Free Lunch (27 page)

When Snow left Treasury he took
on a new job, chairman of a private equity firm called Cerberus Capital Management. Few people outside of Wall Street have heard
of the firm, but almost everyone has heard of some of its business activities. It is a regular in getting government contracts.
Cerberus owns IAP Worldwide Services, the company that the federal government hired to send truckloads of ice to New Orleans,
but that instead ended up scattered across the South, diesel engines idling to keep the cargo from melting. The same company
also had a contract to fix up Building 18 at Walter Reed Army Medical Center, the one where soldiers complained of mold and rats
and shoddy repairs.

W
HEN LINDA PEENO BECAME A PHYSICIAN, SHE TOOK THE
HIPPOCRATIC
Oath, including a promise to patients to “keep them from harm and
injustice.” In time that vow began to weigh on Dr. Peeno's conscience. Her job was not to make patients well, but to make a
company well at their expense.

“In the spring of 1987, as a physician, I caused the death of a
man,” Dr. Peeno told Congress in 1996. “Although this was known to many people, I have not been taken before any court of law or
called to account for this in any professional or public forum. In fact, just the opposite occurred. I was ‘rewarded' for this. It brought
me an improved reputation in my job, and contributed to my advancement afterwards. Not only did I demonstrate I could indeed do
what was expected of me, I exemplified the ‘good' company doctor: I saved a half million dollars.”

Dr. Peeno never saw her patient, a man who needed a heart transplant. Dr. Peeno examined “a piece of
computer paper, less than half full. The ‘clinical goal' was to figure out a way to avoid payment. The ‘diagnosis' was to ‘deny.' Once
I stamped ‘deny' across his authorization form, his life's end was as certain as if I had pulled the plug on a
ventilator.”

She stamped that death sentence at her desk in a 23-story marble office building in
Kentucky; the patient was in California, a state where Dr. Peeno was not licensed to practice medicine.

What Dr. Peeno described is not an anomaly. It is only an extreme example of the predictable results of what
government policy is doing to health care, a system that enriches the few at the expense of the many.

Nearly all decisions by health care corporations about providing care are routine. The companies would
argue that all of their decisions are made in accord with the law. But that is mere cover, ignoring the bigger issue: whether the
system is moral or even economically sound. The government rules shaping health care have created a whole industry of
makework that drives up costs, denies care to some, makes it next to impossible for the already sick to get health insurance, and
condemns others to needless pain and early death, while simultaneously making a few men and women fabulously
rich.

From the perspective of the health care companies, these rules allow them to do business
with only the more profitable patients, avoiding those most in need of care. In turn, that allows them to increase profits or lower
premiums. Unless there is serious competition to expand by taking patients away from competitors, the preferred choice is bigger
profits.

At its core, government policy makes health care a business. The purpose of business
is to maximize profit. That is the appropriate standard for taking care of capital, but not people's health. Yet a strong push is
underway to make health care even more of a business, backed with huge new federal subsidies to for-profit health care
corporations. These subsidies are being lavished on for-profit health insurance companies despite studies showing that nonprofit
health systems tend to provide superior care.

If health care as a business worked, it would be
a success story to embrace. If it resulted in lower costs, more and better care, and longer lives, it would be just what the doctor
ordered. The American system provides superb acute care, trauma care, and access to the highest technology. But by every other
objective measure—cost per capita, health status, longevity, costs of paperwork, and economic pollution—the uniquely American
approach to health care is a complete failure. We pay more, enjoy shorter lives, and are drowning in infuriating makework, filing
claims and making appeals, while distorting the whole economy because one giant component is a commercial
activity.

No other modern country regards health care as an insurance business. While some
nations refer to their plans as health insurance, they mean that in the political sense, just as we call our basic old-age pension
system of Social Security a “social insurance” program. No other country uses the word insurance in the business sense, which
means to spread risks. The business sense of insurance includes the concept of examining claims to see if they fall within the
contractual boundaries for payment, which was Dr. Peeno's job. This is how we ration health care in America, through contracts
that limit care and exclude coverage—and by having tens of millions of people go without any insurance at all.

Because we tie most health care insurance to employment, this system is making us less competitive in the
global economy. That is because no other country makes employers record the cost of health care for their workers on their books.
Everywhere else this cost is part of the national ledgers just like the costs of police, education, and lifeguards.

In Europe, Japan, Canada, Australia, and New Zealand, people benefit from a system of
health service,
not health insurance. In many of these countries doctors still make house
calls. The overwhelming majority of people who seek immediate care are treated that day or the next, which is also true in America.
But the other countries do not spend vast sums on reviewing claims for payment and billing, a deadweight drain on the American
economy that costs every man, woman, and child more than a dollar per day.

Individual
purchases can make things worse, not better, as shown by our history with fire insurance. There was a time in this country when
people paid commercial fire companies to protect their property. But instead of replacing lost property, as we do today, these
policies insured that firefighters would fight any fire at your home or business. A problem arose when the house abutting yours
caught fire. If that owner had paid a different fire company, or none at all, your fire company would not put out the blaze even
though it was a threat to your property. Only when your building was ablaze was your fire insurance company obligated to
act—and that could be too late. That system died when we recognized that fires are a public problem, not a private one. Our
solution was to have government provide fire-protection as a public service. People relinquished having their choice of fire-fighting
companies, but saw that government monopoly on fire-fighting service saved far more lives and protected property much more
efficiently than the market did. Accident and illness are, like fires, public and social problems, not individual ones, that are mostly
efficiently treated as public service.

In America we do not speak of police insurance, or
education insurance, or, when vacationing at the seashore, lifeguard insurance. Rather, we pay taxes for police, education, and
lifeguard services because these are essential services for a civil society. When we need a cop, we dial 911. How quickly the police
respond depends on their judgment as to the urgency of the call compared to other demands for service at that moment. When a
child is five years old, the government does not require proof of ability to pay before a child may start kindergarten. And when
someone caught in a riptide cries out for help the lifeguard does not check a list to see if the person has paid in advance to be
saved and also whether the coverage included Tuesdays before noon when the sky is overcast. But that is exactly what we do in
health care, because we use a business model instead of a service model. In the process we also take from the many to enrich the
few.

Complex bureaucratic systems to deny care based on subparagraph k at page 454 of a
contract are also uniquely American. That does not mean other countries do not ration care. They do. But they do it as a matter of
policy—as opposed to profit. These other countries place limits on care, such as not giving heart transplants to octogenarians. If
you are in your eighties and need a transplant you may prefer our system, which will extend your long life a bit more. But the cost
of that is paid in less care or no care for those much younger, who as a result are less likely to live to see their ninth decade.
Rationing would be eliminated if voters were willing to spend enough on health care to cover every demand for
service.

Adam Smith tells us “what improves the circumstances of the greater part can never
be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the
members are poor and miserable.” His remark was not aimed at health care, yet it deals with the issue of how we allocate scarce
goods in an imperfect world in which choices are inevitable.

No other country spends as large
a share of its economy on health care as the United States. And that share is growing rapidly, crowding out other economic
activity, especially investment in the next generation. Roughly every sixth dollar in the American economy was spent on health
care in 2007. Our government has projected that by 2015 we will be devoting every fifth dollar to health care. In most modern
countries health care accounts for less than one-tenth of their economies.

The inefficiencies of
the American health care system also create jobs. However, that is hardly an argument for maintaining our existing health care
system. If all we wanted was to create jobs we could ban giant earthmovers at construction sites and hire teams of workers with
teaspoons to move dirt. Even if we wanted to treat health care as a jobs program, it would be better to put more nurses to work on
hospital floors than to have so many clerks in the billing department.

The uniquely American
system of health-care-as-a-business results in some poor countries having better health outcomes than the United States. America
ranked thirty-sixth among nations in its rate of infant mortality in 2006. The Central Intelligence Agency estimated American infant
mortality at 643 deaths per 100,000 live births, slightly worse than Cuba at 622.

That American
infant mortality rate was actually an improvement. In 1960, we experienced 2,600 deaths per 100,000 live births. But the falling infant
death rate slowed after 1980, even though medical advances continued. The rate virtually stopped falling in 1996, the year when
Congress and President Clinton ended all basic welfare programs for the poorest children and mothers in America.

There is another awful cost to a policy of health care as a business: No one in the modern world ever goes
bankrupt because of medical bills, except in the United States of America.

It is true that
sometimes, for some conditions that are not life threatening, people in other modern countries have to wait weeks or months for
treatment. But even people in America with health insurance have learned that scheduling appointments, getting referrals to
specialists, getting insurance company approvals for those referrals, making appointments with the specialists, getting evaluated,
and then finally getting treatment can also take months.

After the care is provided, an insurer
can come back and say it made a mistake, demanding that the patient personally pay all their bills retroactively. That is far different
from nations delaying some nonemergency medical services.

But no delay is comparable to
the medical, economic, and moral harm done by a system in which at least 45 million Americans go without health insurance
coverage. The American system is completely at odds with the Biblical morality publicly embraced by nearly every elected
politician, which imposes a duty to sacrifice for the poor. Yet someone without insurance who gets cancer becomes eligible for
government-provided care only at the point where they become permanently and totally disabled. That is to say, when treatment
seldom will help and death is virtually inevitable, care begins.

And who goes without health
coverage? By and large, families who work but earn a modest income. Among those making $65,000 or more, roughly those
Americans in the top 25 percent income group, health insurance is nearly universal. But among Americans with less than average
income, 57 percent are without heath care.

Health care as a business also imposes another
drag on our economy, one that gets very little attention. It is the inefficient deployment of human capital caused by America's
unique lack, among modern nations, of universal health care service. In the debates over the tax treatment of hedge and private
equity funds, those huge unregulated investment pools, Congress has devoted plenty of attention to getting the most efficient
deployment of capital so that we get maximum economic bang for the buck. Yet the inefficient deployment of human capital caused
by treating health care as a business gets almost no attention from policy makers and, in turn, from the news media.

Many people who have a medical condition such as cancer, or who have a dependent with a condition, stick
with their current employer because they have insurance whose payment policies they know. Under the Health Insurance
Portability and Accountability Act of 1996, a new employer cannot exclude a preexisting condition from coverage. But every plan is
different; every plan has its unique internal rules and policies. Changing jobs itself also involves a risk because one lacks seniority
and the new job may not work out, which could result in unemployment. Under the 1996 law anyone who goes 63 days without a
job loses some of their limited rights on health care coverage for preexisting conditions. All of this acts as a curb on efficient
deployment of human capital. Government policy that discourages people from moving to new jobs that would make the most
efficient and effective use of their skills is a drag on the economy, not to mention individual human happiness. Europeans,
Canadians, Japanese, Australians, and New Zealanders never give a moment's thought to these matters because their health care
is not connected to holding a job.