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Extensive premium changes in health insurance followed the introduction of the Affordable Care Act. Most changes involved an increase in patient participation in the costs, either deductibles or coinsurance, coupled with a "cap" on total patient payments. Almost all insurance seemed to grasp the futility of co-payment as a purchasing restraint, substituting fairly high deductibles for the old 20% co-pay. As election day nears, we are seeing a rash of articles about the hardships of front-end deductibles, during the first year of their introduction, and the largest patient group with this kind of experience are holders of Health Savings Accounts. A sudden media clamor about one point generally suggests some political stirring-up is taking place, but perhaps it is fast-breaking news that someone with a torn fingernail decided to bandage it herself rather than go to the accident room, all because of the shocking discovery that the days of first-dollar coverage are fast receding. The lady in the article didn't mention any other medical debts, but that is surely coming in the news.
After Medicare was introduced in 1965, I had already been in practice for fifteen years, and it did not surprise me how many patients, indigent and otherwise, had snaggly teeth, perforated eardrums, amazingly big hernias, gall stones, extensive varicose veins, and gigantic prostate glands. It was just the way things were, and doctors set about treating 'em as they appeared. What amazed me, six or seven years later, was the supply of these things had greatly diminished. Only then did I realize that people had been holding back on elective surgery because of finances. This backlog was a reasonably good measure of the benefit which Medicare was having, by giving elective surgery away free.
But that was only true if you consider every single remediable condition to be a disgrace of some sort. The people who had these conditions had weighed the costs against the benefits and had often simply declined. You could argue if you must, that poor folks just couldn't afford to get essential treatment, and that anyone who denied them this essential human right was an ogre; but that didn't appear to be the case in large measure. What was true was that the threshold for offering charity care was set to match the judgment of the decliners, rather than the level of physical perfection of an ancient Greek god. Folks just didn't think the surgery was worth the money, but when it became free, a new standard was set and they might as well get it fixed like a dent in an auto fender. Nevertheless, there's a strange fact about surgical scarcity and abundance. If you are planning on having any of these procedures, I would advise getting a surgeon with training during that catch-up period of the nineteen-seventies, because he had a lot of practice. In fact, my granddaughter flew to Nashville to have a perforated eardrum repaired by a famous expert during that period. When she recently needed a second operation after forty years, she had trouble finding a surgeon who could do it, even with half a dozen doctors in her family.
Surely a front-end deductible won't get us back to the same state of affairs, even if deductibles continue another forty years. But to some degree, it will happen, and what we once called a backlog will resurface as a debt from one time period to the next, with the threshold reset. Since we definitely need deductibles, it seems we apparently also need a small backlog of untreated elective (non-fatal) conditions, whether they do better than that in France or Sweden, or not. Since it can be safely predicted this will happen, we need to devise a way of managing the issue without provoking unsustainable costs. In the meantime, known but untreated, treatable conditions will become an accounting entry, which can fairly be attributed to the solving of our health cost issues. It's a debt, but I'm not sure total bodily perfection is the best standard of it.
Foreign debts for Medicare. For some time, Medicare has been 50% subsidized by federal borrowing. At the very beginning in 1965, it was 100% federally subsidized, and gradually payroll deductions, premiums and new programs with better funding arrangements took over. So far as is easily determinable, no one has dug out all of the subsidies and repayments, to be able to tell us what the accumulated unpaid debt for the Lyndon Johnson entitlement programs has been. What it has accomplished is harder to measure, since it must include a share of the improved longevity during the interval. Nevertheless, we could make an effort to see what the book cost has been. Surely it has been greater than just the cost of elective surgeries. At first, the creditors were all American citizens, most taxpayers, but at least it kept the money within the domestic budget. Since we started to borrow the money from the Chinese government, it assumes a different character, one which any creditor would feel entitled to evaluate. To know what to do about this debt is above my pay grade, as they say, but at least it would seem to be responsible stewardship to make a formal accounting of where we stand, and what we plan to do about it.
Domestic Healthcare Debts. Without getting into a wrangle about the Tenth Amendment, it is fair to say that health care has long been thought to be a responsibility of the several states, so at the least, the fifty state budgets would have to be examined and aggregated, perhaps the municipal budgets as well. In Philadelphia, the deficit of PGH (Philadelphia General Hospital) was running eleven million dollars a year, when it closed in 1977. The nation's first hospital, the Pennsylvania Hospital, was created by a grant from the state legislature in 1755, at a time when Ben Franklin was active. Perhaps it is not necessary to go quite so far back to see how the books balance, but any adjustment for inflation would bring out the considerable taxpayer expenditure for health, ever since the nation was founded.
Sustainable Growth Factor. Every year since 1997, Congress has calculated the rate at which health costs should be growing, and when it exceeded that, has planned to reduce physician reimbursement to compensate. Every year Congress has relented at the last moment, but never put an end to the threat. Since the accumulation has reached a point where almost every physician in practice would have to stop the practice if Congress honored its threat, something must be done about it. Paying it all off at once would trigger a 26% drop in physician income since every physician carries a 50% gross overhead, collecting an additional 26% would be a disaster. Perhaps the two political parties each hope the other will get the blame and pay the bill. But the bill remains part of the debt hanging over the Federal Government for health entitlements, and like most of this debt, it is a question how to treat all of its inflation in the interval.
Healthcare Mortgages. Bill Dunkelberger the Philadelphia economist, recently remarked that real estate is where the rubber hits the road, the place where interest rates really matter, the place where equities collide with fixed income. For eight years past, our long term interest rates, net of inflation, have been close to zero. That allows the government to borrow free of charge, and in effect allows hospitals and universities to build buildings without much or any cost.
Unfortunately, our businessmen have not responded with a comparable spree of interest-free borrowing, because they see nothing worth borrowing to build for. Their unwillingness to spend leads to the appearance of growing earnings, which artificially supports the stock market. It's hard to imagine a stock crash just because prosperity returns, so it's hard to know what will happen if it does. Hospitals and universities think they have something to build which will generate a healthy return for them, so one builds out-patient facilities, and the other builds lavish dormitories. When interest rates return to normal (they haven't, in Japan, done so for seventeen years), it's a puzzle to know whether the economy and the stock market will tank, or will celebrate. In any event, there is a great deal of new real estate debt which must be added to the level of government indebtedness, due to health. Since nothing much could be done with such single-purpose structures, their disposal is also part of the consideration. When Jefferson University received a gift of a basic science building to house the first two years of its classes, they got a maintenance jolt. Just to heat, air condition and clean the building consumed the entire tuition of the first two years of classes.
Student Loans, broadly defined. To judge by Nineteenth-century plays and novels, medical students were traditionally impoverished. Today, students of all descriptions are carrying six-figure indebtedness, but medical students are a special case. They run up debts in order to stay in school, and the schools prosper. Then, they take jobs for several years as house officers in hospitals, who are paid by the government from Medicare funds which are used in large part to pay off their loans. And then, they go into practice, often reimbursed by salaries provided by government entitlement programs like Medicare and Medicaid. It's more than I am able to say whether these successive loans add to each other, or cancel each other out. In any event, a huge amount of money is being paid for what is described as medical education, but a certain amount of it is diverted to other university uses.
Future Entitlements. In many ways, the largest indebtedness to account for, are entitlements which have been conferred on future generations, many of whom are not yet American citizens. This is the problem most pension funds are now encountering, of whether such a future promise is a contract which must be honored, that is, whether it counts as a debt. Congress certainly acts as though it must say it is a contract, or else be dis-elected. But the rest of us would not regard that as much of a tragedy, so perhaps it isn't a debt. Whatever we end up calling it, it would surely be an improvement if we could hear it accounted for as if it were the debt of a corporation. Perhaps that wouldn't lead to improving the situation, but it would certainly feel a little better.
Originally published: Tuesday, September 02, 2014; most-recently modified: Tuesday, May 21, 2019