An American Sickness: How Healthcare Became Big Business and How You Can Take It Back

by Elisabeth Rosenthal

After endless compromises with the medical industry to enable its passage, the ACA was mostly a bill to make sure that every American could have access to health insurance. But it didn’t directly do much, if anything, to control runaway spending or unsavory business practices.

According to their charter, the Blues were nonprofit and accepted everyone who sought to sign up; all members were charged the same rates, no matter how old or how sick.

In 1993, before the Blues went for-profit, insurers spent 95 cents out of every dollar of premiums on medical care, which is called their “medical loss ratio.” To increase profits, all insurers, regardless of their tax status, have been spending less on care in recent years and more on activities like marketing, lobbying, administration, and the paying out of dividends. The average medical loss ratio is now closer to 80 percent. Some of the Blues were spending far less than that a decade into the new century. The medical loss ratio at the Texas Blues, where the whole concept of health insurance started, was just 64.4 percent in 2010.

Collectively, the medical industry has become the country’s biggest lobbying force, spending nearly half a billion dollars each year. In 2015 the oil and gas industry spent $130 million, securities and investment firms about $100 million, and the defense/aerospace industry a mere $75 million.

Most notably, Maryland has long been a creative outlier in the way it pays hospitals. For more than thirty-five years, its independent Health Services Cost Review Commission has set bundled rates for hospitalization; all insurers, including Medicare, pay the same rate for the same procedure on every patient. (To undertake such experiments, states need only to get a waiver from the Centers for Medicare and Medicaid Services.) In 2014 Maryland’s experimentation got still bolder: the state assigned hospitals a “global payment” based on the number of patients in their system—similar to the capitated payments Boeing negotiated for its employees. They will have to use the money wisely and well to benefit patient health rather than profit by doing more visits and procedures. Patients and insurers will still see bills on the basis of the services provided to them, which will be used to determine co-pays. If the volume of procedures decreases, leading to less calculated revenue than the global payment benchmark, the hospital will get to keep a portion of the savings.

In 2015 and 2016 California and Oregon enacted new laws allowing pharmacists to prescribe birth control pills, a cost-saving innovation. Since pap smears are only recommended once every three years, many women had to pay for a visit to the gynecologist merely to renew their regular contraceptive prescription. States could allow pharmacists far more leeway to dispense long-term medicines, such as asthma inhalers or thyroid pills. Medical society–backed “scope of practice” laws have long relegated these highly trained health professionals with Ph.D.s to counting out pills. States should allow us to take advantage of their knowledge and have three classes of medicines, as exist in much of Europe: over-the-counter, prescription, and pharmacist dispensed.

In October 2017, Maryland enacted the first law that would allow a state to reject some pharmaceutical price hikes, and a number of other states had bills to curb prescription drug costs in process.