each year. That’s a lot of money, but it’s only about one seventh of our total health care spending.

link

Many health care corporations, including insurers, hospital networks and large medical groups, have posted significant earnings gains in recent years. WellPoint Health Networks Inc. of Thousand Oaks, which Indiana's Anthem Inc. is trying to buy to create the country's largest health plan, reported a 34 percent increase in earnings for the second quarter compared with the same period in 2003. Nonprofit Sutter Health, which has 26 hospitals in Northern California, saw its income increase nearly 64 percent from 2002 to 2003.

New medical technologies -- everything from faster CT scans and drug- coated stents to targeted chemotherapies -- may be responsible for as much as 50 percent of U.S. medical cost growth, according to some health economists.

Read more: www.sfgate.com.../c/a/2004/10/11/MNGII96CVP1.DTL#ixzz0LYtGdmS3




Read more: www.sfgate.com.../c/a/2004/10/11/MNGII96CVP1.DTL#ixzz0LYtA9oWB

Drugs represent the fastest growing part of the health care bill, with Americans paying the world's highest prices for medication. While the industry says it needs to charge high prices to finance research and development, the largest pharmaceutical companies in 2002 spent 14 percent of their revenues on research and development while devoting 31 percent to marketing and administration Read more: www.sfgate.com.../c/a/2004/10/11/MNGII96CVP1.DTL#ixzz0LYsw6LTA

Medicaid couldn't of possibly hurt the private system, considering they are boasting insane profits.

Nickie go back and re-read the entire OP.

I put you on ignore because your responses are trolling this thread. Before you post read the entire OP and articles included.

reply to post by nixie_nox


While this nation needs a health care reform and I agree that private health care and the big pharma are costly.

The proposed health care bill is not going to address the people that have not health care coverage because they are unemployed.

Democrats did not say in advance what the overall legislation would cost, meaning that the money to even get the program started have to come from somewhere.

So the hidden cost are no explain, forcing people into taking health care or be penalized while also been force to pay in tax increases makes no sense.

Specially when right now in America the taxable income of America has fallen incredible about 44 percent lost last year.

Sorry to say this but this bound to failure from the start.

Milton Friedman has a great proposal YEARS ago but no one listened...everyone thinks the government is the solver of all problems...when really it's the problem. The market has lowered costs in all other industries...why is it that in this industry that the government has a heavy hand in...that has not occurred. Is that coincidence? I don't think so.

www.hoover.org...

Rapid technological advances have occurred repeatedly since the Industrial Revolution—in agriculture, steam engines, railroads, telephones, electricity, automobiles, radio, television, and, most recently, computers and telecommunication. The other two features seem unique to medicine. It is true that spending initially increased after nonmedical technical advances, but the fraction of national income spent did not increase dramatically after the initial phase of widespread acceptance. On the contrary, technological development lowered cost, so that the fraction of national income spent on food, transportation, communication, and much more has gone down, releasing resources to produce new products or services. Similarly, there seems no counterpart in these other areas to the rising dissatisfaction with the delivery of medical care.

[edit on 24-7-2009 by yellowcard]

WHY THE HELL DO WE EVEN NEED INSURANCE? Medicine should be like any other business. Doctors should be able to practice like chiropractors or a veteranian. Empower people to be much more proactive in their health. Instead we are going to let government dictate everything. I'm not paying for it so why should I worry about being healthy? This is stupid! For those who can't afford it let the government pitch in and take up some of the costs. Get rid of medicare, get rid of medicaid. Give more power to doctors and more power to the community. Doctors would do more pro bono. Community would raise more money for those less needy. GET THE GOVERNMENT OUT OF HEALTHCARE! They ruin everything they touch. There is only one of two ways we will pay for this. Deficit spending or increase in taxes. Either will ruin this country and our economy.

Also I sure as hell don't want to pay for all the irresponsible people who have no regard for their health anymore. I'm healthy and I work hard to take care of myself. Screw the fat, lazy, soda drinking, fast food eating Americans. And they sure as hell are not always the poor. Also there is a TON of waste at the hospital level. I know I'm a nurse. Too many tests, way too many drugs, not enough focus on prevention. God I could go on and on.

[edit on 24-7-2009 by Zosynspiracy]

reply to post by nixie_nox


Yes it did, here is why, the nation now accounts for 19 percent or our GDP and the hight cost of private care, is yes you know it, The Government.

Back in the 1950s and 60s the health care cost accounted for only 5 percent of GDP by 1994 it was 13 percent.

What changed? Government creation of what we know as the popular entitlement program call Medicare and Medicaid. When government takes money out of citizens pay checks to pay for entitlement programs it creates the biggest mess in the history of the nation.

That is what Medicare has done to the nation, now Obamacare will do the same to the tax payer take money out of their pay checks or force businesses into government entitlement programs and guess what, is going to be the same disastrous results as the Medicare has cause to this nation.

Why? because government doesn't have the ability to do accountability for spending.

Is not that Medicare have fail is the government what fail Medicare

And another entitlement program run by the government will fail miserable again.