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September 2009

The Record of US Government-Administered Health Care
Bernard F. Hearon, M.D.

During the last several weeks, there has been much discussion regarding health care reform in the United States. Millions of our citizens do not have health insurance, health care costs are increasing at an unsustainable rate and our health care system is plagued by many inefficiencies. Meaningful health care reform, therefore, should improve access to care for those not currently insured, lower health care costs for all and address health care system inefficiencies in order to improve the overall quality of health care (ref. 1).

America’s Affordable Health Choices Act of 2009, HR3200, is the legislation currently proposed in the House of Representatives to address the nation’s health crisis. This 1018-page bill, written by liberal Democrat congressional staffers, is nearly impossible to decipher. The centerpiece of the legislation is the “public option” for health insurance which would be government-administered by a vast new medical bureaucracy. This federally-sponsored insurance option would be provided at lower cost to the health care consumer and thus would ultimately crowd private insurance companies out of the health insurance market. Nationalized or socialized health care service would be the inevitable end result under the proposed legislation.

Many Democrat representatives were challenged during town hall meetings last month by angry constituents, including the elderly and disabled, who believe that the proposed health care plan would limit their own health care benefits under Medicare and Medicaid. Sadly, these representatives and members of the media have demonized the town hall “protesters” for simply exercising their constitutional right of free speech in opposing the health care bill.

President Obama, while repeatedly advocating a government-administered, one-payer health care system, has not made a persuasive argument. To the contrary, his factual misstatements in this health care debate have shown that he is woefully misinformed on fundamental medical issues and thus lacks the credibility to prevail in the argument for a government-administered program. For example, he recently misrepresented an orthopaedist’s reimbursement for leg amputation and, as a result, drew sharp criticism from the leadership of the American Academy of Orthopaedic Surgeons (see pdf1) and from 19 other surgical subspecialty societies (see pdf2).

All of this discussion begs the question “How have US government-administered health care programs performed in the past?” We don’t have to speculate about the answer to this question. Let’s examine the record.

US Military Medicine

During my career as an Air Force physician and surgeon, I experienced US military medicine firsthand as a health care provider and as a patient. Though the quality of health care provided and received was consistently high, rationing of care was frequently mandated. Commanders at Air Force hospitals and clinics were often forced to restrict access to care due to limited health care personnel and fiscal constraints.

Active duty military personnel were always given immediate access to required care but retirees and military dependents generally had restricted access. For example, retirees and dependents in need of hip or knee replacement were treated with analgesics and, if obese, weight-reduction diets with the promise of reevaluation for joint replacement after they lost weight. Elective surgical procedures were often restricted during the last 6 to 12 weeks of the fiscal year, since there were no funds left in the budget to pay for these operations.

My experience with the Veterans Administration health care system is similar. Elective surgical treatment may be postponed and at times cancelled altogether for lack of operating time, required operating room personnel or financial resources. I will often see VA-eligible patients, who are also covered by private health care insurance, requesting surgical treatment for problems not addressed in the VA system.

If HR3200 becomes law, the demand for health care services would dramatically increase by adding millions of potential patients without increasing the number of physicians and other health care providers to deliver care. This increased demand for services would overwhelm the US health care system and result in rationing of care (ref. 2) similar to what is seen in US military hospitals and in the VA system.

Medicare and Medicaid

A look at our present government-administered Medicare and Medicaid programs also allows us to anticipate what a government-administered health care system for all US citizens would be like.

In 1965, President Johnson and a Democrat majority in congress, using the umbrella of the 1935 Social Security Act, established two massive entitlement programs: Medicare (to provide health insurance for those over 65 years of age) and Medicaid (to provide health insurance for low-income people). Nineteen million initially enrolled in Medicare. By 2006, the program covered 43 million people and, by 2030, 79 million people will be covered under Medicare. Initially, four million enrolled in Medicaid but, by 2006, Medicaid covered 51 million people including the elderly, disabled persons, children and pregnant women. Together, Medicare and Medicaid cover 86 million Americans (8 million are covered by both programs) or about one quarter of the nation’s population (ref. 3).

Medicare initially cost $3 billion in 1966. Although the House Ways and Means Committee estimated that Medicare would cost an inflation-adjusted $12 billion by 1990, the actual cost was over $107 billion, nine times the congressional estimate. Today, Medicare costs exceed $420 billion and continue to rise.

The independent Congressional Budget Office (CBO) has reviewed HR3200 and concluded that this bill’s insurance coverage provisions would cost $1.042 trillion over the ten-year period from 2010 through 2019. The bill would add to the federal budget deficit and would not control rising health care costs. Furthermore, given the government’s track record for predicting future costs, how much confidence can we have that these cost estimates are accurate? Even if the estimates are correct, the tax burden required to pay for this new universal health insurance entitlement would be unsustainable. But what if the latest CBO cost estimate is incorrect by a factor of 9 as it was for Medicare? How then would this new entitlement be funded?

The government has led us to believe that Medicare and Medicaid are insurance programs funded by payroll tax deductions which are deposited into trust funds managed by the government. Unfortunately, this is not true. The payroll taxes supposedly earmarked for future Medicare expenses are spent by the government the moment they are deducted from an employee’s salary. The Medicare and Medicaid trust funds are bankrupt. They only hold trillions of dollars of IOUs that future US taxpayers will be obligated to pay. In 2007, unfunded liabilities for Medicare alone were estimated to be more than $36 trillion (ref. 3).

But there is even more compelling evidence that the government is incapable of managing tax dollars designated for federally-sponsored health care. The Center for Medicare and Medicaid Services (CMS) does not engage in same due diligence that health insurers in the private sector do before making payments to health care providers, suppliers and patients. As a result of this “pay first and ask questions later” policy, CMS loses billions of taxpayer dollars each year to fraudulent claims. Senator Charles Grassley (R-IA) estimates that $60 billion dollars are lost annually on Medicare waste and fraud. Medicaid losses are estimated to be $32 billion annually (ref. 4).

Under the Tax Relief and Healthcare Act of 2006, Congress authorized independent, non-government agents called Recovery Audit Contractors (RACs) to audit practices of health care providers in search of improper payments. During a five-state trial program, the RACs returned nearly $700 million to the Medicare Trust Fund. Of course, the RACs are paid a percentage of the money returned to the trust fund as a fee for their service. Thus our government-administered medical bureaucracy pays billions of federal tax dollars for services not rendered and then pays more tax payer dollars to independent civilian contractors assigned to recover the improper payments. CMS will implement the RAC program nationwide on January 1, 2010.

In summary, there is absolutely no reason to expect that a government-administered health program for all US citizens would function any better than CMS does today. To the contrary, the evidence suggests that a government-sponsored universal health care system will not control the rising cost of health care, will lead to treatment delays and rationing of care and will be rife with the same fraud and waste seen in CMS today.

In 1961, before the Medicare and Medicaid entitlement programs, future President Ronald Reagan said of government-administered health care programs:
        "One of the traditional methods of imposing statism or socialism on a people has been by way of medicine. It’s very easy to disguise a medical program as a humanitarian project. Most people are a little reluctant to oppose anything that suggests medical care for people who possibly can’t afford it.”

Reagan’s admonition is certainly relevant in today’s health care reform debate. HR3200, if enacted with the “public option” for government-sponsored health insurance, would create a massive new entitlement program which we can not afford and, even if we could, would not address the health care problems in the US today. In my opinion, HR3200 will not lead to meaningful health care reform.

What do you think? Email your congressional representatives and let them know your opinion about this important issue.

1. Bible JE, Lee RS, Friedlaender GE. The Need for Increased Access to the U.S. Health-Care System. J Bone Joint Surg; 91A: 476-84, February 2009.

2. Morris D, McGann E. Catastrophe. New York: Harper Collins, 2009.

3. Levin MR. Liberty and Tyranny. New York: Simon and Schuster, 2009.

4. Frogue, J (ed). Stop Paying the Crooks: Solutions to End the Fraud That Threatens Your Healthcare. Washington, D.C.: Center for Health Transformation Press, July 2009.