Medical Care Cost Is a Shell Game

I usually just assume you will voluntarily listen to the videos. But “Healthcare Stole the American Dream” is an essential. Every word Dave Chase says fits the NME point of view perfectly. While you’re here, I recommend the video below as well. Doctor Michael E. Chernew talks about pricing and the altruism of the past which is missing and needed.


One out of every six dollars in your wallet goes to healthcare. Soon it will be one in five!

Without the correct change in policy at federal and state levels, a massive increase in government spending would have to occur.

. . . the $10 aspirin is a result of a shell game run by the insurance industry and backed by the government.

Cost shifting is a hidden sick tax imposed on . . . people paying for medical care in lieu of a fair tax levied on us all.

It is true that hospitals are required to treat the uninsured in crisis, but they can just stabilize them and send them on their way.

In six states where it’s lawful, Anthem Blue Cross Blue Shield will make their insureds pay if their chest pains were due to indigestion, not heart failure.

If you blame the uninsured for their problems, consider those who are denied or cannot afford healthcare coverage.

The only role consumers play . . . is to be manipulated by the system because healthcare is not a free market enterprise.

Alternatives can be found in the early 20th Century when unions, businesses, consumer cooperatives and mutual aid societies paid for healthcare.

When we take control of our local economies, we will also take control of healthcare cost and access at the grassroots level. You’ll see!

Cost Shifting Is a Sick Tax

As I’ve explained elsewhere in this website, I have over 50 years of experience inside and outside of the healthcare system, in the field and at the policy level, and I know healthcare. I know what’s wrong with it and I know who can fix it. And who can’t.

In the U.S., we spend more than 2 trillion dollars on healthcare every year. Per capita, that’s more than any other country in the world. One out of every six dollars in your wallet goes to healthcare. Soon it will be one in five!

You would think that would be enough to grease the best healthcare system in the world, but it is economically unsustainable. Not just because we can’t afford it, but because it is based largely on a payment system run by private insurance and gamed by both the payors and producers of healthcare, mostly behind closed doors.

The only role consumers play in the payment game is to be manipulated by the system because healthcare is not a free market enterprise.

A self-insured person once told me his story about being dunned repeatedly by a collection agency after he had surgery and he offered to settle by writing a check for whatever the insurance company would have paid plus 10 percent. He asked how much the insurance company would have paid.

“I can’t” was the answer. “Why not?” he asked. “It’s a secret,” was the reply.

It’s no secret that the cost of healthcare is out of control and attempts to fix it usually are aimed at the users, not the abusers. Meanwhile, the profit-driven insurance industry is in the driver’s seat. All the political fixes simply try to prop up a failed system.

Caught in the Squeeze

A greater share of Medicaid money goes to pay for long term care than critical care and the rapid aging of the American population results in an imbalance of those who are consuming healthcare with those who are paying for it.

A major portion of Medicare is already privatized through private insurance companies and the push is on to shift the whole thing to an insurance industry that has more interest in profit than regulating fair payment.

Without an effective change in policy at federal and state levels, a massive increase in government spending would have to occur. And so, you would think, policy makers would be eager to fix the system. But, so far, the solution seems to be less, not more, healthcare and completely misdirected. Instead of reducing the unnecessary cost of healthcare at its source, policy-makers are intent on reducing coverage. Instead of addressing the illness, they are increasing the pain.

Why on earth would that be?

Why? I’ll tell you why. Once again it is the combination of unrestrained capitalism and blind consumerism.

But please don’t blame the healthcare providers. They are the ones who deliver the care and, by and large, they are devoted to the common good. Yes, they get their share of the wealth, but they deserve it! They have devoted a great deal of their lives to education and continuing education and they are the caregivers. They work long and hard and, collectively, their hearts are in it. I can’t say the same for those who work in the business office.

And notice, this time I didn’t burden you with blame by referring to it as “unrestrained” consumerism as I did in my essay on consumerism in commerce. Your role in the healthcare mess is not greed. You’re the fall guy.

Healthcare Insurance Companies Rule

I’ll give you a little personal insight here.

Back in the 1980s I was a part-time state-legislator, marketing and public relations director for a non-profit community hospital and chairman of the State Senate Standing Committee on Health and Human Services.

I was elected on the Democrat ticket but I was, and remained, an Independent. Even then I knew healthcare from the inside and came down on the side of healthcare providers at a time when organized labor staffed the state’s healthcare cost containment agency. I, of course, was the one painted as having a conflict of interest!

My opponents were blinded by the $10 aspirin.

In their view, hospitals were the bad guys inflating the cost of healthcare and they must be regulated! I, on the other hand, knew that the aspirin was a result of a shell game run by the insurance industry and backed by the government. Insurance reimbursement and government cost-shifting was forcing hospitals into really stupid financial practices.

But no one wanted to hear that.

Least of all the healthcare insurance industry which smugly hid from the controversies of healthcare cost containment. Except when I voiced the idea of regulating them! Through their intermediaries I was informed forcefully that if I pursued that idea the industry would simply pull out of the state! I’m sure other senators got the same message and that was that. Power prevailed.

By the way, healthcare providers can’t pull out that easily except when they are forced out by insurance companies that remove them from their plans because they won’t agree to what they believe to be an inadequate pay scale. You’ve probably been the victim of such an event.

Eventually I was the one who pulled out. I resigned my seat in the Senate a year before the end of my second term. Right then and there I realized that there was no political answer.

The local liberal press bid me goodbye with a lead editorial headlined, “Good Riddance!”

Now I’m talking about the problems of healthcare finance again.

Explaining the Sick Tax

A few years ago I had major heart surgery. During six hours on the table I received five bi-passes and a reconstructed aortic valve made out of parts of a cow. The bills from the surgeon, hospital and other specialists on my team added up to around a half million dollars. The insurance company paid a couple of hundred thousand and I paid a couple of thousand.

Whatta deal!

I’m certain the healthcare providers’ bills were inflated. I’m just as certain that what the insurance company paid didn’t adequately cover their bills. And I’m certain that part of my expenses were shifted to other patients in the hospital. Especially to those who were self-insured and, therefore, had no leverage to pay less.

Cost shifting is a hidden tax, a sick tax imposed on a relatively small number of paying patients rather than a fair tax levied on us all. Chief executives and legislators at both state and federal level avoid imposing higher taxes by shifting the cost of healthcare to the insurance companies who, in turn, shift it to the providers who, in turn, shift it to sick people in the hospital or examining rooms.

I had Medicare coverage and so my cost negotiator was the government. Great for me, but what about all the other people our government is responsible for?

Emergency Room Economics

My story gets worse.

I’m certain part of the cost of my surgery and recovery had an effect on people coming to the emergency room.

My extraordinary surgery came before I even had a heart attack. Because I had Medicare, I was seeing a cardiologist every six months because of an irregular heartbeat. Although I had no symptoms, the doctor discovered I had up to 90 percent blockages and was due for a life-threatening heart attack. He may have saved my life!

That’s not the way it goes for uninsured or underinsured patients who arrive at the emergency room in crisis and without pre-care. People think the uninsured get the same care everyone else gets because the law won’t let a hospital refuse them. That’s not quite a myth, but here’s the rest of the story. If the situation is not life threatening, the patient gets patched up and sent home. Heart attack delayed until later!

Containing Cost by Limiting Access

If you leave it up to insurance companies to contain costs, here’s what you get in the emergency room, and when I say you, I’m saying you who are insured.

In six states where laws were passed allowing them to get away with it, Anthem Blue Cross Blue Shield (the original health insurance company) recently announced an expansion in their policy of not paying for emergency room care that it decides was not an emergency. If that happens, the insurance policy holder is responsible for the cost.

Several more states are in the process of passing the same anti-social law.

Anthem’s decision whether to pay is based on a doctor’s diagnosis, not the reason a patient went to the hospital. So if you go to the hospital with chest pains and it turns out to be indigestion, you pay the bill even if you have insurance.

Healthcare professionals worry that the policy may cause patients to erroneously self-diagnose and not go to the ER out of the fear of having to pay the bill.

Blaming the Uninsured

There are those who like to claim that the uninsured or underinsured bring these problems on themselves. There are anecdotes to back them up and there is no doubt non-emergent care is part of what drives healthcare costs up. But as employers continue to shirk their responsibilities to their employees and the government continues to provide inadequate funds for Medicare and Medicaid, the lack of healthcare coverage rises and cost shifting with it.

As wages decline and benefits disappear, people are often forced to buy insurance with high deductibles and co-pays to afford a bare bones policy. Anti-social cost containment regulators love it! People are more likely to avoid seeking health coverage because they have to pay a considerable amount of the cost. Those who can manage the cost of insurance with low deductibles and co-pays are way more likely to overuse the system.

And then there are the unwanted.

My wife Michele has fought a number of chronic illnesses most of her adult life, beginning with multiple sclerosis and now cancer. She has also been self-employed and, therefore, responsible for funding her own healthcare coverage. There was a short time when she could not get healthcare coverage in any form because she was considered high risk and had pre-existing conditions.

Eventually insurance companies opened the door and she enrolled in a plan.

I once thought insurance companies leveled the cost of coverage by spreading the risk, but it isn’t the case. They place people in groups called risk pools and when the risk gets too big, they shuffle them into another group where the premiums go higher. Look on your insurance card. You will see your group number.

Michele’s business was small with only a few clients and at one point I observed that she wasn’t working for herself, she was working for Humana. Her insurance policy was costing her $17,000 a year before she qualified for Medicare. That was exactly equal to the profit she earned at the end of a year.

The Role of Healthcare Consumers

I’m sorry to do it, but I can’t overlook the role played by the healthcare consumer.

A few of us remember the days when there were no healthcare insurance companies or at least not a preponderance of them until after World War II.

Healthcare was a local matter and treatment began at home. If home remedies failed, then as a last resort, the sick would call the local doctor. People who couldn’t pay would give the doctor a live chicken or some other thing of value.

Along came private insurance companies and those who could afford premiums paid the price and relieved themselves of all responsibility. They were the first to transfer risk to someone else. All of sudden they were unrestrained in their use of healthcare which encouraged the healthcare industry to commoditize their offerings which expanded rapidly through the magic of modern science.

Our healthcare providers were perfectly happy to comply with over-prescribed tests and meds, which included the pain killers that caused the opiate epidemic.

Regardless of the type of insurance, any time you transfer risk, you become reckless. The shell game is played by the insurance industry because it can. And it will as long as we enjoy healthcare to the excess.

Alternatives to Health Insurance

Alternatives can be found in the early 20th century when healthcare capitalism was not yet an option. Unions, businesses, consumer cooperatives and ethnic and African-American mutual aid societies had diverse ways of organizing and paying for medical care.

When I was president and CEO of the Nevada Hospital Association in the ’80s, I became intimately acquainted with alternatives to insurance when a liability insurance specialist from California made an appointment with me to talk about liability cooperatives for small and rural hospitals. It would, he claimed, save hospitals money and lower healthcare costs.

Nevada had two kinds of hospitals: the rich and the poor. The poor hospitals were located in frontier towns along the 400-mile stretch between Reno and Las Vegas and west to east between the California and Utah borders. If they weren’t so isolated, they would have been too small to support a hospital.

I didn’t hesitate to embrace the idea of a liability cooperative and eagerly sold the idea to small and rural hospital administrators. Before long, I was also CEO of the Liability Cooperative of Nevada (LiCon).

Hospitals began depositing their former liability insurance premiums in a bank account owned by themselves. The fund grew rapidly and they were able to reduce their contributions, freeing that money up for improved or less expensive healthcare.

But what was really amazing was that their malpractice suits dropped dramatically. The State Insurance Commissioner was more than suspicious, but it was the fact that those hospitals were owning their own risk and that caused safety to rise and lawsuits to fall.

When we go to the Green Zone and make plans to take control of our local economies, we will also take control of healthcare cost and access at the grassroots level. I have a plan.

You’ll see!

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Please move on to the next essay
The Capitalization of Education


Not My EconomicsMedical Care Cost Is a Shell Game