George Rebane

If there is a problem in the land, consider government guilty of its cause until proven innocent.

And that RR tagline applies doubly to the current cost of healthcare in America.  A short history of how we achieved healthcare costs that rank highest as a percentage of GDP is provided (here) by John Steele Gordon, nationally prominent author and economic historian.  Our healthcare costs have soared from 3.5% of GDP in 1930 to about 15% in 2015, indicating that “per capita medical costs in the United States have risen by a factor of 30 in 90 years.”

Speaking to a Hillsdale College audience, he opens with the reminder – “Whenever one segment of an economy exhibits, year after year, inflation above the general rate, and when there is no constraint on supply, then either a cartel is in operation or there is a lack of price transparency—or both, as is the case with American medical care.”

The history of real diagnostic and curative medicine actually began around 1930; prior to that physicians provided little benefit in those functions, and relied on the body’s own immune and restorative abilities to heal the patient.  But at the beginning of the Great Depression medical science had advanced enough to start providing remedies, albeit costly, that really did save patients from some dreaded diseases and injuries.  The expense of these new treatments launched the field of “hospital insurance” – dominated by Blue Cross and Blue Shield (for doctors’ fees) which broadened to what today we call medical or simply health insurance.

Hospital insurance paid only for services rendered while the patient was in the hospital.  It paid the complete hospital bill no matter its amount or treatment, thereby causing patients and doctors to make expensive hospital stays longer rather than shorter.  Government succumbed to doctor and hospital lobbies to keep service levels and prices up.  This gave rise to a special category of highly regulated (as non-profits) insurance companies.  And off we went onto the regimen of cost-plus payments to hospitals and doctors.  Given this scheme, there was no impetus to contain costs since these were actually withheld from the customers (patients) who had no information nor motive to shop for better prices for received services.

Then came wartime wage and price controls which forced companies to compete for workers from an already scarce pool, not through wages, which were fixed, but through fringe benefits which launched ‘free’ health insurance.  There’s a lot more important detail about how the various government departments, greedy politicians, and well-heeled lobbyists worked together to permanently keep America’s healthcare from responding to the normal markets which tremendously increased our quality of life in all other sectors of the economy over the decades.

The solution from here is not a ‘single payer’ comprehensively nationalized healthcare.  Gordon points out that “our federal government already runs three single-payer systems—Medicare, the Veterans Health Administration, and the Indian Health Service—each of which is in a shambles, noted for fraud, waste, and corruption. Why would we want to turn over all of American medicine to those who have proved themselves incompetent to run large parts of it?”  Instead he outlines a number of “far better and cheaper alternatives”.  I won’t steal any more of his thunder here but invite you to read his eye-opening essay on the topic.  Gordon concludes his piece with –

Finally, we need to get the practitioners of modern medicine to recognize an age-old reality: there is no cure for old age itself. Maybe someday we’ll be able to 3-D print a new body and have the data in our brain downloaded to it. But for the time being, when the body begins to break down systemically, we should let nature take its course. … There are enormous forces arrayed against these economically sensible reforms. Defenders of the status quo are the most potent lobbyists in Washington and the state capitals. This is not to mention the leftist proponents of single payer, who favor whatever will increase the power and scope of government. So it won’t be an easy fight. But at least we have one thing on our side—Stein’s law, named after the famous economist Herbert Stein: “If something cannot go on forever, it will stop.”

[Addendum]  I was in a rush to get this posted before another scheduled chore would interrupt.  What I failed to mention is that the Dems are playing ACA and healthcare as their only card in this mid-term election, and blaming Republicans for the baked in shortcomings of Obamacare, such as the rapid rise in healthcare costs.  The question many conservatives have had lately is whether President Trump is overplaying his ‘immigration, immigration, immigration’ hand.  I would advise our president to also point out that the defections from the multiple ‘migrant caravans’ are occurring only because he is making real his intent to use every legal means available – including active military – to stop the planned illegal bums rush across our borders.  These people aren’t going home or staying in Mexico because their road is a long one.  But what our president should really emphasize is what he has accomplished for our economy – that should make the greatest impact on those voters who have the capacity to understand the basics.

In any event, I am among the few who believe that knowing how our healthcare became so expensive and remains so is important.  Unfortunately not that many people give a big rat’s ass about that as they demonstrate their concern by limiting their healthcare knowledge to five or six publicized slogans.