steveh_131
Grandmaster
Read more here: http://www.policestateusa.com/2013/health-care-100-years-creeping-government-control/
Some people think we need socialized medicine. Some think we need tort reform. Some think we need heavier regulations of insurance companies.
My opinion: We need less government.
There are two main factors that haven driven prices up into the atmosphere:
1. Simple supply and demand. The government programs in place affect this in two ways. They increase the demand by subsidizing luxurious health care for people who couldn't otherwise afford it. And they decrease the supply by regulating health care providers in accordance with their lobbyists demands.
2. Removal of consumer choice from the equation. The vast majority of consumers have no incentive to price shop. Providers can charge whatever they choose. And since the provider is linked directly to the supplier via the insurance companies - there is absolutely no competition in price.
Here is a short summary of the history surrounding the very strange health care system that now consumes a vast portion of our wealth. You may notice a common theme: Government.
1910 - The Flexner Report
Leveraging government regulation, the AMA permanently solidifies its market share and monopoly on health care.
Murray N. Rothbard, Making Economic Sense
1929 - Blue Cross
The predecessor to Blue Cross is created by the hospitals, explicitly designed to ensure steady income. The AHA lobbies for tax exempt status and succeeds, allowing it an unfair market advantage and spurs its growth.
The History of Health Care Costs and Health Insurance
The plans designed by the AHA were specifically designed to stifle competition, but remained profitable due to the government-created incentives - Fewer regulations and tax exempt status.
Health Insurance In The United States
1942 - Legislation surrounding WWII permanently solidifies employer-based health insurance.
The practice of offering health insurance as an employment benefit was spawned by government imposed wage restrictions. Business were encouraged to bypass these restrictions by offering high-end insurance packages.
An Introduction to the Health Care Crisis in America
1945-1954 - More legislation is passed to further entangle employment and health insurance.
An Introduction to the Health Care Crisis in America
1965 - Medicare is passed.
Medicare is based on the same flawed concepts that the AHA specifically designed to ensure hospital profitability. Third party payer with no possibility of competition.
In addition, medical care is now made available to an even larger segment of the population. Demand increases dramatically while the supply is still artificially hampered by the consequences of the Flexner report and the corrupt legislation that followed.
1973 - Health Management Act is passed.
Marketed as an attempt to control costs, it accomplished the opposite. These organizations further connected the supply with the demand.
An Introduction to the Health Care Crisis in America
1983 - Medicare introduces price controls.
In yet another attempt to control costs, medicare introduces a fixed price system that is ultimately adopted by the entire industry.
These fixed prices encouraged health care providers to game the system. Helping the individual was no longer profitable, considering the fixed prices for any given diagnosis. Despite the fixed prices, more health care was ultimately consumed and overall costs increased.
An Introduction to the Health Care Crisis in America
2010 - Obamacare.
At no point has a single piece of government regulation or intervention actually accomplished anything other than increase the cost of health care.
I think it is safe to assume that this time will be no different.
Some people think we need socialized medicine. Some think we need tort reform. Some think we need heavier regulations of insurance companies.
My opinion: We need less government.
There are two main factors that haven driven prices up into the atmosphere:
1. Simple supply and demand. The government programs in place affect this in two ways. They increase the demand by subsidizing luxurious health care for people who couldn't otherwise afford it. And they decrease the supply by regulating health care providers in accordance with their lobbyists demands.
2. Removal of consumer choice from the equation. The vast majority of consumers have no incentive to price shop. Providers can charge whatever they choose. And since the provider is linked directly to the supplier via the insurance companies - there is absolutely no competition in price.
Here is a short summary of the history surrounding the very strange health care system that now consumes a vast portion of our wealth. You may notice a common theme: Government.
1910 - The Flexner Report
Leveraging government regulation, the AMA permanently solidifies its market share and monopoly on health care.
Murray N. Rothbard, Making Economic Sense
Abraham Flexner, an unemployed former owner of a prep school in Kentucky, and sporting neither a medical degree nor any other advanced degree, was commissioned by the Carnegie Foundation to write a study of American medical education. Flexner's only qualification for this job was to be the brother of the powerful Dr. Simon Flexner, indeed a physician and head of the Rockefeller Institute for Medical Research. Flexner's report was virtually written in advance by high officials of the American Medical Association, and its advice was quickly taken by every state in the Union.
The result: every medical school and hospital was subjected to licensing by the state, which would turn the power to appoint licensing boards over to the state AMA. The state was supposed to, and did, put out of business all medical schools that were proprietary and profit-making, that admitted blacks and women, and that did not specialize in orthodox, "allopathic" medicine: particularly homeopaths, who were then a substantial part of the medical profession, and a respectable alternative to orthodox allopathy.
1929 - Blue Cross
The predecessor to Blue Cross is created by the hospitals, explicitly designed to ensure steady income. The AHA lobbies for tax exempt status and succeeds, allowing it an unfair market advantage and spurs its growth.
The History of Health Care Costs and Health Insurance
Hospitals, hit hard by the Great Depression, rushed to embrace plans for prepaid health care as a way to survive. In 1939 the American Hospital Association began allowing plans that met its standards to use the Blue Cross name and logo. State legislatures agreed not to treat Blue Cross plans as insurance, based on the rationale that they were owned by hospitals. This permitted Blue Cross plans to operate as non-profit corporations, escaping the 2% to 3% premiums generally charged private insurance companies, and exempted them from insurance company reserve requirements.
Worried that the hospitals would expand the Blue Cross concept into physician services, physicians began thinking about their own organization. By 1946 all of the prepaid physician services plans had affiliated and became known as Blue Shield.
Since the primary concern of the early Blue Cross and Blue Shield plans was to ensure that hospitals and physicians were paid, the plans covered all costs, and everyone in the same geographic area paid the same price. This encouraged patients and their doctors to use medical care without worrying about costs.
The plans designed by the AHA were specifically designed to stifle competition, but remained profitable due to the government-created incentives - Fewer regulations and tax exempt status.
Health Insurance In The United States
The AHA designed the Blue Cross guidelines so as to reduce price competition among hospitals. Prepayment plans seeking the Blue Cross designation had to provide subscribers with free choice of physician and hospital, a requirement that eliminated single-hospital plans from consideration. Blue Cross plans also benefited from special state-level enabling legislation allowing them to act as non-profit corporations, to enjoy tax-exempt status, and to be free from the usual insurance regulations.
Originally, the reason for this exemption was that Blue Cross plans were considered to be in society's best interest since they often provided benefits to low-income individuals (Eilers 1963, p. 82). Without the enabling legislation, Blue Cross plans would have had to organize under the laws for insurance companies. If they organized as stock companies, the plans would have had to meet reserve requirements to ensure their solvency. Organizing as mutual companies meant that they would either have to meet reserve requirements or be subject to assessment liability.3 Given that most plans had little financial resources available to them, they would not have been able to meet the requirements.
1942 - Legislation surrounding WWII permanently solidifies employer-based health insurance.
The practice of offering health insurance as an employment benefit was spawned by government imposed wage restrictions. Business were encouraged to bypass these restrictions by offering high-end insurance packages.
An Introduction to the Health Care Crisis in America
Responding to the inflationary pressures of a wartime economy, the federal government imposed wage and price controls to prevent employers from raising wages in order to compete for scarce labor. While stripping them of their power to increase wages, the 1942 Stabilization Act allowed employers to expand their benefit offerings. By permitting employers to offer health insurance to their employees, the government provided private insurers with a new market for their product. In the years that followed, the government passed several additional rulings that reinforced the efforts of insurance companies to link health insurance with employment and institutionalized the employment-based system of health insurance that exists today.
1945-1954 - More legislation is passed to further entangle employment and health insurance.
An Introduction to the Health Care Crisis in America
The first piece of legislation, passed by the War Labor Board in 1945, ruled that employers could not change or cancel an employee’s insurance plan during the contract period. The second ruling, which became law in 1949, mandated that benefits should be considered part of the compensation package so that unions could haggle over both wages and health insurance in their contract negotiations. Finally, in 1954, the IRS decided that workers would not be taxed on the contributions that their employers made to their health insurance plans. This preferential tax treatment for “fringe” benefits gave businesses an incentive to offer health insurance to their employees.
1965 - Medicare is passed.
Medicare is based on the same flawed concepts that the AHA specifically designed to ensure hospital profitability. Third party payer with no possibility of competition.
In addition, medical care is now made available to an even larger segment of the population. Demand increases dramatically while the supply is still artificially hampered by the consequences of the Flexner report and the corrupt legislation that followed.
1973 - Health Management Act is passed.
Marketed as an attempt to control costs, it accomplished the opposite. These organizations further connected the supply with the demand.
An Introduction to the Health Care Crisis in America
Along with certificate of need laws, the federal government embraced managed care as a cost control measure, tilting federal health policy towards Health Maintenance Organizations (HMOs) with the passage of Senator Edward Kennedy’s (D-Mass) 1973 HMO Act. Federal agencies were formed to aid in the development of HMOs. To artificially create a market for services that few people at the time wanted, businesses with more than 25 employees were required to offer an HMO option under their health insurance plans. According to John C. Goodman and Gerald L. Musgrave, HMO premiums accounted for just 2% of all health insurance premiums in 1962. Federal insistence on adopting the HMO model of care delivery resulted in rapid growth in HMO membership rising from 5% in 1980 to 46% by 1996, of the total insured population under age 65.
Health Maintenance Organizations differ from standard indemnity insurance and from preferred provider organizations (PPOs) because they combine the physician and the insurer in a single organization. Patients pay a flat fee for their health care, a capitated payment, and the HMO promises to provide all of the health care an individual needs. A conflict of interest is built into HMO structure: HMO physicians work for the insurer, not for the patient.
1983 - Medicare introduces price controls.
In yet another attempt to control costs, medicare introduces a fixed price system that is ultimately adopted by the entire industry.
These fixed prices encouraged health care providers to game the system. Helping the individual was no longer profitable, considering the fixed prices for any given diagnosis. Despite the fixed prices, more health care was ultimately consumed and overall costs increased.
An Introduction to the Health Care Crisis in America
With its fixed price for any case with a given diagnosis, the prospective payment system instantly turned patients who cost more, generally those who were older, sicker, and frailer, into financial liabilities. Hospitals discharged patients “quicker but sicker,” shifting much of the burden of care and rehabilitation to nursing homes unconstrained by the new payments system. As providers learned to game the system, diagnoses with higher reimbursements increased, corrupting medical records. Intense lobbying efforts occurred to create DRGs that reflected costs in various specialties and treatments for various diseases. As of 2004, the number of DRGs had expanded to 526.
As a result of prospective payments, Fitzgerald, Moore, and Dittus found that between 1981 and 1986 the mean length of hospitalization for elderly patients with hip fracture decreased from 21.9 to 12.6 days and the maximal distance walked before discharge fell from 93 to 38 feet. The proportion of patients discharged to nursing homes rose from 38% to 60%, and the proportion of patients who were still in a nursing home one year after their hip fracture also rose, from 9% to 33%.
Sicker but quicker discharges appear to have been the norm for patients with other conditions as well. In 1990, Kosecoff et al. developed measures of discharge impairment for five conditions before and after the imposition of prospective payments. They found that before prospective payments, 10% of patients discharged to their homes were unstable. After prospective payments, 15% of patients discharged to their homes were unstable. In general, unstable discharge was associated with a higher mortality rate; death in 16% of cases versus death in 10% of cases.
Although prospective payment undoubtedly reduced hospital use, it may well have done so at the expense of increasing overall costs. Unstable patients often have to be readmitted to hospitals, increasing the cost per case even as the number of days of hospitalization per admission falls. Writing in 1990, Keeler et al. looked at the U.S. system before and after prospective payments, finding that patients admitted to the hospital were much sicker after prospective payments than before. Captivated by what planners said should be happening, the authors figuratively scratched their heads, saying that the reasons for this were “not clear,” because under the new system hospitals should be encouraged to take healthier people.
They did not consider the possibility that the sicker patient population was an artifact of multiple readmissions.
2010 - Obamacare.
At no point has a single piece of government regulation or intervention actually accomplished anything other than increase the cost of health care.
I think it is safe to assume that this time will be no different.
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