After reading Christopher Westley's fine article, The Carriage-Trade Trend, I got to thinking about the imminent demise of the health-care industry in this country. After earning my living in this business for thirty-eight years, I feel kind of attached to it, and I will be sorry to see it go. Why does this have to happen? I went looking for some facts and figures.
I wish that the private organizations of private businesses would collect and publish their own statistics. Apparently they let their "parent" organization, the federal government, do it for them. I'm sorry I had to resort to state sources, but there it is.
To explain the failure of this business, my own hypothesis is twofold; one, that the state won't pay for the obligation it has undertaken, and two, that the bulk of the money earmarked for health-care goes to pay for state mandated bureaucracies and not for health-care.
The first issue is pretty straightforward. Imagine that you could selectively decide to pay for only certain items on your auto mechanic's bill after the work was done. Imagine that the mechanic was forced to take what you paid without recourse to any system of justice. Imagine that it was the law. That's how it works. A full-time staff at the Medicare third-party-payer contractor's office, read insurance company, changes the billing rules and the billing codes willy-nilly. One day your electrocardiogram is paid, one day it isn't. The advisories fall like rain into the offices of health-care providers, who must necessarily employ a full-time staff to keep track of them. One little mistake in a multi-digit code means no money. But then they only pay a percentage of whatever charge they approve, so maybe you have to charge $1253.00 for a procedure to get $550.00 in your bank account, which, after you subtract wages, taxes, and the overhead of maintaining your own personal bureaucracy, means that you may end up with 10% of what you charged. This socialist reality drives some private practitioners into true private practice – cash only; others it drives out of the business altogether. (I don't think mechanics would like it either.)
To address the second issue, I asked myself this question: For every health-care professional, how many non-professional clerical workers are there in health-care related bureaucracies? I wanted to include and count everybody working in hospitals, clinics, DME offices, doctor's offices, city, state, and federal health-care offices, and third-party-payer insurance company offices, and then compare the numbers.
I searched for the numbers of people employed in 1960, five-years before Medicare, and for the numbers of people employed in 2000, thirty-five years after Medicare. Alas, I could not find these numbers. However, I did find some numbers that were pretty interesting.
In 1983, for example, there were 6,888 "registered hospitals" in this country and 36,703 "administrators and assistant administrators". Ten years later, in 1993, there were 6,467 hospitals and 69,393 administrators. Say what? The number of hospitals declined and the number of administrators nearly doubled. It looks like an epidemic.
In the same time period, the number of Registered Nurses working in these hospitals went from 770,846 to 958,966. It appears that this modest increase in the number of nurses required a whopping increase in the number of administrators. Of course, there is no correlation between nurses and administrators; health-care cannot do without nurses. Bureaucracies just grow, it's what they do. (One hospital where I worked had twenty-nine managers for twenty-five patient beds.)
On the key issue of the growth rate in the number of clerical staff involved in getting medical bills paid or not paid, I nearly drew a blank. One source that had numbers declared that the number of people employed in 2000 in "Medical Service and Heath Insurance" was 381,000, and in "Hospital and Medical Service Plans" was 304,000. That means, I take it, that 685,000 people were employed as clerical workers by third-party-payer health insurance companies who contract their services to Medicare. Technically, they are not government employees, though in reality their paychecks come from taxes.
I could not find any numbers for insurance company employees prior to 2000, so I don't know their growth rate. I would really like to know how many pencil pushers worked for these outfits in 1960. I hope that somebody who knows will tell me.
So maybe I'm not much of a research kind of guy and I can't prove my hypothesis after all. But I do have a rule of thumb; I call it the parking-lot rule and you can prove it for yourself. Drive through any hospital parking lot on any day of the week and count the empty parking spaces. Then drive through on any weekend or holiday and count the empty parking spaces. You will see a marked difference. The difference is, the bureaucrats don't work on weekends. Count their numbers.
August 6, 2001