bailing-life-boat

Healthcare is in crisis.  Costs are rising well ahead of inflation, and both patient and physician satisfaction is dropping.  How could this be?  Doesn’t rising healthcare costs mean more money to physicians?  Obviously not, in fact the number of primary care physicians is dropping as is the overall satisfaction of physicians with their job.

As pundits try to solve the crisis, the main means of fixing the problems seems to be focused on the payment system.  Either migrate toward a single-payer system, or employ a “free market” approach.  But as I said in a previous post, simply addressing who writes the checks is not enough; we need to address who is cashing the checks.  Simply put: any system put in place must have a means of cost-containment – something that is missing from most plans.

It is as if we are talking about getting a bigger bucket to bail the boat rather than patching the holes in the bottom of the boat that are spewing money.  Any system in place that does not contain cost somehow will fail.  So what are the holes in our boat?  There are many – and I expect this idea to take more than a single post to describe. 

So let’s get started.

Hole # 1 – Profiteers

There are individuals and industries that are far better rewarded by a dysfunctional system.  They are financially motivated to keep the system broken.  These are the publically-held companies that have made their fortunes in medicine: health insurance companies and drug/device companies.

Now, I must first say that I hesitate putting both of these industries in the same category – as I have far less stomach for the insurance industry than the drug/device manufacturers.  The former simply add a layer of administration, while distributing the money of healthcare transactions (and taking a substantial chunk of it).  The drug/device companies do contribute vital products for the benefit of patients, but the profit-driven mindset of the publically-held corporation has caused a number of well-known abuses to occur.

Just do the math:

CEO Name Company 2007 Salary
Miles White Abbott $33,400,000
Fred Hassan Schering-Plough $30,100,000
Bill Weldon J  & J $25,100,000
Bob Essner Wyeth $24,100,000
Robert Parkinson Baxter $17,600,000
Daniel Vasella Novartis $15,500,000
Richard Clark Merck $14,500,000
Frank Baldino Cephalon $13,300,000
Sydney Taurel Eli Lilly $13,000,000
Jeff Kindler Pfizer $12,600,000
Jim Cornelius BMS $11,300,000
     
Total   $210,500,000

Source.

CEO Name Company 2005 Salary
William McGuire United $135,000,000
John Rowe Aetna $57,0490,00
Edward Hanway Cigna $42,1300,00
Total   $234,620,000

Source

Now, William McGuire has run into some hard times recently with the practice of back-dating stock options.  He had to pay back $30 Million to shareholders (not policy holders).  Looking at his salary, this has not hurt him too much.  As far as I can tell, his net-worth is still around $1.2 Billion (nearly all of it made from being an insurance company executive).

One more fact: in 2006, the profits for the top 6 insurers in the US was $11 Billion.

Let me put all of this into perspective. 

1.  There are around 40 Million people over age 65 in the US. 

  • The 14 CEO’s together could give each person over age 65 $12.40. 
  • From their profits in 2006, the insurance companies could give each of these people $306. 
  • Mr. McGuire could personally give each of them $33.

2.  There are an estimated 40,000 primary care physicians in the US.

  • The CEO’s could pay each one $11,128 or they could give 3000 PCP’s a salary of $150,000.
  • The Insurance companies could give each PCP in the US a salary of $275,000 with their 2006 profits.
  • Mr. McGuire could pay give them a bonus of $30,000, or pay 8,000 PCP’s a salary of $150,000

3.  The estimated average cost of a Colonoscopy is $675, a mammogram costs $150, and an MRI of the LS spine costs $2,500.  This means:

  • The CEO’s could fund 659,000 Colonoscopies, 2.9 Million Mammograms, and 178,000 MRI’s
  • The insurance companies could afford to pay for 16 Million Colonoscopies, 73 Million mammograms, and 4.4 Million MRI’s.
  • McGuire could personally fund 1.78 Million Colonoscopies, 8 Million Mammograms, and 480,000 MRI scans.

This is just one area of money lost.  Yes, the CEO’s deserve a salary, and the insurance companies deserve some profit; but if the system is going down the toilet, the solution needs to be found wherever possible.  Clearly there is excess (as shown by the math).  What do we get for all this money?  Another bureaucratic layer on our system, rising insurance premiums, and a bunch of private jets.

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And remember, this is only the first hole in the boat.

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