Storm Clouds Over US Healthcare…
In a mad world, only the mad are sane.
- Kurosawa
By JM Hamilton 1-26-2020
The battle lines are clearly drawn in the ongoing US healthcare fight, and at stake, trillions in annual revenue for an industry that syphons off nearly 20% of US GDP.
On one side of the war, we have:
· Healthcare insurers (an industry well on its way to becoming a cartel, if it’s not already there);
· Hospital chains (that rarely compete);
· Big Pharma (thanks to patents -granted by gov- essentially monopolies);
· Pharmacy benefit managers (PBMs… the blackhole of the entire healthcare scam);
· Doctors (the holy of holies, in terms of special interest groups – who, after all, doesn’t love their doctor);
· Predatory Private Equity is increasingly penetrating this industry & is well known for shock & awe billing;
· Battalions of attorneys and lobbyist (who represent this multitrillion dollar leviathan); and of course, supporting this unholy alliance;
On the other side of the battle royal, stands alone:
This is no mere David and Goliath story… at stake for America are the very lives of our citizens. The life expectancy of Americans – unlike other Western democracies – is in decline. Those other Western democracies, with increasing life expectancies, all have some form of universal care, with strict controls over any private sector involvement. At stake for the US economy is trillions - in opportunity costs - sucked up by the healthcare industry that could be spent in other areas of the economy. The healthcare storm speaks to the very priorities the United States elite hold dear: profits before the health of the nation’s children & families.
In a profits first society, it’s no surprise that healthcare debt is the number one cause of US bankruptcy. The vampires who run the healthcare cartels & monopolies like to frame this as a “choice" argument… after all, we don’t want the state to takeover healthcare, because that would eliminate choice.
But the reality on the ground is Americans, all too often, have one of two options: one, forego care and die; or two, seek treatment and enter abject poverty and bankruptcy. That’s one hell of a choice… perhaps some alternative K-Street lobbyist, or advisory firm, can create another lie for the healthcare industry?
At the heart of the US healthcare catastrophe, we have the classic case of capitalism’s & neoliberalism’s very failure; and more to the point, cartels and monopolies – authorized by the state – that often refuse to compete and have been granted the ability to charge whatever they want w/out sanction and little or no oversight. When it comes to aforementioned healthcare industry, the various entities like to cast blame at one another for ever increasing costs. The drug cartel, frequently & often, likes to blame healthcare insurers and PBMs. While the healthcare insurers and PBMs blame the ultra-greedy Big Pharma companies. And even though both entities, healthcare insurers & Big Pharma, seemingly, can’t control one another, they both hold incredible power over the US government, particularly the best legislative bodies money can buy.
There’s also the issue of dual systems, and redundancies on top of redundancies: with private insurance and public insurance (Medicare & Medicaid) systems. The result: doctors spending more time on paperwork and arguing with insurance carriers than they spend with patients.
To top it all off: healthcare insurers and pharmacy benefit managers – despite the finger pointing engaged in w/ Big Pharma – have every incentive to see drug, doctor, and hospital prices escalate. Call it a perverse incentive… as medical costs grow, so do premiums (and so do the insurers’/PBMs’ profit markups and administrative loads). Higher medical costs translate into higher premiums, also translates into higher actuarial reserves, and presumably higher investment income (here, Fed and central bank actions - in regards interest rate suppression - may have driven healthcare premiums higher, as well). And if the premium cannot be fully passed onto the US employer/employee… well, there’s always higher co-pays, deductibles, and annual deductibles, etc., etc. (This abortion of a healthcare system also makes it far more difficult for US businesses and labor to compete in the global market, since our developed & emerging market competitors aren't dealing w/ a failed US healthcare model.)
Either way, the insurance carriers and PBMs (sometimes carriers own the PBM) mysteriously hit their profit goals, and C-Suite brass hit their targets, bonuses are paid, stock buybacks ensue, and Wall St receives its dividends and stock appreciation.
See, the current US healthcare system makes the 1% very happy. Everyone else can go die.
And speaking of Wall St., superimposed across the US healthcare price gouging dynamic are the usual suspects: M&A, industry consolidation, stock buybacks, financial engineering, vertical integration, free money furnished to the elite - for financial engineering & buyouts - courtesy of the Fed, and of course, evil incarnate: private equity.
So how to weather this perfect healthcare storm, and more importantly make US healthcare affordable for all… first, eliminate the middlemen, who have for decades failed to contain and control costs (which, last I heard, is the alleged social benefit of capitalism). Of course, the middlemen are healthcare insurers and the pharmacy benefit managers. These businesses - healthcare insurers & pharmacy benefit managers - are along for the ride in absorbing the astronomical annual mark ups of Big Pharma, doctors, and hospitals. The end result: greater economy, & family, crippling insurance premiums. Pharmacy benefit managers and their nontransparent formulas, by which drug costs are allocated (and long known for kickbacks and other financial shenanigans), really need the boot.
By removing the middlemen, the American consumer loses an expensive cost center and a layer of superfluous overhead.
That’s step one… step two is put the US government to work for the American people, instead of the criminal enterprise that is today’s healthcare industry. This means freeing the Federal government – as is done in other Western democracies – to negotiate drug and healthcare costs directly with Big Pharma, doctors, and hospitals.
Heh, if Big Pharma and hospitals want to run cartels and monopolies – that is, up until now, w/out checks and balances against price fixing & gouging – then they need to be, thoroughly: regulated; profit taking needs to be strictly monitored & subject to caps and a windfall profits tax; and in the case of Big Pharma, especially, a predetermined percentage of revenue – not profits but revenue – needs to be allocated to R&D. All this will curtail the financial engineering, surrounding an industry, that only benefits the 1%.
With the middlemen eliminated, and w/ the government working for the consumer and the public – instead of cartels & monopolies – healthcare as a percentage of GDP should fall into line w/ that enjoyed by other Western democracies. Thanks to improving technologies and AI, costs should travel down, not up. The US also spends absurd sums on end-of-life care, vis a vis our peers... this bloodletting must cease.
At the end of the day, the current US healthcare system is sick and to use another metaphor, a dead man walking. It’s time to euthanize the apex predators, and redundancies in the US healthcare system, and operate the industry as a public good for the benefit of the citizenry, in lieu of as a profit-making venture for an elite few. The handful of bottom feeders at the top of the healthcare scheme - ride the storm and - prey upon the weak, the infirm, the mentally challenged, the desperate and the dying.
Americans are dying so robber barons, per the usual, can loot, pillage and rape the US citizenry, from the cradle to the grave. The business model of today’s US healthcare system is for patients to go deep into debt, not only so that they can pay for their initial medical care but pay and continue to pay (as interest & fees on medical debt accrue).
It’s time for the US government to stop working for the financial & medical aristocracy and go to work for the American people.
Copyright JM Hamilton Publishing 2020
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