In October 1983, 40 years ago almost to the month, Newsweek magazine ran a lengthy feature article on America’s evolving healthcare system, entitled “The Big Business of Medicine.” As its title suggested, the gist of the piece was that US healthcare was becoming a purely business enterprise run by a network of corporations that increasingly controlled all aspects of medical practice — hospitals, clinics, providers, rehabilitation and care facilities — and operated on a cost-cutting, profit-making basis.
Critics of the emerging marketplace system, dubbed “the new medical-industrial complex,” viewed it as a recipe for higher prices and substandard care, and predicted dire long-range consequences for medicine’s social-service mission. A generation later, they’ve been proven correct.
Statistics bear this out. According to the authoritative Economist Pocket World in Figures, US health spending, annually the highest worldwide by far, continues to ratchet up; it rose from 13% of GDP in 2004 to 17% (double most industrialized countries) in 2021, while average American life expectancy, the measure of a successful healthcare system, fell from a deplorable 34th among nations to an even worse 48th over the same period.
The trends reported by Newsweek investigators did not go unnoticed by America’s political class, but prompted no alarm. Since the article appeared, seven US administrations (four Republican and three Democratic) have held office; the results from a medical-policy standpoint have been uniformly dismal. When big initiatives were attempted (for example, the G.W. Bush expansion of Medicare Advantage, or the Obama introduction of the Affordable Care Act), the intended results were designed to expand or solidify marketplace medicine, not limit or redirect it.
The bottom-line assumption of both major parties — the exception being the agitation for Medicare-for-All among progressive Democrats — has been that the system should remain mostly profit centered, subsidized if necessary by infusions of corporate welfare in order to generate additional business, guarantee profits, and write off overhead, but kept at all costs from reverting to the public sector. (The rejection of an ACA public option was in keeping with this desired format.) Private vested interests, primarily insurance companies, would take the lead in running the system, with the budgetary support of government; consumers would pay at both ends, through federal taxes and through private premiums.
This is where things stand as we enter the second decade of the 21st century, unchanged in direction from four decades ago. Depending on how you measure it, incremental steps beginning with passage of the ACA in 2010 have whittled the number of uninsured Americans down from roughly 20% of the population to around 10%, but universal coverage, achieved elsewhere by government-run systems, remains aspirational. In the meantime, a dysfunctional free-enterprise healthcare system devised under the pressure of intense corporate lobbying combined with a generally hands-off federal regulatory policy has come to fruition; it negatively affects public health in ways far beyond the mere question of who is or is not medically insured.
Start with the public sector’s leading program, Medicare. For years, conservative Republicans conspired to privatize it, and, with little resistance from Democrats, they’ve virtually succeeded. As of 2021, over half of America’s seniors (54%) had enrolled in Medicare Advantage, purchasing private plans from corporate health insurers federally subsidized through the Centers for Medicare and Medicaid Services (CMS). The gradual restructuring began with George W. Bush’s signing of the egregiously named Medicare Modernization Act of 2003, which set the framework for privatization.
Along the way, private Medicare was reinforced by the CMS itself, first by Donald Trump’s ideologically motivated CMS Administrator Seema Verma, who enthusiastically advanced it, then by Joe Biden’s appointee Chiquita Brooks-LaSure, an inept career bureaucrat who’s done nothing to reverse or temper her predecessor’s policies. Under Brooks-LaSure’s tenure, health insurers have been allowed free reign to market their policies like auto insurance, and the federal government itself has joined in the hard-sell advertising binge, encouraging seniors to switch from standard public Medicare.
The upshot is that private companies now receive $400 billion annually from Washington to administer their share of Medicare, approximately $27 billion more than if signed-up customers were covered in the traditional manner; overpayments resulting from systematically fraudulent medical billing add another estimated $25 billion to insurer coffers, resulting in continued Justice Department lawsuits. Together, these wasted dollars amount to 13% of Medicare’s total yearly budget. Call it the price of privatization.
The government is not alone in being financially gouged by grasping health-insurance companies. So are the nation’s hospitals, which routinely complain of prior-authorization denials and under-payments from insurers when treating Medicare Advantage patients. This has led some to terminate contracts with Advantage plans altogether. But the hospital sector itself is not without fault in the conversion to corporatized healthcare. Most US hospitals (about two-thirds) are nonprofits, yet under growing competitive market pressures, they are increasingly behaving like for-profits.
Abandoning the charitable responsibilities technically imposed by their tax-exempt status (community services like providing free or low-cost care for the indigent), nonprofits have embarked on massive merger-and-acquisition sprees paid for by staffing and payroll cuts, aggressive medical-debt collection, outside contracting, and price increases on patients. Once localized institutions are rapidly becoming impersonal chains led by highly compensated CEOs eager to adopt the prevailing free-enterprise healthcare model.
There are other changes under way in American healthcare. One sign of the times is the increased role of private-equity investment in both hospitals and physician group practices, a sure indicator of the pursuit of profit above all other considerations. Another is the emergence of so-called value-based managed care as a reimbursement replacement for fee-for-service, allowing increased use of pre-authorizations and denials of care.
Value-based care goes hand in hand with perhaps the most disturbing change in the American system — its takeover by what The Economist calls Big Health, large, vertically integrated healthcare oligopolists (exemplified by the $372 billion behemoth UnitedHealth Group) that not only insure Americans, but employ their doctors (70% of whom are no longer independent professionals); they also influence drug prices through ownership of pharmacies and pharmaceutical benefit-management firms (PBMs), and operate hospitals and nursing homes as well.
The nightmare scenario foreseen in 1983 — giant insurers with few restrictions on their behavior, doctors as a disempowered labor force, hospitals as institutional monopolies — is coming to pass. It’s a healthcare system only Wall Street could love.
Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.
From The Progressive Populist, March 1, 2024
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