The following column was first published by “The Rural monitor” in its issue of spring, 2005. Myers’ columns appear quarterly under the series title, “Look What’s Coming.” This column is a fantasy written in response to the question, “how can we get from the current mess to a single payer system?”
Wayne Myers, MD
Health care bills are a factor in about half of household bankruptcies, which are at an all-time high. At this writing Congress is focused on controlling bankruptcy instead of its causes. Eventually the problem of health costs will have to be dealt with. Health costs have been taking increasingly large bites of our economy for 75 years and won't stop without major structural change. To gather material for this column I cashed in a bunch of frequent flyer miles and made a trip to the year 2011. This is what I learned.
Early on, the spiral toward meltdown was subtle and without a clear beginning. Since the early 1990s families' health costs had been continually shifting from employers to employees as unaffordable premiums, deductibles and co-pays. More recently, federal cuts to the Medicaid budget were interacting with states' budget difficulties to produce Medicaid enrollment cuts. The proportion of the population with real insurance was dwindling.
The health care meltdown began heating up in 2006. Hospitals and clinics were seeing their bad debt and accounts receivable climb. They shifted ever more costs to insured and paying customers, making insurance even less affordable, increasing the percentage of uninsured and accelerating the spiral. More and more providers became unable to pay suppliers, to make payroll or to keep their doors open. The first to go under were those with the largest share of indigent patients. Their demise shifted the indigent care load to more affluent hospitals. People getting into hospitals were sicker, and the number of preventable deaths climbed.
At first political economists spun the phenomenon as a necessary shake-out of redundant capacity. This interpretation had some early adherents since the bulk of early failures were in poorer communities. But within months even flagship institutions were in trouble.
Health care dominated the run-up to the 2008 election. In early 2007 about 17 percent of working Americans had jobs in health care. By Election Day a quarter of the hospitals and clinics had closed, and a quarter of these workers were out of work with no prospect of finding another health job. Any surplus capacity in health care was long gone. People couldn't find care. Investors holding hospitals bonds were screaming.
The administration was paralyzed. There were two key arguments. First, is health care a right or a purchasable service – i.e., should hospitals and clinics have to care for people who can't pay? Second, should essential services be preserved by government action or should the market handle the issue? The administration stayed the market course.
The fact that it was an election year hurt and helped. It thwarted prompt action, but it also exposed the issues to brutal public debate and extracted very public commitments from candidates. Special interests often collided and were neutralized. The new administration took office with a mandate to stabilize the situation. In its "first hundred days" it laid out a plan to buy selected hospitals for their indebtedness. Except in a few remote rural areas, failing private clinics were permitted to go under. There were just too many to deal with. Instead, hospital-based clinics and community health centers were expanded, hiring docs from the private sector. There was no question about the need to manage this federal hodgepodge. Legislation was passed permitting the feds to negotiate with venders of essential drugs, goods and services. The Veterans Administration hospital personnel management and patient care protocols were applied in the foundling institutions, as were various longstanding recommendations for safer, more equal care. Consolidation of management and billing structures, plus direct federal payment, saved some money as did bulk negotiated purchasing and other economies of scale. Overall savings approached 20 percent, but hundreds of thousands of fiscal and billing personnel lost their jobs.
The switch-over was paid for by a broad employer-employee payroll tax, which replaced insurance payments. The indigent care piece was covered by a wealth tax on individuals with net worth of over $5 million.
There were unanticipated consequences. There was a surge in development when people with ideas for small businesses could count on affordable health care. The competitive advantage of "big box" retailers decreased when they had to help pay for employee health care through the health payroll tax. The small service companies thought they couldn't afford the health payroll tax, but since all their competitors were in the same boat most survived.
By 2011 America had two tiers of health care. The wealthy continued to use boutique providers who continued to do very well. Over half of all hospitals continued in private ownership receiving federal payment through a Medicare sort of scheme. But for many Americans the federal health program was their health care home. It was "big government," clumsy and imperfect, but fair and affordable.
In future columns, I hope to fill in more details on the program and how it evolved.