Causes for the Rise in Health Care Costs

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The Supreme Court last week took up the issue of health care reform, and heard arguments for and against the Affordable Care Act’s constitutionality. Regardless of what the Supreme Court says, the bill is unconstitutional. All this aside, let us take a look at one of the biggest reasons folks feel this law should be enacted, tied directly to the passage of one act: the Emergency Medical Treatment and Active Labor Act.

The cost of rising health insurance is due to the use of emergency rooms by those who don’t have any ability, nor inclination, to pay for health care. The reason there are people going into emergency rooms and getting care without the ability to pay, is due to the Emergency Medical Treatment and Active Labor Act. The EMTAL was passed and signed into law in 1986 and we can thank Ronald Reagan for this unjust law. While well-meaning, it forces hospitals to take in patients regardless their citizenship, legal status or ability to pay. This law has forced decisions that should be made by hospitals, private citizens, and charities, and turned it into an unfunded federal mandate. This law was applied to any hospital that took Medicare/Medicaid payments which especially hamstrings all hospitals into this arrangement as data shows that around 44% of all medical expenses in the US are paid by Medicare and Medicaid in 2004.

This is just the tip of the iceberg of why the health care industry costs have skyrocketed to the point they are at today. To really understand why your health care bills have gone up over the past few decades, we must take a look at the causes of this trend.

Health care was first restricted, from a labor perspective, by requiring doctors to gain licensing and restricting the number of medical schools by requiring fulfilling a certification process set up by the state. In 1860 the United States had the highest ratio of doctors to the population. There were 55,000 doctors, which works out 175 doctors for every 100,000 people. During this time there were competing types of medical care going on in this country alongside the mainstream medical doctors who practiced blood letting, mercury poisoning, and other methods that killed lots of people. The homeopathic method was one of these competing methods of doctoring which focuses on nutrition to aide in the health of individuals. The American Medical Association pushed for licensing as they wanted to reduce the number of doctors so as a group they could have a more stable and reliable stream of income. They also focused on getting a certification for medical schools to operate which limited the number of schools to non-profits and systematically shutdown the privately run non-conforming medical schools. This restriction of who got into medical school, as well as who could offer medical help, is one of the main contributors to the increase in medical care costs.

Another reason for the cost hike in health care is the intervention of the federal government in the form of Medicare, as well as third party payers in the form of insurance companies. The ability to go to the doctor for every little problem that arises without seeing the direct cost has driven the overall cost of medical care and services higher year after year. Just think about it, when you were younger and your parents were paying the bills, the sky was the limit. You could buy anything you wanted as long as your parents blindly footed the bill. When you got older and started to pay for things yourself those same items you demanded your parents buy for you suddenly don’t seem so essential.

The same relationship goes along with a third party payer for health care. You don’t see the direct bill as it is sent to your insurance company, or more and more often, the federal or state government. The whole reason we have medical insurance today was due to government intervention in the form of wage controls put into affect during WWII. To draw workers in-and not get in trouble with the government-employers started offering health care insurance as way to entice folks to work for them. Before this time, many folks either paid for all their medical expenses out of pocket or purchased insurance for a few select services, mostly catastrophic coverage for surgery or a sudden hospitalization. Those who could not afford care, could have their medical bills taken care of by generous donors to a hospital, or in many cases doctors themselves would offer their services for free or at a reduced price. An example today is Congressman Ron Paul‘s medical practice and how he offered to take care of bills for patients who could not afford his service or he would work out a way for the a patient to pay him.

The Federal Reserve, as always, has a role in the increase in cost of health care relative to the average person’s take home pay. The Federal Reserve has been devaluing the dollar since it’s inception in 1913. If you take a look at the inflation calculator here, a dollar in 1913 has the buying power today of $23.00. That means in 1913, my last major surgery and hospital stay should have cost $26,068 in US Dollars instead of the $600,000 plus it cost in today’s inflated prices. The solution to all this health care debate nonsense is to get government out of it and allow for more choices in the type of medical care an individual can take part in…that is true freedom.