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Over 700 insurance companies are selling health insurance. Concern about a "doctor shortage" and the need for more "health manpower" leads to federal measures to expand education in the health professions. Major medical insurance endorses high-cost medicine. President Lyndon Johnson signs Medicare and Medicaid into law in 1965. Costs immediately begin to accelerate.
1970's
President Richard Nixon renames prepaid group health care plans as health maintenance organizations (HMOs), with legislation that provides federal endorsement, certification, and assistance. Healthcare costs are escalating rapidly, partially due to unexpectedly high Medicare expenditures, rapid inflation in the economy, expansion of hospital expenses and profits, and changes in medical care including greater use of technology, medications, and conservative approaches to treatment. American medicine is now seen as in crisis.
1980's
Corporations begin to integrate the hospital system (previously a decentralized structure), enter many other healthcare-related businesses, and consolidate control. Overall, there is a shift toward privatization and corporatization of healthcare. Under President Reagan, Medicare shifts to payment by diagnosis (DRG) instead of by treatment. Private plans quickly follow suit. There are growing complaints by insurance companies that the traditional fee-for-service method of payment to doctors is being exploited. Corporate profits trump care. Charitable non-profit hospitals are driven out of the market.
1990's
Health care costs rise at double the rate of inflation. Expansion of managed care helps to moderate increases in health care costs. Federal health care reform legislation fails again to pass in the U.S. Congress. By the end of the decade there are 44 million Americans, 16% of the nation, with no health insurance at all. The long-term viability of Medicare and Medicaid is ignored by Congress.
2000's
Health care costs are on the rise again. Medicare is unsustainable under the present structure and must be "rescued". Changing demographics of the workplace lead many to believe the employer-based system of insurance can't last. Direct-to-consumer advertising for pharmaceuticals and medical devices is on the rise. National health care expenditures are 17.6 percent of the Gross National Product by 2009. Obama is about to pass healthcare legislation which will result in a dramatic increase in costs.
Government did not get involved in healthcare until 1965, when Medicare and Medicaid were passed by a Democratic President and a Democratic Congress. The charts below paint a picture of waste, mismanagement, administrative nightmares, and out of control costs. Annual national health expenditures have risen from $50 billion in 1960 to $2.5 trillion in 2009. Government intrusion and control is the single biggest explanation for this disastrous result. The policies instituted by the government through Medicare, Medicaid, and HMO laws, along with mandating that insurance companies meet 50 separate state requirements to do business have bastardized the free market. There is no competition between doctors, hospitals, or insurance companies. The incentives are all geared towards charging more for services. Introducing a government run insurance option will now decrease competition and drive people into the government option. Employers will be dropping employees from their insurance plans by the millions. A new bloated government bureaucracy will "surprisingly" get out of control. Price fixing by government will drive service levels downward and rationing of care will be the result. Prepare to wait months for knee surgery. They'll get to you as soon as your appendix bursts.
Dr. Ron Paul describes how government has already destroyed our healthcare system, so the massive overhaul proposed by the Democrats will surely blow up in Americans' faces again:
"We should remember that HMOs did not arise because of free-market demand, but rather because of government mandates. The HMO Act of 1973 requires all but the smallest employers to offer their employees HMO coverage, and the tax code allows businesses -- but not individuals -- to deduct the cost of health insurance premiums. The result is the illogical coupling of employment and health insurance, which often leaves the unemployed without needed catastrophic coverage. While many in Congress are happy to criticize HMOs today, the public never hear how the present system was imposed upon the American people by federal law. As usual, government intervention in the private market failed to deliver the promised benefits and caused unintended consequences, but Congress never blames itself for the problems created by bad laws. Instead, we are told more government -- in the form of "universal coverage" -- is the answer. But government already is involved in roughly two-thirds of all health care spending, through Medicare, Medicaid, and other programs."
In 1960, 5.9% of costs were incurred for Administration and Gov't and 2.5% for Research. In 2004, 10.3% of our costs were related to Administration and Gov't and 2.1% for Research. We spend vastly more on paper pushing and government regulations and less on research and care. The FDA government bureaucratic jungle imposes billions in useless costs on the developers of every new drug. This money goes to lawyers and compliance experts, not research scientists. Government thrives while average Americans pay and suffer.
"You will never understand bureaucracies until you understand that for bureaucrats, procedure is everything and outcomes are nothing."
Thomas Sowell
