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Why the U.S. Medical “System” is Broken in the Year 2020

First thing: I realize most people who bother to read this blog do so because they are interested in things like guns, shooting, ammunition performance, ballistics, tactics, and the like. I get that. But if you’ve read any of my older blogs, you know I occasionally stray on to political topics. This is one of those meanders into the political realm. Don’t worry, I’ll be back onto the blood-guts-and-gunsmoke side of things next column.

I recently quoted an article on my personal Facebook page, an article about the “system” relying upon the work ethic of doctors and nurses to keep running. You can read that article here:

Yes, it says that the health care industry is kept afloat by exploiting doctors (and nurses, too, but this site is a doctor site, so they emphasize that side of the article in the headline). And this is 100% true.

The scary thing is that this exploitation is getting close to squeezing the last drop of blood from the turnip, so to speak, and in many places it’s already happening. Doctors are just flat out refusing to keep running faster and faster on the hamster wheel to please the insurance companies and the corporate medical system.

The result is becoming apparent: as a patient, you can’t find a primary care doctor in your area who is taking new patients. This means you have to go to walk-in clinics or ER’s to get basic medical care, which has a higher co-pay, which penalizes you for something you can’t control.

And it’s going to get worse in the very near future. A lot worse.

American medical schools aren’t producing enough doctors to meet the demand of our growing population. This isn’t a new thing, it’s been going on for decades. As a result, our hospitals and corporate health care entities have been importing foreign doctors to meet the need. Which explains why you often have to see someone who speaks English poorly and has no empathy for the culture in which you live when you “go to the doctor”.

The reasons medical schools aren’t making enough doctors are complex, but essentially it’s because the number of quality applicants to medical schools has declined sharply, and the medical industry has done nothing to incentivize medical school enrollment and output. Why do young people not want to go to medical school, you ask?

Well, they look at the cost and duration of a medical education, and they look at the (relatively) low earnings doctors can expect when they finally start to work, and they realize they can get a better deal by going into a business career track such as law, or an MBA program. Think about it: a board certified family doctor can expect an annual income of about $250,000, after spending 11 years in training (4 years for a bachelor’s degree, 4 years in medical school, and 3 years in residency). Student loan debt at the end of that will be about $300,000 for most kids. On the other hand, if that same college freshman does an MBA, he’ll be out of school in 6 years, with half the debt load.

The big difference no one talks about is this: the kid with the MBA can expect his salary to keep rising at or above the rate of inflation as he gains experience and knowledge. The kid who goes into medicine is a fool if he expects that to happen to him. Medical salaries have not kept up with inflation for decades, and doctors with 30 years’ experience are hired at the same salary as doctors straight out of residency by almost all health care systems.

It’s a mess, isn’t it? We often hear people say they want their doctors to be “the best and the brightest”… but for at least 20 years (by my admittedly biased count) the best and the brightest have been going into other fields than medicine: engineering, computer technology, and business. Because they know their future prospects are much brighter in those mostly non-regulated fields.

How did this happen? How did the “rich” doctor of the 1960’s become the corporate wage slave of 2020? Well, like the frog in the pot of slowly heating water on the stove, it happened so slowly no one realized what was happening until it was too late. Here’s a primer on the history of the corporate takeover of medical care in America:

In the 1950’s, virtually all doctors were in private practice. If you went to the doctor, you paid cash for your visit. If your doctor prescribed medicine, you paid cash at the pharmacy. If you had your appendix taken out at the hospital, you paid the doctors and the hospital cash for your operation. The bill you were given was exactly what you paid. If it was more than you could afford today, they would work out a payment plan for you and in a couple of months you’d have the bill paid off.

But by the 1960’s, medical care had become more complex. We could do more to save lives than we had in the immediate post-war era, which actually saved lives. But these more advanced procedures and medicines were a lot costlier. Soon, enough people had had catastrophic medical problems come along that were so expensive they began searching for a way to defray that cost, and medical insurance companies sprang up to meet that need.

This was a boon for patients who had to have a major operation, or cancer treatment that exhausted their savings. In fact, it was so much of a change to people’s personal finances, people were opting to have medical care that they wouldn’t have done if they were paying for them out of pocket.

As a result, the medical economy began to boom. Doctors and hospitals saw their workload–and their incomes–increase dramatically. Doctors had had decent incomes before this, but with the advent of healthcare insurance, they learned they could move up from a split-level in the ‘burbs to a big two-storey on the fairway at the country club; they could trade in their old Lincoln for a new Mercedes-Benz; instead of sending their kids to college at State, they could send them to Harvard.

And the insurance companies saw this happening. Their profit margins hadn’t exactly suffered, of course. As people used their insurance more, the premiums were increased to keep corporate profits healthy. But the sharp thinkers in Omaha and Akron saw the exponential growth of the medical economy, and they coveted a piece of the action.

So the insurance companies invented a new concept. It took time and effort. They catalogued all the failings of the medical industry, and played them up to the news media and to government. They pointed out how the medical system was so ineffecient, how it was wasting money, how negligent doctors were hurting patients, how greedy hospitals were price-gouging, and so on. It didn’t take much, really… lots of folks are envious by nature, and they were easily led to blame “the doctors” for any an all ills. Once public awareness of the “flaws” of the smoothly running medical economy was high enough, the insurance companies proposed a solution: Managed Care.

They said it was an easy fix, and everyone would love it. Everyone would benefit: patients, doctors, hospitals, everybody. The way it would work was this: you could keep your personal health insurance (but the premiums kept going higher and higher), or you could enroll in a managed care plan. The managed care plan had lower premiums, and you could get coverage for everything: routine doctor visits, prescriptions, medical appliances, the works. “What a great concept!” said just about every healthcare consumer, and they flocked to the new Managed Care plans (called HMO’s, or Health Maintenance Organizations) in droves.

So many people went from regular insurance to HMO’s that doctors and hospitals had no choice but to accept those plans, or face economic ruin. But for doctors and hospitals, the HMO’s were a very mixed blessing. Sure, they got paid promptly, but they got paid less for the same services and there were strings attached… they had to meet certain “performance criteria” set by the medical experts hired by the HMO’s.

The “strings” weren’t onerous, at first. Doctors and hospitals were still getting paid, although they had to work a little harder to make the same profits. But every year the HMO’s paid a few cents on the dollar less, citing high costs, of course; and the “strings”, the restrictions on practice, kept getting more and more restrictive. The panel of labs and other tests a doctor could order for his HMO patients began to shrink. The panel of surgeons he could refer his patients to began to get more restrictive. And so on.

On the patient side, the problems were equally apparent. Your new insurance plan wasn’t yours, any longer. Your insurance had become a part of your employment package. The insurance companies lobbied government to pass laws that made employer-provided health insurance the norm, rather than an exception.

The incentives to move from private health plans to employer plans were great for employers and for patients, initially. But insurance companies made it harder and harder for non-HMO plans to stay affordable. So gradually Managed Care took over the employer-based healthcare market.

By the 1980’s, HMO’s and quasi-HMO’s were the dominant form of health insurance in America, and the problems with HMO’s were manifest. Patients were forced to see new doctors, if their old family doctor wasn’t a part of the HMO plan. They were also starting to have to deal with higher and higher personal costs… their cover-it-all insurance was starting to only cover 90% of it, or 80%, or less. The medicines they had been taking for years were no longer covered (but a cheaper, less effective medicine was covered, so guess what happened?).

As consumer groups shouted in protest to these changes, governments and insurance companies felt the heat and made some changes. Not a lot of changes, but some. Restrictions on patients became a bit less severe, provider panels grew larger and portability from one hospital to another became a bit easier. But the changes were truly very small, even inconsequential.

By this time the “cost savings” of managed care were manifestly a Big Lie. Insurance companies had created an entire new industry, employing millions of office workers, to administer their HMO’s. And government, bumbling along with them, had created multiple new regulatory entities to watch over both the insurance and medical industries, which again required millions of employees to administer.

So by the early 2000’s, our health care system had become an amalgam of two enormous bureaucracies: one private, run by the insurance industry, and one public, run by various levels of government.

The costs and complexity of dealing with these bureaucracies were staggering for private practice doctors and small hospitals. In the 1950’s, a doctor could run his office with a receptionist who did all the filing and billing, handled the phones, and so on. By the 1960’s, that same doctor had to add a billing clerk to deal with insurance claims. And by 1985, the average doctor had to employ 2.5 billing clerks working full time to keep up with insurance paperwork. Moreover, the increased restrictions imposed on the doctor’s medical practice by insurance companies and governent regulators required employing a compliance officer (usually called an office manager) to keep up with the constantly changing rules of the game.

By the early 1990’s most private practice doctors were no longer able to keep up with the increased regulatory load imposed by HMO’s and government. It was simply too costly, both in money and in time. And corporate America was there to take advantage of the situation.

Hospitals had been mostly privately owned up until the 1960’s. Groups of doctors, sometimes with other investors, were often involved. More often, communities owned their hospitals, and a sizable share of the hospital market was owned by charitable organizations (often churches and religious orders). But in the 60’s, private corporations began buying hospitals. A corporation could operate multiple hospitals much more economically than your local hospital board, because they could use their economies of scale and bulk buying power to bring down costs. Corporate hospital ownership had become the norm by the 1980s.

So when private practice doctors in the 80’s began to fail economically, these hospital corporations saw an opportunity: they bought up private practices like hotcakes. The doctors loved it: they were paid good value for their practice (usually around 2X their annual gross billings, a common standard purchase price for decades), but they no longer had to manage their own billings or compliance. The hospital/corporation took that over for them. The corporation also took on all his employees, and absorbed all the employer obligations the doctor had previously had to do (or pay his accountant to do). The doctor stayed in his office, kept his staff, drew a good salary, and had money in the bank. What could possibly go wrong?

What went wrong was that there were strings attached. Just like the deal with insurance companies in the 60’s and HMO’s (which were still the insurance companies) in the 70’s and 80’s, these Physician-Hospital Organizations (PHO’s) proved increasingly restrictive. Corporate profits were now the driving factor in all decisions. Doctors found themselves forced out of their “inefficient” private clinics into large group practice offices. The nurses and receptionists they had employed for years were moved to different locations, or simply laid off in favor of cheaper, less experienced staff who could be easily replaced if need be. Work that had been previously delegated to nurses and medical assistants became the responsibility of the doctor.

And the doctor’s salary no longer reflected the amount of work he was putting in. Instead, it reflected the Corporation’s balance sheet.

The worst was yet to come. First, the federal government mandated implementation of Electronic Medical Records nationwide. This sounded good, but proved to be a millstone around doctors’ and nurses’ necks. Rather than a streamlined and efficient means of recording medical encounters, procedures, and so forth, Corporate medicine designed it as a means of monitoring and controlling “production”, then added the clinical components doctors and nurses need as almost a second thought. Government went along with this philosophy whole hog, of course, because governments are all about monitoring and control.

By the year 2010, the full mess had arrived. Doctors and nurses, being paid far less for their work than they had been in 1970 (in inflation-adjusted dollars) were seeing roughly the same number of patients than they had in 1970, but because EMR’s required so much data input, these front-line, hands-on, hearts-out practitioners of medicine and nursing were spending more time in front of a computer terminal than they did interacting with patients.

The Affordable Care Act, a.k.a. Obamacare, exacerbated the problem. For everybody. Patients immediately noted that their health care plans were costing them a LOT more, and providing a LOT less service, with a MUCH higher co-payment responsibility. Doctors noticed that the regulatory hurdles for prescribing medicines and getting procedures pre-approved had become a LOT more common and a LOT higher and harder to jump over. Insurance company and government bureaucracies thrived, however, as the increased revenues fed both. The reason for these changes, quite simply, was that Congress more or less wrote the ACA at the behest of the health care insurance company lobby… so the insurers got everything they wanted, while patients, doctors, hospitals, and other players in the health care community were allowed little or no input. Obamacare “expanded” the number of patients with healthcare insurance primarily by expanding the Medicaid program, but numerous studies have shown that it: 1) made health care insurance unaffordable for millions who previously had it; 2) increased regulatory restrictions on doctors, nurses, hospitals, labs, and other providers of health care services and increasing their workload without any increase in reimbursement; 3) eliminated “safety net” plans that paid for catastrophic medical care only, but were affordable for even low income folks; 4) forced everyone to buy plans with higher premiums, higher copays, and higher deductibles, thereby decreasing health care insurance companies’ payouts and increasing their revenues simultaneously.

Until the devastating provisions of the ACA are repealed, we will continue to see everyone except the insurance companies struggle under these increased burdens. The net effect on the front line health care workforce has been loss of experienced doctors and nurses due to early retirement, change of careers, or both. These experienced providers are not being replaced by the medical and nursing training systems fast enough, so an influx of foreign medical grads has been allowed to try to meet the demand.

There is some hope, however. A significant change in the makeup of Congress in November (we need removal of the Democratic House majority) could mean the end of the ACA. Whether there is a comprehensive plan to replace it is not relevant; the ACA needs to die. A healthcare insurance reform bill, opening healthcare markets nationwide (in the same manner that auto insurance was opened up a number of years ago), is badly needed, and the insurance companies need to be free to offer low-cost plans that don’t cover every possible medical situation. By opening up competition we will inevitably see some price relief for the medical consumer.

In the meantime, the world of medical practice is changing. In 2020, doctors in private practice are rare birds, but the number is growing. More and more primary care physicians are spurning the government/insurance/hospital-corporation cabal (the healthcare equivalent of what Eisenhower called the Military-Industrial Complex in the 1950’s) and returning to a direct-pay system for their patients. Since patients are essentially paying cash for most primary care services anyway due to high copays and deductibles, they are starting to say they will pay a premium to have a GOOD family doctor or internist work with them and their families. This is taking the shape of things like concierge medical practices, where folks pay a set fee monthly to have access to first-rate personal medical care from a doctor they trust and who will commit to them for the long term.

The government/insurance-company/hospital-corporation cabal is teetering. It is not sustainable. Whether the feds do anything about it or not, the system is going to collapse. Whether that collapse will be a “market adjustment”, or a catastrophe, is all that remains to be seen.