We do not have a healthcare "system" in the U.S. What we have is
an expensive, fragmented, unmanaged, confusing and ineffective
free for all.
The industry is a strange amalgamation of players including: government (Medicare and Medicaid), not-for-profits (hospitals, nursing homes, clinics),
publicly traded for profits (insurance and drug companies) and independent professionals (physicians, nurses, pharmacists). Price competition is among
insurance companies vying for members versus among providers
vying for patients. The huge profits made by most of the national
insurers are not reinvested in hospitals, research, equipment and
technology. Rather, they are distributed to share holders; it is quite
a mess.
U.S. healthcare spending is rapidly approaching two trillion dollars per year. (This slightly more than Alex Rodriguez's contract with the Yankees.) It
is now
almost 16% of our GDP. This puts us well ahead of other OECD (Organization for Economic Cooperation and Development) countries. I don't have 2007
figures, but in 2003, when we were at a mere 15.2% of the GPD, the closest OECD country to us was Switzerland at 11.5% of their GDP. Some other
countries in the OECD you may recognize are: Canada 9.9%, France 10.4%, Japan 8%, and UK 7.8%. Interestingly, the vast majority of the 20 OECD
countries have some sort of national system.
When it comes to per capita spending, again, no one comes close to the US. In 2003, the US was at $5,711 per capita. The other notable OECD
countries
were Switzerland $3,847, Canada $2,998, France $3,048, Japan $2,249 and UK $2,317. We are 90% higher than some of the OECD countries we are
competing with globally. US manufacturers are clearly at a pricing disadvantage when it comes to other OECD countries. It should be noted that China
is not a member of OECD. Since the 70s, annual increases for health insurance have routinely exceeded the CPI or inflation rate, often by two or three
times. A family health premium, now in the $1,000 to $1,200 per month range, exceeds an average family's monthly mortgage. The spiraling cost of health
care will continue to fuel the debate on a national health care system (We actually have one already, it's called Medicare). Although we spend more
per capita than most countries, we barely make the top 20 when it comes to measurable outcomes or bang for the buck.
Where is the money going you ask? Over the past 20 years, less and less of your money on a percentage basis actually goes to your local providers of care,
hospitals and doctors. More and more of your money goes to out of area national insurers and drug companies. On the average, 30% of your premium goes
for hospitalization and related outpatient services, 25% goes for physician services, 20% goes for drugs, 5% goes for miscellaneous and 20% is retained by
insurance companies. Twenty years ago, drugs comprised 3% of the premium.
The insurance industry calls the percentage of premium dollars spent on medical claims as the "medical loss ratio". In publicly traded insurance
companies, CEOs are awarded incredible bonuses for producing low medical loss ratios. So, in the breakdown above, the medical loss ratio is 80%,
meaning the insurance company retains 20% of the premium. Aetna, Cigna, HealthNet, Humana, United and Well Point have loss ratios anywhere from
77% to 84%. Many employers, who pay the lion's share of the premium, are beginning to question these corporate profits and the huge reserves being built
up by insurers.
I hope this has given you a better understanding of the crisis we are in and why many employers are starting to give national healthcare serious
consideration.