Get Ready for the Political Antics

 

American health care know-how and technology are the best in the world.  The American system of care delivery is a more than 40-year experiment that has failed to deliver health care that is accessible and affordable to the American people. It is unlikely there is any system more complex, more in need of real reform, or more resistant to change.  I am compelled to write about it now from my vantage point of nearly forty years on the inside – 10 as a hands-on clinician and nearly 30 as a hospital administrator in major health systems – because I understand the system better than most and will tell you the truth about how things work. The “health care crisis” is going to be used as a political football in the upcoming months as members of both Parties jockey for political advantage.  I will arm you with enough information to see through them as they try to deflect and deceive to put points on the board.

 

Understanding What the Current Brouhaha is All About

In 2010, the Affordable Care Act (ACA - also known as Obama Care) became law. It was intended to reduce the number of uninsured Americans by reducing the cost of insurance and required coverage of those with pre-existing conditions, prohibited annual lifetime coverage limits, required preventive care at no out-of-pocket cost to patients, and limited the amount of out-of-pocket expense the insured must pay each year.

 

The ACA created a health care “marketplace” so insurance companies could offer plans to individuals who do not have traditional sources of insurance.  Government subsidies were offered, based on income, to make insurance premiums more affordable. Today more than 24 million people get their insurance through the marketplace.  22 million of those receive premium subsidies.

 

During the Biden administration, as COVID policies wreaked havoc on the economy, eligibility for government subsidies was expanded from people whose income is a maximum of 400% of poverty, which is $128,600 for a family of 4, to any income level as long as the monthly premium for insurance doesn’t exceed 8.5% of household income. Someone making $500,000 can now qualify for the subsidy with the expansion of eligibility.  Knowing this was unsustainable, the Democrats in Congress set the expiration date for expanded subsidies as the end of 2025.  Now, insurance premiums, which have been increasing substantially for years and are part of the problem, are projected to skyrocket in 2026 and the Democrats are feverishly trying to extend the subsidies that are set to expire, a mere Band Aid on the real problem.  Insurance is unaffordable for all Americans.  The median proposed increase on premiums for Marketplace plans in 2026 is 18%.  The lowest cost marketplace plan in 2025 has a deductible (the amount the insured has to pay out of pocket) of $7,186. The average annual premium for a family that has insurance through the workplace in 2025 is $27,000 (employers typically pay a portion of this as a benefit, a practice that was started after WWII to help businesses compete for workers).

 

Evidence of Abysmal Failure

In 1983, the United States spending on health care was approaching 10% of the Gross Domestic Product (GDP), which is the value of all of the goods and services produced.  The GDP that year was $7.88 trillion.  Alarm bells were triggered by the percent of GDP that was going to health care and a series of reforms were set in motion, including the creation of the modern “health care system” and new models of payment.  Today, the United States spends $4.9 trillion on health care, rapidly approaching 20% of GDP which has grown to more than $29 trillion. This equates to more than $14,500 per person and is more than double what other wealthy nations spend on health care.  For all of our health care spending, our outcomes are far worse than most developed countries.  We have lower life expectancy, higher infant mortality, more preventable deaths and high levels of chronic illness and obesity.  Evidence of abysmal failure.

 

Follow the Money

Health Care Delivery Systems, the Insurance Industry and the Pharmaceutical Industry are good places to start when trying to understand some of the issues that have made our approach to health care a serious and urgent problem.  This is where the big money is.

 

The Evolution of Health Care Delivery Systems – A Wisconsin Case Study

In 1980 St. Luke’s Hospital in Milwaukee was the largest private hospital in the state. It operated as a “not for profit” corporation because of the “community benefit” it provided.  Not for profit entities do not pay taxes and any “profit” they make, in theory, is reinvested into the company’s services. In the early ‘80’s hospitals were stand alone entities, physicians were self-employed within their own businesses, and all of the other components of health care such as insurance companies, pharmacies, medical technology companies, home health agencies, hospices, and nursing homes, were independently organized business entities.

 

Health care was primarily paid for by the government (Medicare, the insurance for those over 65, or Medicaid, the insurance for the poor) and private insurance.  Back then, as it is now, close to 50% of hospital care was paid by government payers.  The payment system at the time was similar to any other purchase.  Services were delivered. A bill was generated and the bill was paid.  There was no incentive to reduce cost.  The more services delivered, the bigger the bill and the bigger the reimbursement.  When the cost of health care approached 10% of GDP, the government implemented fixed reimbursement for hospital care, which meant they dictated what they would pay for services and the fee would encompass all care.  For example, the reimbursement for heart surgery might be $25,000.  This would include nursing care, operating room time, equipment, drugs, therapies and so on.  The theory was efficient providers would provide care for less than the amount of reimbursement and make a profit and inefficient providers would be penalized by losing money. This was a radical change and sparked rethinking how care was delivered.

 

The concept of health care systems that would serve patients from birth to death was born.  Continuity of care, elimination of duplication and unnecessary cost, improved communication, enhanced purchasing power, and better patient outcomes were among the lofty goals of this revolutionary idea.

 

Here’s how it played out at St. Luke’s Hospital.  In 1984, St. Luke’s formed a partnership with Good Samaritan, another Milwaukee hospital.  This was the beginning of what became Aurora Health Care through numerous mergers and acquisitions. By 2018, Aurora was the largest employer in Wisconsin with 15 hospitals, many clinics, pharmacies, and other health related businesses.  In 2018, Aurora merged with Advocate Health another large health system based in Illinois, and ballooned to 26 hospitals and 75,000 employees, including 10,000 employed physicians. The corporation was renamed Advocate Aurora.  In 2022, Advocate Aurora merged with Atrium Health, another large system based in Charlotte, North Carolina and became the 5th largest system in the country with 67 hospitals, 150,000 employees and $27 billion in annual revenue. The new parent company was named Advocate Health.

 

The health system continues to operate as a tax exempt “not for profit”, though today it generates billions in profits and making money is a key driver in decision making. The complex bureaucracy that has been created moved decision making far from the point of care where dedicated clinicians lay hands on patients. Decisions are often made by executives who know nothing about the core business they are managing. This behemoth, and many others like it, was created from many hospitals with “faith-based” origins and would be unrecognizable to the founding Sisters and other religious who selflessly provided care to the sick and the poor. The CEO of Advocate Health is paid more than $17 million a year. In 2023 the 26 most highly paid executives were paid $50 million and even the “Chief Spiritual Officer” made $1.6 million.

 

“Cost shifting” is the perverse business model of health care.  The organization sets the prices for its services, which almost no one actually pays.  The government dictates to the organization what it will pay and private insurance companies negotiate for the prices they will pay. The government’s fixed pricing is made up for by shifting cost to private payers.

 

Most physicians have become employees of their health systems to rid themselves of the hassles of managing their own business. Many are rethinking the wisdom of the tradeoff of their independence. Their livelihood now depends on toeing the company line.

 

The transformation of St. Luke’s over the years is the complicated story of the corporatization of health care.  Health care systems have become big, complex bureaucracies that have not delivered on the promise of well-integrated, accessible, affordable care.  I believe we need to fundamentally rethink corporatized health care structures; the concept of “not for profit”; and deceptive pricing strategies for starters.  Bigger has not been better and the dedicated but frustrated professionals who lay hands on the patients will be the first to attest to this.

 

Insurance at What Price?

Health insurance is a massive industry estimated to be worth $1.6 trillion. It is a significant portion of overall healthcare spending.  Much like the health care systems that negotiate prices with insurers, insurers negotiate their prices with employers.  The larger the employer, the more negotiating leverage they have.  Rates are regulated by the states for the private sector and the Federal Government for the healthcare marketplace created by the ACA, but as anyone who has insurance knows, rates have been allowed to climb significantly year after year.  Over the course of the past 5 years, employer plans have increased almost 25% on average, and for 2026, the average premium in the ACA marketplace is projected to increase 26%!  Insurance companies cite the aging population, increase in chronic disease and rising cost of health care as the reasons they must increase rates but the facts don’t generate much sympathy. 

 

Case in point. United Health Group is the largest health insurance company in the country covering 50 million people.  In 2024 they made $14.4 billion in profit and their CEO was compensated $26.3 million.  There is a reason the insurance industry is among the top 5 in spending on lobbying in the country, spending $155 million annually to keep regulators on their side.

 

No Pharmaceutical Panacea

Americans spent an astounding $487 billion on prescription drugs in 2024, with $98 billion coming out of the pockets of the American people.  A course of treatment for some cancer drugs can literally cost several hundred thousand dollars. We are not only sicker than most other developed nations but we have a culture that promotes taking a drug for whatever ails you.  We are one of only two developed nations that permit advertising of prescription drugs on TV and we are inundated by a “pull strategy” designed to get consumers to ask their medical providers for a drug by name. Secretary of Health and Human Services (HHS), Bobby Kennedy, has expressed his desire to curtail this practice.

 

Pharmaceutical companies have been gouging Americans on drug pricing for years. They were allowed by Presidents and Congresses to peddle the notion that Americans were responsible for funding all drug research, resulting in Americans paying as much as 80% more than other developed nations for the same drug. Trump is ending this with a concrete example of the kind of thinking and bold leadership that are going to be required to change the current healthcare trajectory in a meaningful way. He put the drug companies on notice that he expects the American people to receive the lowest prices of any developed nation. He gave them a deadline and they are complying.

 

Corruption is a serious problem in the pharmaceutical industry with conflicts of interest between the regulators and the regulated. Secretary Kennedy and Food and Drug Administration Commissioner (FDA) Marty Makary have made eliminating conflicts a priority, while at the same time forming productive partnerships with the pharmaceutical companies to cut red tape and facilitate bringing promising new drugs to market quickly and safely. 

 

The pharmaceutical industry is number 1 in amount spent on lobbying.  They have been able to buy their way to outrageous profits at the expense of the American people. In 2024 the industry spent $385 million on lobbying.  Pfizer, the largest company, had revenue of almost $64 billion, reported gross profits (revenue minus cost of goods sold) of nearly $46 billion and net income (profit after subtracting all expenses) of more than $8 billion.  They paid their CEO almost $25 million.

 

Get Ready for the Political Antics

You now know more than most (including the politicians who bear responsibility for how we got here) about how our health care system works and why it isn’t working for us, even though we’ve hardly scratched the surface. No American should lose their life or go bankrupt because quality health care was not accessible to them. Real solutions will not come easy. Our strong preference for capitalism, with competition and free markets, will have to be tempered by our inability to walk away from what they’re selling if we don’t like what they’re charging. We must have health care. Our lives depend on it. Altruism died with the founding Sisters and corporate leaders will need strong incentives to do the right thing for the American people. The out-of-the-box thinking and bold leadership shown by Donald Trump and his team are cause for optimism. His use of tariffs brought the pharmaceutical companies to the table to reprice drugs and bring manufacturing home, and he’s just getting started.  In the meantime, you are now well armed to detect the unserious political antics that are about to come our way. Don’t allow yourself to be deceived. Use what you know to keep your elected representatives in check. It’s time to get serious.

 

HAPPY THANKSGIVING TO YOU AND YOURS!