Eight thousand dollars a head—for every man, woman and child in the U.S.—that’s what we spent on health care last year. It adds up to 2.6 trillion dollars, more than the entire GDP of France. As Ezekial J. Emanuel, professor of medical ethics and health policy at the University of Pennsylvania, put it in a Sunday New York Times Op-Ed piece, that’s equal to the fifth largest GDP in the world. It’s about what France, with a population of 65 million, spends on everything.
And what do we get for this gargantuan expenditure? Number one health status in the world, right? Emphatically, No. Mostly, we’re buried in the middle of the pack. In terms of life expectancy, we rank 49th in the world. In a broad range of measures I covered in a June 2010 Open Salon piece, we stood in the middle of the pack as compared to European countries, like France, that spent about 50 percent less per person than the U.S. So what is all our excess medical spending buying?
Welfare. Corporate welfare. Welfare for an army of apparatchiks who administer claims, deny claims, and, finally, often with significant delays, pay claims—that's one thing our excess medical spending buys.
The Congressional Budget Office found in 2009 that overall health administration expenditures by insurance companies cost about 12 percent of all medical spending. That’s 312 billion dollars a year. But wait, there’s more. Administrative overhead on an individual policy, the kind Paul Ryan would like you to buy with a Medicare voucher, is 30 percent according to the CBO. And these numbers do not cover the costs medical providers must pay to process medical claims. According to noted health care economist Ewe E. Reinhardt, writing in the New York Times, “The McKinsey Global Institute estimated that excess spending on ‘health administration and insurance’ accounted for as much as 21 percent of the estimated total excess spending.” That would be $546 billion in 2010. Since 2003, when that figure was $477 billion, this excess expenditure has been growing at a rate of just under $10 billion a year.
This means that when our health insurance premiums grow by a factor of up to 15 percent per year, and the actual costs of providing health care grow by 2.4 percent per year faster than GNP, we are funding to a significant extent a form of corporate or institutional welfare. Think of it as a make-work project of gargantuan proportions for a vast middle and upper-middle class of workers who enjoy salaries, health benefits and retirement benefits that would be the envy of millions of un- or underemployed Americans.
And the profits that inure to those at the very top of this food chain rate right up there with some of the most egregious cases of overcompensation for underperformance in the entire corporate landscape. In our present ugly civics moment, we see public sector workers scapegoated for enjoying perks greater than employees receive in the private sector. What about private sector workers, and costs, that deliver nothing but unnecessary administrative labor as compared to the labor required to deliver health care in countries where outcomes far exceed our own? I’m talking about France and Germany, for example.
This isn’t to demonize people who go to work each day and perform their jobs as instructed. It’s just, why would we waste precious medical dollars on useless work? Rick Perry wants to give you a tax plan that can be described on a postcard. One must presume this would throw an army of tax preparers out of work. No one worries about their fates under such a plan.
In fact, much of what we have come to describe as a service economy is really an administrative economy. I’m sorry, but I would rather keep teachers and cops on the job than billing and claims administrators.
Corporate Welfare for the Health Care Middle-Man
The status quo so beloved to insurance companies positions them as an afunctional intermediary force in terms of medical outcomes. These private sector bureaucrats do not improve patient outcomes, save lives, deliver babies, or provide any other service beyond a perpetuation of their own machinery. It’s a bloated bureaucracy that we simply cannot afford.
In our accidental universe of Balkanized employer plans, the greatest administrative efficiencies are found in the largest employer plans according to the CBO. But most of us don’t work for Fortune 500 companies. Most of us, as conservatives will be quick to tell you, work for small employers, where the administrative overhead is more than double that found in the largest companies.
All of this would argue for broad-based health exchanges covering millions of people under one umbrella. That at least would be a step in the right direction. But shadowy insurance and provider interests want this whole reform thing to disappear before it has time to gain a foothold against the waste they represent. Yet these administrative monoliths decrease the percentage of your medical dollar that goes to medical care each and every year.
It is no surprise that those who benefit from this welfare gravy train are poised to defend their interests. What is surprising is that we insist on attacking a public sector workforce that comprises a much smaller piece of the pie than $546 billion a year spent on medical overhead while we look the other way regarding a make-work bureaucracy that dwarfs even our military personnel spending, which was “just” $154 billion in 2010.