Healthcare Bankruptcy

Civil Defense Perspectives May 2012, Vol. 28 No. 4

To sell national or “universal” (that is, compulsory) health insurance,  “reformers” use individual hardship stories and statistical hype. Barack Obama claimed that medical costs cause a bankruptcy in America every 30 seconds. Senate candidate Elizabeth Warren claimed that “at least” 46% of all bankruptcies had a medical cause in 2001, and that this represented a 23-fold increase over 20 years.

Although the statistics are flawed, the cost problem is real. The proposed solutions do not prevent bankruptcy, but rather assure it—for the existing medical system, and ultimately the whole economy. Flawed Analysis

Bankruptcy is caused by debt and the loss of the income required to service it. Single-payer advocates attribute bankruptcy to medical reasons if the debtor reported uncovered medical bills exceeding $1,000 in 2 years, or lost at least 2 weeks worth of income because of illness or injury. In contrast, a study at the University of California at Davis concluded that only 5% of bankruptcies were caused by medical problems ( Warren arrived at her startling increase by greatly broadening the definition of medical bankruptcy to include any filer who reported uncontrolled gambling, drug or alcohol addiction, or birth or adoption of a child (

The Healthcare Bubble

A startling increase in health-related spending, however, is undeniable, and unsustainable. From around 10% of per capita income in 1970, it has accelerated to consume more than 30% of per capita income in 2010 (Arthur Robinson, Common Sense 2012).

In 2008, the U.S. Dept. of Health and Human Services (HHS) estimated national health expenditures at an average of about $7,800 per person, or more than $31,000 for a family of four. The Census Bureau estimated that almost one-fifth of U.S. households earn less income than their share of national health expenditures.  Clearly, U.S. citizens cannot afford this, writes Andrew Foy, M.D. (J Amer Phys Surg, summer 2012).

Foy writes: “The U.S. healthcare system is a huge bubble created by misguided U.S. government policies that are made possible by the U.S. government’s ability to borrow money at artificially low interest rates.”

Although national health insurance proponents like to blame the cost spiral on fee-for-service payment, the upward trend began around 1965, with the enactment of Medicare and Medicaid, and with the trend to replace out-of-pocket payment with third-party coverage, that is to shift responsibility from the individual to everyone in the insurance pool.

Between 1999 and 2011, government spending on healthcare increased by 240%,  while GDP increased only 62%. Since 1970, government spending on healthcare has increased 5,400%.

The so-called Patient Protection and Affordable Care Act (PPACA or “ObamaCare”) pours in more billions of subsidies, heedless of the possibility of being overturned by the U.S. Supreme Court or repealed by Congress. Just one example, the equivalent of six Solyndras, is $3.4 billion in loan guarantees to newly created state-sponsored insurers called Consumer Operated and Oriented Plans, or CO-OPs. The White House predicts that 91% of the CO-OP loans will fail—and of course taxpayers will be stuck with the bill (

When government spending on healthcare declines—as it must, “healthcare spending will decrease dramatically, healthcare prices will drop, revenues will decline, and profits for the healthcare industry and related industries will dry up,” Foy writes.

“The healthcare bubble will burst.”

Medicine will survive. But physicians will have to give patients what they value, instead of giving the medical-industrial complex what it values.

Medical Care Versus Healthcare

Decades ago, we purchased medical care, and paid at the time of service. Now, we buy “healthcare,” which means we are buying payments for a wide range of items marginally related to health, writes Ralph Weber. With a “medical loss ratio” of 80% for an insurance policy (80% of premiums paid out in claims), 20% is lost immediately. Since those premiums also finance contraception, wigs for cancer patients, and counseling for drug addicts, at least 40% is not paying for medical care. Today’s medical practices need to dedicate so many people to billing and administrative functions that the average practice overhead is more than 60%, so that in many cases out of $100 in premium, only $16 or less actually goes to the doctor providing care.

Single-payer advocates claim that Medicare is a model of efficiency, with only 3% going to “administration.” On the other hand, Deane Waldman, M.D., author of Uproot U.S. Healthcare, states that 40% of all the money the U.S. spent on “healthcare” in 2010 just disappeared. He added up all monies that went to anything or anyone associated with providing patient care: hospitals, nursing homes, professionals, pharmaceutical companies, wheelchair manufacturers, etc., and compared that number to the total amount listed under  “healthcare” in the federal budget.

True value can only be determined in a free marketplace. The best evidence that prices are excessive comes from real prices charged to self-paying patients and posted on the internet ( These prices include the facility, the surgeon, and the anesthesiologist. Patients can pay five to ten times as much at most hospitals, even “nonprofits.” Dr. Smith goes to Washington to explain:

A Needed Correction

The unfunded liabilities of Medicare—promises made with no source of revenue to cover them—are variously estimated, but are probably at least $50 trillion, an amount that cannot possibly be paid. Medicare has been likened to PAC-Man, a mechanism for devouring the entire federal budget, and then the whole economy. Throughout the medical economy, misallocation of resources is at least 40%. Bankruptcy could be a short, sharp, painful shock leading to the necessary correction.

How Much Should You Pay for Medical Care?

The biggest reason for the medical spending spiral is the lack of straightforward information on prices and actual costs. Third-party payment with “assignment” of benefits (paying providers, not subscribers) disguises and increase costs.

Those feeding on the cash cow of third-party payment have a vested interest in keeping prices as high as possible—and true payment rates and costs a secret.

Self-paying patients are often quoted and billed the “chargemaster” price. This is at least three times what Medicare pays, and also much more than “providers” have agreed to accept from health plans. A generous-sounding “discount” of say 50% isn’t all that great when you’re starting with a price inflated by as much as tenfold.

When some people get a “discount,” other people pay more. How can self-paying patients protect themselves against bearing the brunt of cost-shifting? Why should they have to make up for underpayment by government plans, managed care, and irresponsible patients who don’t pay their bills?

Patients may resort to “re-pricing” or negotiation services or brokers. Beware: these services may be touted as “free,” but the negotiator collects a portion of the price or of the “savings.” We are aware of cases in which the negotiator got paid more than the surgeon! If the patient deals directly with the physician or the facility, then the total amount paid goes to people who cared for the patient, and the total amount of savings is kept by the patient.

It is best to determine the price before having the procedure. But even after having an emergency procedure, patients need not accept the bill without question. Collection agencies and lawyers are expensive, and so is delay. Direct, timely payment is in everyone’s best interest. Patients need to be armed with information about what a fair price would be. They need to talk to a person with the authority to make a deal, and offer prompt payment.

To get the astonishingly low prices posted by the Surgery Center of Oklahoma (see p. 1), the patient has to go to Oklahoma City and pay cash in advance. Other hospitals have, however, been known to match these prices. Some hospitals and physicians will agree to a package price for certain procedures.

Resources that may be useful: This matches patients and physicians or facilities for a nominal up-front fee. Patient or physician can enter a procedure and search for a “fair” price, based on claims information. Expanded information is offered, for a fee, to self-funded employment plans. Direct-payment-friendly and third-party-free practices are listed under the “patients” tab. There are also links to Medicare carrier websites that list opted-out physicians by state (

Individual Facilities. In addition to anesthesiologist G. Keith Smith, M.D., (, pioneers in direct-pay surgery are surgeons James Spearman, M.D.,  ( and Keith Petersen, M.D. (

Federal government “reforms” move us toward more central control, more third-party payment, and more barriers to access—and more outsourcing to foreign lands, called “medical tourism.” Free-market reforms are essential to keeping medical care available here in the U.S., at a reasonable price.

End-of-Life Energy Subsidies

Medical spending at the “end of life” may be criticized as diverting money from “healthcare.” Such sickness care, of course,  prolongs the lives of many who would die quickly without it.

A different logic applies to environmentally correct energy projects that are economically nonviable when taken off life support. Charles Battig calls renewables “franken-energy.” Unlike Frankenstein’s creation, which received its life-force from lightning, franken-energy is recharged by political mandates and tax funding (The Week That Was 5/26/12,

“Emissions-free solar and wind energy, on which the U.K. plans increasingly to rely, are expensive,” writes Rael Jean Isaac. “The government estimates that a planned offshore wind farm project ringing the coast will cost £140 billion, or £5,600 ($8,972) for every household in the country. Conventional energy could provide the same amount of energy at 5% of the cost” (WSJ 6/5/12,

The opportunity cost for the UK’s subsidies to renewable is 10,000 lost jobs between 2009 and 2010 alone. Spain’s subsidies have cost 110,500 jobs. The healthiest economy in Europe, Germany’s, is also threatened.

“We’re destroying the foundations of our prosperity,” says Fritz Vahrenholt, former hero of the German environmental movement. “In the end what we are doing is putting the German automotive sector at risk, the steel, copper and chemical sectors, silicon, you name it” (ibid.).

“End” can be a verb as well as a noun. The environmental movement is not content with subsidizing its darlings, but wants to end—to kill—energy sources that work. Marita Noon asks, “Where will you be when the lights go out?” ( Having blocked new nuclear plants for 30 years, kept much of the U.S. off limits to oil drilling, and all but shut down new coal plants, the environmental lobby is now targeting natural gas, she notes.

By heavily regulating phantom risks, the U.S. Environmental Protection Agency (EPA) saves phantom lives and imaginary dollars. But the real costs are driving us to bankruptcy and death.

For the mistake of telling it like it is, Al “Crucify Them” Armendariz resigned from the EPA. He was, however, “a perfect general for Mr. Obama’s war against natural gas” (WSJ 5/3/12,

“Energy Abundance or Poverty: the Choice of the Century” is the theme for this year’s meeting of Doctors for Disaster Preparedness at the Long Island Marriott, July 27-29. See enclosed flyer or register online at

Bernard L. Cohen, R.I.P.

We have lost a great friend in Bernie Cohen, a brilliant scientist with integrity. He never let theory trump data. He set out to demonstrate the hazards of indoor radon, but his classic study, which covered most counties in the U.S., demolished the linear no-threshold hypothesis of radiation carcinogenesis (CDP, January 2000). Two of his presentations at DDP meetings, on radioactive waste disposal, are available at: and Articles by Dr. Cohen published by the Association of American Physicians and Surgeons are in J Amer Phys Surg , Summer 2003 and Fall 2008. Books include Before It’s Too Late: A Scientist’s Case FOR Nuclear Energy.

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