For profit enterprise in health care: can it contribute to health reform?

I. INTRODUCTION Since the demise of the last major health reform initiative in 1994, ' health coverage for the American people has deteriorated. Private insurance costs have risen, and coverage under private insurance became less comprehensive, with higher deductibles and copayments.2 Many new treatments for serious diseases and associated provider compensation have become more and more unaffordable, even for those with health insurance coverage.3 Recent reports document the challenges for cancer patients faced with the soaring cost of cancer treatment.4 Public programs, such as Medicare and Medicaid, have picked up some slack and have grown in numbers.5 But gaps remain. Approximately 16 percent of the U.S. population is uninsured.6 Annual U.S. spending for health care was $2 trillion in 2005, and is estimated to reach $4 trillion by 2015." Healthcare's share of the economy has more than doubled over the past 35 years, rising from 7-2 percent of gross domestic product (GDP) in 1970 to 16 percent of GDP in 2005. 8 The Centers for Medicare and Medicaid Services (CMS) estimates that national healthcare spending is expected to reach $4.5 trillion and comprise 19-3 percent of GDP by 2019.9 The elephant in the room when it comes to healthcare is its cost. This article analyzes how and why the cost of healthcare services grew in the way they did from the 1930s until today. This article proposes that the inflation in healthcare costs in the United States is due to both factors common to other countries and unique to the United States. The common factors are: (1) advances in medical science and associated technology and pharmaceutical products; and (2) the advent of widespread health insurance coverage. The factor unique to the United States is the large amount of for-profit enterprise in the healthcare sector. The United States is unique in the degree to which healthcare is produced, financed and delivered through for-profit enterprise. This article analyzes the characteristics and behavior of the major players in the healthcare sector - physicians, hospitals, health insurers and medical product manufacturers - and assesses what characteristics and behavior might be undesirable in a publically-subsidized sector of the national economy. Resolving these issues becomes increasingly important as the nation moves toward health reform and mandated insurance coverage imposing involuntary financial obligations on patients, employees and employers. II. THE HEALTH INSURANCE CRISIS This section reviews the reasons for rising health care costs from the sl930s until today. This inflation results from two important factors: (l) the advent of widespread health insurance coverage; and (2) advances in medical science and associated technology and pharmaceutical products. A. HEALTH INSURANCE IN THE UNITED STATES Health insurance is a Twentieth Century phenomenon. Early in the century, health insurance as it is known today did not exist. Only "sickness insurance" which paid for loss of income as a result of illness was available.10 The American healthcare financing system took shape in the mid-Twentieth Century following World War II. Now in the Twenty-First Century, the health insurance system in the United States is crumbling under the weight of the tremendous and increasing cost of health insurance benefits. Healthcare was not always unaffordable. In the early years of the Twentieth Century, the costs of medical care were lower and a manageable expense for most people. One analyst concluded that, in 1930, "[t]he people of the United States . . . are paying for the treatment of disease not less than $2,500,000,000 a year, or ($2,500, 000,000-^ 120,000,000 population) $20.83 per capita, or approximately $100 per family."11 Presented in Table 1 are the elements of costs included in this estimate.12 One dollar in 1930 was worth $11.69 in 2005 dollars, according to the Consumer Price Index. …