Jump to content


This topic is now archived and is closed to further replies.


How Health Care In America Got So Screwed Up

Recommended Posts


Adam Smith’s invisible hand theory has proven to be the most effective means for a society to prosper, however, it only works when there is a level playing field. That means fair and free competition, supported by equitable government policies. On the other hand, government granted monopolies, government sanctioned price fixing and other interference can weaken competition, thus squashing prosperity. As Trust Busting Teddy Roosevelt discovered, even with no government interference the monopolistic tendencies of private sector players can be equally harmful.

Another important aspect of Smith’s invisible hand theory is non-coercion. Business transactions need to be both mutually beneficial, and the free will of each party. Free will, however, does not exist when you introduce the elements of pain, illness and fear of death.

I’ll give you an example from personal experience: About eight years ago, I started experiencing a nagging pain in one of my molars. Over the next couple of days, the pain increased and by the Fourth of July it was close to intolerable, so the following day I started calling dentists. Since it was now Saturday most offices were closed or unable to fit me in for an appointment, but after several calls I was finally successful. It turned out that I had an infection underneath one of my molars, requiring a root canal, and a new crown. I had dental insurance, but my available benefit only covered a fraction of the cost. I also had some money saved, but unfortunately, was still about a thousand dollars’ short. Because the dentist wanted his money at the time of service, the billing clerk had me fill out a finance company’s loan application before starting the procedure… At that moment, the cost of the procedure and the terms of the contract meant nothing to me… All I cared about was having them take away the excruciating pain!

This is only one small instance. What if you happen to be one of the 28 million Americans without health coverage, and you require a lifesaving drug? And what if this drug costs thousands of dollars a month? And what about expenses from the hospital, doctors, technicians, and labs that run into tens of thousands of dollars?


The history of health care legislation in the United States is a story of special interest influence, which has not only corrupted the political process, but also driven costs to ridiculous levels. Prior to World War II, medical expenses were typically paid by the consumer. However, in the 1930’s Blue Cross began providing guaranteed services for a fixed fee. Also in the 1930’s Roosevelt worked on a plan to create a national health insurance program, but was forced to cancel it due to fierce opposition from the American Medical Association (AMA). During World War II, Roosevelt implemented wage and price controls, which angered the labor unions, so to appease the unions, the War Labor Board exempted employer-paid health benefits from wage controls and income tax. As you can imagine, employer paid group health plans became very popular and eventually replaced individual health insurance plans, which by 2008 were prohibitively expensive to obtain and excluded pre-existing conditions. The system worked pretty well, if you happened to be employed by a firm large and generous enough to provide health insurance as a benefit for its employees.

In 1945, President Truman proposed a national health insurance program that would benefit all Americans. The idea was very popular with everyone except the Chamber of Commerce, the American Hospital Association and the American Medical Association. Guess who won?

In 1993, President Bill Clinton formed a task force to tackle health care reform. It was to be the centerpiece of his first term. He even appointed his wife Hillary to be its chairperson. Unfortunately, the task force was fraught with controversy from its inception and the plan itself was a complicated mix of public and private mandates, making it an easy target for the pharmaceutical and health insurance industries. It turned out that even though he took office with a majority in congress, Clinton couldn’t even get his own party to completely buy into the plan. By 1994, it was dead. Later that year the democrats lost their majority in the House of Representatives, killing any prospect of a renewed effort.

What’s the Problem?

We have an incredible health care infrastructure in this country; when you consider the advancements in medical technology, lifesaving drugs, and world class medical facilities. Plus, we have the best educated doctors and nurses. Why then, in 2007, did only 18% of people polled believe that our health system was working well and some 79% believed that the system needed “fundamental change” or “a complete overhaul”.

Healthcare as a Percent of GDP

                          1995               2005              2014

USA                   13.1 — — — —  15.3 — — — —  17.1

Switzerland      09.3 — — — —  11.6 — — — —  11.7

France             10.1 — — - — — 11.1 — — — — 11.5

Germany         09.4 — — — —-  10.7 — — — —  11.3

Canada            08.9 — — —- — 09.8 — — — —  10.4

Sweden            08.0 — — — —  09.1 — — — —   11.9

UK                     06.7 — — — — 08.3 — — — —   09.1

Japan               06.6 — — — — 08.0 — — — —   10.2

Mexico              05.1 — — — —06.4 — — — —   06.3

Taiwan               05.2 — — —     06.2 — — — —  06.5

Sources: 2005: Health at a Glance, 2007; Government of Taiwan, (Taken from the book: The Healing of America, by T.R. Reid). 1995, 2014: World Health Organization, Global Health Expenditures Database. 2014 Taiwan: CIA World Factbook.

Part of the answer was affordability. By 2008, health insurance premiums in the new millennium had increased by 119%. The insurance companies were frantically attempting to keep up with soaring increases in costs. Health care in the United States was consuming 16% of our GDP, the highest percentage of any OECD nation. And we were also the only nation in the western industrialized world to not have a uniform system, offering universal healthcare for everyone.

The basic programs in use around the world are as follows:

· A national health service

· A single-payer national health insurance system

· A multi-payer universal health insurance fund

Prior to Obamacare, Japan (which offers universal coverage); had the oldest population in the world, and per capita averaged fourteen visits to the doctor’s office per year. By comparison, we averaged five… yet Japan only spent about $3,000 per person on health care each year, 8% of GDP. We spent $7,000, over twice as much. But, you may ask, what about the quality of care? Surveys showed that Americans who saw a doctor tended to be less satisfied with their treatment than the Japanese. We were also less satisfied than Britons, Italians, Germans and Canadians. At the same time 1 in 6 Americans, about 45 million people were without health coverage and if you looked at the under 65 population (those who were not yet qualified for Medicare coverage), 1 in 3 went without coverage at least part the time during a two-year period.

In 2009 we had a new democratic President, filled with the promise of hope and change, and for the next two years a democratic majority in both the house and senate. This seemed like the perfect time to face the daunting task of tackling America’s health care system. But to call it a system is a misnomer. We essentially had four totally different health care systems operating simultaneously, each mimicking one of the four basic models in use around the world.

Four Health Care Systems

· If, for example: you are under 65 and worked for a company that provides health coverage for its employees, then health insurance is a part of your compensation package. Your employer pays a portion and you pay a portion of the monthly premium. When you go to the doctor or hospital you typically make a co-payment or pay a percentage, but the insurance company picks up most of the bill. There are currently about 160 million Americans or 66% of the population covered by their employers. This system was designed in Germany by Otto Von Bismarck (1815–1898) and is therefore called the Bismarck plan.

· If you are in the military or a veteran (14.14 million Americans); or Native-American (2.2 million Americans) you can go to U.S. government owned clinics or hospitals and your doctor or care-giver will be a federal employee. You will never get a bill; your health care is free. This is the British (or Beveridge) model.

· If you are over 65 then you qualify for Medicare (50.5 million Americans), which is a National Health Insurance system that pays for basic medical care, hospitalization and prescriptions. Many seniors also purchase supplemental policies for more complete coverage. Medicare is modeled after Canada’s health care system. Medicaid (61.65 million Americans) is similar to Medicare, but only for certain groups, primarily: the elderly, blind, disabled or families with dependent children.

· For everyone else (28 million Americans) it’s a pay as you go system, which is the same as your average third world country, except of course we have vastly more facilities. In other words, you have access to care as long as you can pay the doctor or hospital bill. If you can’t pay and you’re sick enough or seriously injured, then you will be given basic treatment in an emergency room, however, you will still be billed and the costs could force you into bankruptcy. Your last option is a charity clinic, if you are lucky enough to find one.

Share this post

Link to post
Share on other sites

Thanks! I researched and wrote all four articles a while back, thinking that I would include them as a chapter in a book. However, the content really didn't fit the book that I published: Greed, Power and Politics The Dismal History of Economics and the Forgotten Path To Prosperity.

Share this post

Link to post
Share on other sites

  • Create New...