First, let’s get a little historical perspective on American health care. This is not intended to be an exhaustive look into that history, but it will appreciate how the health care system and our expectations for it developed. What drove costs higher and higher?
To begin, let’s turn to the American civil war. In that war, dated tactics and the carnage inflicted by modern weapons of the era combined to cause ghastly results. Not generally known is that most of the deaths on both sides of that war were not the result of actual combat but to what happened after a battlefield wound was inflicted. First, evacuation of the wounded moved at a snail’s pace, which caused severe delays in treating the wounded. Secondly, many wounds were subjected to wound care, related surgeries and/or amputations of the affected limbs and this often resulted in the onset of massive infection. So you might survive a battle wound only to die at the hands of medical care providers who although well-intentioned, their interventions were often quite lethal. High death tolls can also be ascribed to everyday sicknesses and diseases when no antibiotics existed. In total, something like 600,000 deaths occurred from all causes, over 2% of the U.S. population at the time!
Let’s skip to the first half of the 20th century for some additional perspective and bring us up to more modern times.
After the civil war, there were steady improvements in American medicine in understanding and treating certain diseases, new surgical techniques, and physician education and training. But for the most part, the best that doctors could offer their patients was a “wait and see” approach. Medicine could handle bone fractures and increasingly attempt risky surgeries (now largely performed in sterile surgical environments), but medicines were not yet available to handle serious illnesses. The majority of deaths remained the result of untreatable conditions such as tuberculosis, pneumonia, scarlet fever, measles, and/or related complications. Doctors were increasingly aware of heart and vascular conditions and cancer, but they had almost nothing to treat these conditions.
This fundamental review of American medical history helps us understand that until quite recently (around the 1950s), we had virtually no technologies to treat serious or even minor ailments. Here is a critical point we need to understand; “nothing to treat you with means that visits the doctor if at all were relegated to emergencies so in such a scenario costs are curtailed. The simple fact is that there was little for doctors to offer and, therefore, virtually nothing to drive health care spending. A second factor holding down costs was that medical treatments that were provided were paid for out-of-pocket, meaning by way of an individual’s personal resources. There was no such thing as health insurance and certainly not health insurance paid by an employer. Except for the very destitute who were lucky to find their way into a charity hospital, health care costs were the individual’s responsibility.
What does health care insurance have to do with health care costs? Its impact on health care costs has been and remains to this day absolutely enormous. When health insurance for individuals and families emerged as a means for corporations to escape wage freezes and to attract and retain employees after World War II, almost overnight a great pool of money became available to pay for health care. MAsa a result of the availability of billions of dollars from health insurance pools, emoney ncouraged an innovative America to increase medical research efforts. More Americans became insured through private, employer-sponsored health insurance and increased government funding that created Medicare and Medicaid (1965). Also, funding became available for expanded veterans’ health care benefits. Finding a cure for almost anything has consequently become very lucrative. This is also the primary reason for the vast array of treatments we have available today.
I do not wish to convey that medical innovations are a bad thing. Think of the tens of millions of lives that have been saved, extended, enhanced, and made more productive as a result. But with a funding source grown to its current magnitude (hundreds of billions of dollars annually) upward pressure on health care costs are inevitable. Doctors offer, and most of us demand and get access to the latest available health care technology in the form of pharmaceuticals, medical devices, diagnostic tools, and surgical procedures. So the result is that there is more health care to spend our money on, and until very recently, most of us were insured, and the costs were largely covered by a third party (government, employers). Add an insatiable and unrealistic public demand for access and treatment, and we have the “perfect storm” for higher and higher health care costs. And by and large, the storm is only intensifying.