Health Insurance | Heart Health Program

Date: 07/20/2009    Written by: Jon Barron

Health Care, Running Out Of Time

Several weeks ago, The Economist ran an article titled, "This is going to hurt." It was a quick discussion, what The Economist calls a "leader," about the future of health care in the United States. To me, the importance of the article was not in what was said, but in what wasn't said -- the elephant in the room no one wants to talk about. And that elephant, if not eventually shooed from the room, will destroy not only America's health care system, but every health care system in the world. I'm not talking about the cost of doctors or electronic records or the prices of pharmaceutical drugs. I'm talking about the accelerating rate of catastrophic illness both in the elderly and in the very young throughout the world (Type 2 diabetes and heart disease in teens and preteens, for example). No health care system or solution that ignores this looming crisis can survive.

Alternative Health

What elephant?

With that in mind, let's take a look the key points in The Economist's article, and explore the reality behind them.

Huge dollars spent on health care for minimal results

"Even though one dollar in every six generated by the world's richest economy is spent on health -- almost twice the average for rich countries -- infant mortality, life expectancy and survival-rates for heart attacks are all worse than the OECD average."

This is actually a huge understatement. In 1960, total health expenditures in the U.S. amounted to $27 billion; in 2003, the figure stood at nearly $1.7 trillion (a 63-fold rise). In contrast, the U.S. population grew by only 51 percent. Also, during that same period, health expenditures per person rose from $143 to $5,670 (a 40-fold rise) while general inflation, as a point of reference, showed only a fivefold increase.

The bottom line is that the United States spends more on health care than any other country in the world -- more than twice as much per person as Britain and Japan and nearly 30 percent more than second-ranked Monaco according to the World Health Organization. And the amount has risen steadily, and keeps rising. Annual medical spending in the United States had climbed to over $6,000 per person in just the next two years, by 2005 (that's 53% more than any other country in the world).

  Health Care

And while the United States certainly spearheads this trend (spending more on health care than the entire Gross National Product of every other country in the world, with the exception -- barely -- of Japan, Germany, UK, France, and China), it is hardly alone. The UK, Germany, Canada, and France all now spend upwards of $2,000 to $3,000 per person…and climbing.

The uninsured

"Because health insurance is so expensive, nearly 50m Americans, an obscene number in such a rich place, have none; those that are insured pay through the nose for their cover[age], and often find it bankruptingly inadequate if they get seriously ill or injured."

This statement is half misleading and half misstated. Of course, the half that's true is bad enough.

Every commentator keeps throwing up the 50m Americans who are uninsured, but that number is hugely misleading. Nevertheless, a huge number of "experts" insist on taking that statement at face value. As Sherry Glied, PhD, Associate Professor of Public Health, Columbia University says, "The people who are most at risk today are those who have no health insurance at all. They're at risk of not getting regular care when they need it. They're at risk of not catching real problems before they get serious enough to not be treatable. They're at risk of not getting the best treatment when they actually do get sick. And they're at tremendous financial risk. They could lose everything that they've saved in their lives because of some even fairly minor health problem."

This immediately brings to mind images of poor people left behind by a cruel, unfeeling system. But that's not necessarily so -- at least not at the 50m number. There is another perspective if you look at the reality behind the face value. "This situation is really misrepresented," said June O'Neill, professor of finance at Baruch College, part of the City University of New York. O'Neill is also the former director of the nonpartisan Congressional Budget Office. "It is contradicted by the studies that show the large amount of resources that the uninsured actually do get."

O'Neil goes on to say that many can afford coverage but, for various reasons, choose to go without it. Others are eligible for coverage from the government but don't take it. Others choose alternative means, such as neighborhood clinics. And others, including many who read this newsletter, just don't believe in it except for severe trauma. And the numbers back her up. Almost one-third of the uninsured in the United States now live in households with annual incomes above $50,000. In fact, a more accurate representation of the numbers would be as follows:

  • First of all, the actual estimate is 47m, not 50m. Politicians (both Republicans and Democrats, for different reasons) just round it up because it sounds better.
  • Around 20m of those are college students or wealthy people who choose not to pay for health insurance.
  • Approximately 11m are actually covered by medicaid -- or at least eligible for it -- but haven't signed up for it.
  • And 12 million are not American citizens.
  • That leaves an actual number of around 4m-6m of the needy poor who are truly uninsured. (Incidentally, you could justifiably subtract 2m from that number (the prison population of the US) since they are in prison and receive at least some level of health care as inmates.

Now 4m people is still too many to be left uninsured, but it is a far, far cry from the 50m figure bandied about. And it certainly shouldn't cost over a trillion dollars to provide 4m people with health care. But let's not argue about numbers. When it comes to health care, no one who wants it should be left behind. (And for now, we'll bypass the equally disturbing situation of those who don't want it -- people who don't want their children to undergo chemotherapy or radiation treatment -- but are forced to get it.)

The burden of health care

"Since half the population (most children, the very poor, the old, public-sector workers) get their health care via the government, the burden on the taxpayer is heavier than it needs to be, and is slowly but surely eating up federal and state budgets."

But in many countries such as Canada and United Kingdom, where the state offers health care, the burden on the taxpayer already covers 100% of the population. That's what universal coverage means. The bottom line is that one way or another someone has to pay. And nine times out of ten, no matter the system, you're the one who pays. If it's a "state" plan, you pay through your taxes. If it's an employer covered plan, you pay in reduced wages. Either way, you pay.

To be sure, the current system in the United States provides the worst of all possible worlds. The cost of private insurance plans is a huge cost to employers. It contributed greatly to the fall of General Motors, and many smaller firms are giving up covering employees. It also puts US corporations at a disadvantage vis-à-vis any corporation based in a country covered by a state sponsored plan. Higher health care costs alone accounted for a $1,500-per-car cost gap between GM and Japanese vehicles. On the other hand, if corporations are shouldering most of the burden of health care, you don't have to pay as much for it in taxes.

Publicly funded health care would certainly avoid that problem and make US corporations more competitive. But it would also cost you more money. Anyone who tells you that your taxes won't increase is lying to you. Somewhere, somehow, someone must pay for it -- and if not in direct taxes, then through increased fees. For example, although the UK dropped its top income tax rate to 40%, you still pay a VAT (sales tax) of 17.5% on everything you buy. And 72 percent of the price of petrol in the UK is tax, even though production costs are among the cheapest in Europe. The bottom line is that one way or another, you pay for your health care. Currently, the US House of Representatives is proposing a surtax of up to 5.4% on the top 1.2% of American earners. I am not here to argue the fairness of that surtax, but know for sure that it will not come close to covering the cost of the proposed changes in health care. One way or another, you will pay. In Europe and Japan, you already pay.

In the US, as discussed at the top of this newsletter, we currently spend around $2.2 trillion a year on health care. But new plans under discussion could add $1.2 trillion to $1.6 trillion over ten years…and that's in addition to the natural increases we can look forward to. That's right, the cost of health care was already expected to rise to over $4.3 trillion a year during that time frame -- even before Congress took on health care this year. Incidentally, that works out to around $31,000 a year per taxpayer. (There are about 138 million taxpayers in the US.) And that's without counting any increases that might come from the health care plan now under discussion.

Fee for service versus results based plans

 

"Most doctors in America work on a fee-for-service basis; the more pills they prescribe, or tests they order, or procedures they perform, the more money they get -- even though there is abundant clinical evidence that more spending does not reliably lead to better outcomes."

 

The alternative, of course, is to pay for results, not services. Cutting back on unnecessary, expensive procedures and prescriptions could save vast amounts of money while producing better outcomes at the same time.

Unfortunately, these savings, as large as they might be, will apply only in the US and will provide only a temporary blip in the inevitable trend that is happening in every country in the world. The problem lies not in what The Economist covered, but what they ignored. (Of course, the real alternative is to get people to live "alternative lifestyles." That actually could dramatically change health care outcomes. But that's a different issue, and we'll come back to that a little later.)

But now let's start exploring some of those key issues that The Economist article ignored.

People living longer require expensive health care far longer

The Economist didn't really address how the issue of aging affects health care costs in their "This is going to hurt" article. However, they did address it in a "special report" in the same issue under the title, "A slow burning fuse." In that report, they stated:

"In 1900 average life expectancy at birth for the world as a whole was only around 30 years, and in rich countries under 50. The figures now are 67 and 78 respectively, and still rising. For all the talk about the coming old-age crisis, that is surely something to be grateful for -- especially since older people these days also seem to remain healthy, fit and active for much longer."

All well and good, except for the fact that this statement is fundamentally inaccurate (or at least misleading) and dramatically understates the problem at hand. The first problem with these numbers is that they imply (or people automatically infer) that they are the result of better medical care. This is not necessarily so. In fact, about 90% of the gains in life expectancy are attributable to a reduction in the rate of death from cardiovascular disease (primarily from a reduction in smoking) combined with a reduction in the rate of death in infancy. Those gains are not necessarily attributable to advances in medical care as much as they are to: better water treatment, improved sanitation, changes in diet, better nutrition, changes in lifestyle, and fewer people smoking. In fact, the reduction in infant mortality alone accounts for all but two or three of those years of increased longevity as cited by The Economist. It is very important that you understand this concept, so let me explain.

Let's say you have ten people -- five of whom live to the ripe old age of 69 and five of whom die of diphtheria at the age of one. Statistically, that gives you an average life expectancy at birth of 35 (5x69 plus 5x1 divided by 10). Now, let's say through a vaccination program that you eliminate the deaths from diphtheria so that those five children no longer die as babies, but now live full lives to the ripe old age of 69. Understand, no one is living longer than 69. Everyone is still maxing out at the same age, but statistically, you've just doubled the average life expectancy at birth from 35 to 69 (10/69 divided by 10). Not dying at infancy is certainly important to the children who would otherwise have died, but the doubling in life expectancy doesn't actually mean that people are living longer. Or as Benjamin Disraeli was reportedly fond of saying, "There are three kinds of lies in the world: lies, damn lies, and statistics." So what kind of change are we talking about in infant mortality numbers? At the beginning of the 20th century, for every 1000 live births, six to nine women in the United States died of pregnancy-related complications, and approximately 100 infants died before they reached one year old. From 1915 through 1997, the infant mortality rate declined greater than 90% to 7.2 per 1000 live births, and from 1900 through 1997, the maternal mortality rate declined almost 99% to less than 0.1 reported death per 1000 live births (7.7 deaths per 100,000 live births in 1997). Needless to say, that has had a huge impact on average life expectancy numbers.

Is this an important distinction? Oh my yes, big time! The problem is that if you were to believe that the increased life expectancy we are seeing was due to "medical advances," then it would be easy to infer that similar advances could be expected in the next 20-30 years. But if the improved numbers are really the result of statistical abnormalities resulting from reduced infant mortality and people quitting smoking, then we can pretty much assume that we've reached the end of the track on that particular train -- as infant mortality is now pretty low and smoking rates are no longer dropping.

However, there is another factor that is driving up the age of the developed world's population, and that is that people throughout the developed world are having far fewer children.

As The Economist points out:

"As always, the averages mask considerable diversity. In the richer parts of Asia the populations of Japan, South Korea and Taiwan are already old and will rapidly get even older. Europe is split several ways: Germany, Italy and Spain, for instance, now have tiny families and are therefore ageing fast, whereas France, Britain and most of the Nordic countries have more children to keep them younger. In eastern Europe, and particularly in Russia, birth rates are low and life expectancy has also taken a knock. America, thanks to a resilient birth rate and high immigration, will still be fairly youthful by mid-century."

"Alone among developing countries, China is already ageing fast. This is mainly because for the past 30 years it has been keeping a tight lid on population growth…Although China has seen stupendous economic growth in recent years, it is still some way off being rich, so it will have trouble absorbing the cost of this rapid ageing." (And then when you factor in that upwards of 50% of the adult male population in China now smokes heavily (with that many men and women again being exposed to second hand smoke), you have a catastrophic health care situation in the making -- 20-30 years down the road.)

So what does this mean in terms of health care costs?

We've just seen the tip of iceberg in terms of the costs of health care that our aging world population is likely to bring about. The key here is that the number of elderly as a proportion of the population is just starting to explode worldwide. Quite simply, as the proportion of senior citizens climbs in any particular country, it means that the burden of paying for their health care falls on ever fewer, healthy, young earners who are not yet drawing on the system. In other words, the costs of health care for the coming generation will go up dramatically -- not for their own care, but for the care of the elderly who came before them. The question, of course, becomes, "Who will pay for their health care when they come of age to need it?"

And not only will it go up, but it will continue to stay up as the world sees an explosion of people living into their 80's. Again, this has less to do with improved health care and more to do with the fact that more of the Baby Boomers survived the dangers of infant mortality. Another way of looking at this is to say that even if the percentages of people living to a hundred remain the same, the number of centenarians will explode quite simply because the population base is so much larger to draw from and so many more of them are surviving childhood.

The buried bomb of health care

Health Care CostsThe Economist claims that the burden of the increasing number of elderly on the health care system won't be that great because better health care is keeping senior citizens healthy longer. This quite simply is not true. Think about this for a moment. If the cost of taking care of the elderly was as insignificant as The Economist implies, then insurance companies wouldn't be so reluctant to cover the elderly. But they know the actual dollars involved, and in fact, work hard to exclude the elderly and sign up a greater proportion of young people to average their costs down. But here's the buried bomb of health care -- the problem is no longer just the elderly. It would be bad enough if the ever shrinking base of young working taxpayers just had to deal with an exploding population of people facing the diseases of the elderly -- cardiovascular disease, cancer, dementia, osteoporosis, arthritis, Parkinson's, diabetes, MS, etc. The problem is that so many of these diseases that used to be known as diseases of the elderly are now appearing in young people. For example, adult onset diabetes, which was so named because at one time it only appeared in adults, had to be renamed Type 2 diabetes, because so many young people started  getting it. The range of "aging" diseases now appearing in young people is mind boggling.

And this presents us with two huge problems

  • First, we now have to pay for the care of people afflicted with these diseases for far, far longer periods of time than ever before in history. Keep in mind that it costs a whole lot more to provide someone with diabetes and blood pressure medication if you have to start at age 18 as opposed to starting at 68. That's 40 extra years of health care and pharmaceutical drugs the system has to pay for.
  • And if people are getting sicker earlier, they are much more likely to have to have ever increasing amounts of "downtime" from work during their productive years -- thus shrinking the base (tax or premium) to support health care by that much more.

Now, to be sure, government officials have adopted the mantra of "preventive health care." But every time I hear someone in government use that phrase, I am reminded of the character Inigo Montoya from the movie, The Princess Bride, who after hearing another character repeatedly use the word "inconceivable" is finally moved to say, "You keep using that word. I do not think it means what you think it means." And, in fact, when government officials refer to preventive health care, I don't think they know what it means. They seem to be referring to:

  • More checkups
  • Getting people on drugs earlier -- such as teenagers on statin drugs -- to prevent complications later in life
  • Mandatory vaccinations for every citizen in the world to prevent pandemics
  • Taxing sugared beverages to encourage people to drink "healthy" aspartame and Sucralose sweetened beverages instead
  • Etc.

That's not preventive health care. It's more of the same, as "envisioned" by the very medical establishment that got us here in the first place. It will not only be ineffective; but it will be outrageously costly.

So, what can be done to reduce the cost of health care?

No amount of tinkering and funding can stop the inevitable train wreck barreling towards us -- unless there's a major paradigm shift. No matter where you live or what health care system you function under, the demographics are undeniable. The American model is headed for disaster. But so is the French model. How can any health-care system survive up to half its population living for 20–30 years with severe diabetes (as predicted by the CDC), let alone the other half suffering from cancer, heart disease, osteoporosis, Alzheimer's disease, and MS? There isn't enough money in the world to cover it. Quite simply, the sicker a population makes itself, the more it costs to provide health care for it. And as I have repeatedly said over the years, the demographics are compounding. Not only are more and more people getting sick earlier because of dietary choices and inescapable environmental toxins, but in the wealthier countries, populations are rapidly aging, which means there are fewer and fewer taxpayers to support an ever aging, ever sicker, ever expanding population of high health care users. Pretending that any tinkering of the current systems can produce a viable solution to this problem of compounding demographics is the equivalent to rearranging deck chairs on the Titanic. At some point, our children will be left drowning in debt. (But maybe people are okay with that. Certainly most governments seem to be.) The bottom line is that the only way that health care can survive -- the only way you can survive -- is if you take back control of your health and start doing those things that allow your body to stay healthy without the need for health care. Or to put it another way, the only way to save health care is to stop relying on it, use it only for the exceptional, and take care of yourself.

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