As some country people know, to “ring the bull” is an important process. Once it’s done you can control the bull, but it’s scary if you wait too long and the bull gets too big, as we have in this case. The ring is jointed with two pointed ends. You have to push the two pointed ends through the septum of the bull’s nose and clip them together. It hurts the bull. Such an act seems beyond the courage of the folks we have in Washington right now, perhaps because the bull is already too big.
Thirty-five years ago, when I was a young doc, Congress suddenly decided to rein in health spending. Until then the national plan had called for more care: more money in the form of Medicare and Medicaid; more medical schools and students through enormous start-up grants and per-student payments to school; regional continuing education programs; and, satellite-mediated consultation. Suddenly the growth promotion programs stopped. Health care costs were at 7.4 percent of the economy. Detroit was spending more on health care than steel. The sudden pronouncement in 1974: growth in health spending simply had to slow down.
Growth slowed for three or four years and then made up for the pause. There was a similar effort in the 1980s. That cycle had, I believe, one very unfortunate unanticipated consequence: the conversion of most U.S. health insurance companies from not-for-profit to for-profit. It went like this.
Health insurance companies were born during the 1930s and 1940s. The national models were Blue Cross and Blue Shield, regional not-for-profit companies managed by volunteer boards of businessmen and businesswomen. There were a few for-profit companies but I believe their roles were minor. In 1984 Congress decided to pay hospitals to care for Medicare patients what Congress and its advisors thought it should cost, instead of what the hospital had actually spent. A few hospitals went broke. Most hospitals shifted the difference in their expenses (the term “cost shift” should sound familiar!) to the private payers through large and sudden cost increases. The not-for-profit “Blues” couldn’t or wouldn’t raise rates to their premium payers fast enough, and saw their reserves plummet.
At the same time, the country was entranced with the idea of “health maintenance organizations.” Health insurance companies were to become beneficent overseers of their subscribers’ health care needs. But the computers then were new, huge, crude and very expensive. It was going to take lots of money to buy the enormous computers required to keep track of the health needs of all those beneficiaries. The not-for-profit companies could barely raise the money to function as insurance companies through the abrupt shift in congressional Medicare policy, let alone turn themselves into computerized modernized HMOs. They sold themselves to the for-profit firms. Those firms had access to plenty of capital and no scruples about raising rates. They did no health maintenance, eased themselves toward the exit of the risky individual market and became fiscal intermediaries to self-insured employers while charging very large commissions.
The net effect was to put our health cash flow into commercial hands at very high overhead rates and very little corporate risk. The practical point for today is that commercial health insurance is not the traditional American model. Our for-profit pattern of health insurance is the result of well intended but poorly timed congressional action. It is only about 20 years old—a very young but powerful bull. Any mention of curbing its growth seems politically unspeakable.
So here we are, 35 years into our nation’s stuttering efforts to control health care costs. Said costs are now up around 17 percent of the economy. That means that the people controlling all that money have enormous resources at their disposal to control the political process. It now seems fairly likely to me that our health care cost increases will not be controlled.
Recently President Obama predicted that the United States and China would shape the 21st century. I am doubtful that the U.S. will be at that table. I’m afraid, in a couple more decades, our health spending will have wrecked our economy and the U.S. will have joined the list of countries that once were great. But do not confront the bull.
I don’t know how long it may take for that decline to come about. The health care bite of the economy will increase by about one half a percent per year in the coming decade. Where is the tipping point? I obviously don’t know. At some point before my grandkids graduate from college, health-spending growth will consume more growth than the rest of the economy can provide and our overall standard of living will decline.
When I was young I was confident that when things got really serious our leaders would do the right thing. But now I’m older.
Wayne Myers, a pediatrician, founded the University of Kentucky Center for Rural Health and served as its director. He also served as director of the Office of Rural Health Policy in the Department of Health and Human Services’ Health Resources and Services Administration. He is a past president of the National Rural Health Association.
Opinions expressed in this column are those of the author and do not necessarily reflect the views of the Rural Health Information Hub.
Back to: Summer 2009 Issue