July 29th, 2009
02:20 PM ET

The healthcare hostage crisis

Editor's Note: This article begins an 8-part series excerpted from the "Healthcare Hostage Crisis" chapter of AC360° contributor David Gewirtz's upcoming book, How To Save Jobs, which will be available in October. To learn more about the book, follow David on Twitter at http://www.twitter.com/DavidGewirtz.

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David Gewirtz | BIO
AC360° Contributor
Editor-in-Chief, ZATZ Publishing

Every American is being held hostage by the largest special-interest group in the history of the world. This chapter tells the story of how we got into this mess and will help you understand the mind-boggling magnitude of the problem. It's a life and death battle for the health and welfare of each of us. And guess what? We're not winning.

It is almost impossible to discuss jobs without discussing healthcare. It wasn't always that way. In fact, before about 1920, the concept of health insurance didn't really exist. While there were hospitals and medical practitioners, the sort of heroic, life-saving healthcare our doctors now routinely practice barely existed. Before 1900 or so, most Americans didn't even realize the benefits of using soap or washing their hands, and antiseptic practices were virtually unknown.

Given that there really wasn't much 1920s-era doctors could do for very sick people, there was no reason for an insurance industry that would pay for medical care. You could buy something called "sickness insurance," which was similar in spirit to our modern disability insurance. If you were out of work for a few days, sickness insurance would make up for your lost salary.

Of course, a lot has changed since 1920. As I'm sure you know, we're once again going through a fuss about national health insurance. But what you might not know is that there were attempts in America to create a nationalized health insurance program going back as far as 1920.

It turns out, just like with many doctors today, doctors back then didn't like the idea of national health insurance. According to Melissa Thomasson of Miami University, their primary concern was money: a national program wouldn't allow them to discriminate against some patients, charging one patient more for the same services as another patient. Groups of physicians hired what we'd now call lobbyists to argue against any sort of national health insurance. Obviously, they were successful and were free to discriminate.

Yep, there were lobbyists even in the 1920s.

Medical costs, of course, had been going up. Hospitals started getting new-fangled equipment, new procedures were being developed, and battlefield medicine techniques from World War I and World War II trickled back to the home-front, increasing the ability of doctors to save lives - but also increasing the costs of treatment.

How employer-funded healthcare got its start

As medical care in America got better, it got more expensive. But there was no real link between employers and medical care until World War II. Believe it or not, employer-funded healthcare started off as a marketing gimic.

After Pearl Harbor was bombed by the Japanese and America fully entered the war, President Franklin Delano Roosevelt enacted a series of sweeping policies designed, according to Richard E. Schumann of the Bureau of Labor Statistics, to "increase total production, reallocate production to military uses, and control wages and prices."

By law, employers couldn't use wages as incentives to attract workers.

But there was a loophole. Employers could offer so-called "fringe-benefits." These benefits were goodies outside of the control of the various regulating agencies that employers could use to lure labor.

One such loophole was health insurance. And so employer-paid health insurance was offered to American workers for the first time.

And it's here the seeds were planted for one of America's longest running and most serious assault on capitalism. American business was, forever more, to be held hostage by health insurance.

About this chapter

Before I delve deeper into this disturbing debacle, I want to talk about what you'll be reading in this series. This chapter is distressing. It showcases just how completely dysfunctional the American healthcare system is - and how bad that is for American society. But as you read it, remember that Americans are a very resourceful people and there are good, better, and even best solutions to problems even as gnarly as America's healthcare system.

And even if the politicians do what we expect politicians to do - water everything down and create something too little, too late, and maybe even make matters worse, Americans, individually and through our business leaders, can find ways to make things better. Later in the book, I'll showcase some tactics business owners and individuals can take to create a better, healthier society.

So, fear not. There is some good news later in the book. But not in this chapter. In this chapter, prepare to be outraged.

Follow David on Twitter at http://www.Twitter.com/DavidGewirtz.

Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.

soundoff (24 Responses)
  1. Kate

    Governor Dean conducted a wonderful discussion this week, showcasing the VA as a cost effective and successful US Government run medical program that satisfies its customers (our veterans). Furthermore the VA has incorporated computerized patient records and efficient practices.

    It is time to shape the new Health Care System debate with common sense – cut governments wasteful spending and give health coverage to all our citizens by creating the Citizens VA.

    The funds to establish and run the program will be generated by eliminating administrative overhead in a myriad of medical programs in disconnected agencies nationwide: AABD, CHIP, Medicaid, Medicare, Department of Welfare Medical Assistance, TANF Medical/Dental, Indian Health Services, SSI Medical, SAMHSA, Workers Comp, Retirement Medical Coverage for Federal and State Employees. All the patients filing endless paperwork for these services will find their lives simplified.

    By following this approach taxpayers will see government debt reductions throughout the system. Medical costs will level off and drop because the computer system will tie all medical records together. Individuals will be able to save money, have the Public Option to attend a Citizens VA or pay extra for private insurance. Medical coverage will finally be accessible to everyone in our country, just as it is to all our Veterans. At the same time drug, insurance and private health companies will be able to thrive in a more streamlined computerized system competing on an even playing field for the affluent patients in our country.

    Kate (Kernville, California)

    July 30, 2009 at 2:48 am |
  2. Mary from LA.


    I am with you. Lets stop giving great medical care
    to all illegals and we WILL see a significant savings.

    As long as this country provides Medicaid to all illegals,
    they will continue to come for this great medical care that they
    cannot have in their native countries.
    They just do not come here for the minimum wage jobs.
    The feds also have to monitor and change the manner in which
    these MEDICAID clinics operate. They bus in the poor and the
    illegals, anyone with Medicaid for medical treatments.
    This runs up the cost of medicine in many ways, not to mention
    that it is illegal.
    Healthcare reform is very badly needed...

    July 30, 2009 at 2:03 am |
  3. nea-nea

    President Obama have been having town hall meetings trying to pass healthcare reform by telling American people why we need healthcare reformed, so I want the republicans to have a town hall meeting explaining to the American people why we dont need healthcare Reformed. I want the republicans to tell us what they are proposing as far as healthcare Reform and how are they going to pay for it.

    July 30, 2009 at 12:56 am |
  4. Mike, Syracuse, NY

    49 million 'uninsured'
    minus 12 million illegals,
    minus 17 million (mostly 20 someyhings) who can afford it but haven't bought it,
    minus 10 million who qualify for Medicare but haven't registered,
    leaves 10 million out of a US population of 310 million. Hardly a crisis.

    July 29, 2009 at 8:58 pm |
  5. Clarence

    It is time that the United States of America show the world that its citizens are just as important as their soldiers and weaponry. We have the most powerful weapons of mass destruction in the world, yet our health care is in shambles. Where are our priorities?

    Now, it is time that we can show the world and most importantly the citizens of the United States that health care for all citizens is possible. Not only that, we should have the best health care in the world. We have the potential to meet these needs. It is time to get it done.

    July 29, 2009 at 7:54 pm |
  6. Jim M

    YES a goodly portion of the economic problem with health care is worker's comp and malpractice costs – AND ATTORNEYS.

    July 29, 2009 at 6:29 pm |
  7. Dean D. Ellis lake Worth, Florida

    Denying pharmaceutical companies any "grace period" to continue looting and plundering the public in an unabated fashion should be at the forefront of any “reform” bill. If incarceration is an attempt at “reform” maybe then that same theory should be articulated in a “reform bill”. More incarceration for welfare fraud and Medicare fraud is a form of "reform".

    Let us not forget that at one time Unions were the sole source of health insurance for most of the blue collar in the U.S. That was due to the fact that employers refused to offer any health insurance benefits. The Reagan administration went all-out to drive Unions form the health care industry because we were unfairly competing against for-profit corporations. We owned our building and we owned the company. We attempted to add additional benefits at no increase in price. But why did the Reagan administration say no to this offer? Because Regan believed that we were using Union benefits to increase our membership and that was not right (hint).

    I don’t believe that Jimmy understands the issue correctly. Workman’s Compensation is insurance that protects the Employer. It is now a requirement and not a benefit that only some employers used to pay. Workman’s Compensation provides relief for lost wages due to on-the-job injuries only. Sometimes employers do not understand that health insurance pays only a portion of the employee’s health care costs due to injuries (not OJI). By law health insurance companies are prohibited from paying for bills resulting from on-the-job injuries. When you make a doctor’s visit in Florida, look on the wall in the waiting room. To make a claim for on-the-job injury costs to your health insurance company constitutes insurance fraud and that is punishable by fine and/or imprisonment.

    Theodore Roosevelt once said: When they call the roll in the Senate, the Senators do not know whether to answer "Present" or "Not guilty."

    The money for the greased palmcame from a company that over-charged me for my prescriptions because they have to factor-in the costs for greasing that same palm. In other words, the price of bribes is factored into the cost of prescriptions even if they are paid for by Medicare or you health insurance. A great thinker once said something like:

    "You don't know how dirty your hands are until you peal a hard-boiled egg, or you go into politics.”

    Yes, I agree wholeheartedly when the writer called this situation a hostage crisis. All law enforcement agencies rely on hostage negotiators. Why President Obama has been delegated the task of being the sole hostage negotiator for the entire country is anybody’s guess. But I’ll go out on a limb and declare that it is because he is the only person in politics that has the both the tenacity and the forthrightness to declare that negatiations are over and we must now act.

    I thank him wholeheartedly for taking up the call to arms against economic terrorists.

    July 29, 2009 at 5:37 pm |
  8. Larry

    Why do patients, and their families, not ask their doctor(s) how much a procedure is going to cost; and why it is necessary?

    July 29, 2009 at 5:11 pm |
  9. Tim Gibson

    Perhaps the solution to the problem is paying political leaders on performance. Then and only then can the real problems begin to be addressed and lead the way to national health and personal health.

    July 29, 2009 at 4:57 pm |
  10. RLWellman

    The Government is there to to help you? They will help you alright. The Government wants to control all of us. It's too bad that some of you are young and naive in believing they exist to help us. This is what they are supposed to do. However, they only take care of themselves now. THEY DO NOT REPRESENT US!

    The laws they propose and pass should be for all American citizens. This includes those 554 people who make the laws, but do they? No! They don't have to follow the same laws that they make for us.

    Nationalized Health Care, don't you think it should be good enough for all of us to have? Then why doesn't the Government have to abide by the same health care?

    They will make all insurance carriers go out of business. They will make employers cancel existing health care insurance. We will all end up on Government run health care because they can subsidize it with our tax money and no one else will be able to compete with it.

    Is this what you want America? 8-10% of America, telling the other 90-92% what we have to do. YOU NEED TO WAKE UP AND SPEAK OUT BEFORE IT IS TOO LATE!

    July 29, 2009 at 3:52 pm |
  11. Dana

    All of us patients are at the mercy of the doctors AND the insurance. Too many doctors are too greedy–gotta have those Beemers. Several doctors my family has gone to have repeatedly performed tests that weren't needed just to add to the bill they could present to the insurance. On the other hand, the insurance companies are also out to make as much money as they can. While they're increasing rates tremendously, their profits are higher than ever. Hello? Why do you have to increase rates if your profits are soaring? And while these two sides battle it out, us patients are caught in the middle. Too many bankruptcies, lawsuits, children in poverty, and health issues are dragging down the productivity and happiness of our society. We're all under too much stress worrying over this issue. Please fix it, Democrats and Republicans!

    July 29, 2009 at 3:49 pm |
  12. Ruby Coria LA., CA.

    We're in 2009, with the technology that we have now, we can push hundreds of cars through the assembly line, we pick fruit with robots, we brew beer by the billions of gallons per hour, we bottle billions of Viagra per hour, why do hospitals charge $50. dollars for a Tylenol? We need to put a halt on giving U.S. citizenship, & clean house. To much abuse & greed.

    July 29, 2009 at 3:28 pm |
  13. Joanne R. Pacicca

    Jimmy is correct. I work as a risk manager for a private company. Workers' Compensation insurance is the biggest source of fraud in the workplace. Using health insurance only as an option would save, billions of dollars, reduce the cost of healthcare and foster business growth.

    Also, I do not support the mandated Obama plan because it would tax those of us who have health insurance as income. We , then, pay for those that do not have health insurance ~ expanded from the Medicare we are taxed on already...and beyond.

    July 29, 2009 at 3:09 pm |
  14. Gail Duncan

    That is one of the main reasons i stay in Germany. I tried to move back to D.C. to care for my parents and could not get insurance. We must get health insurance up and running fast with humanity being the mind set not greed.

    July 29, 2009 at 2:38 pm |
  15. Joe G. (Illinois)

    Obama won’t lower himself into copying the Canadians, Brittan’s, French, or Italians heath care system. He claims that their health care system is “not perfect” and that he wants one that would be uniquely Obama. Obama is a person very careful and meticulous about his doings.. His decades or so of attendance to Jeremiah Wright’s church, and his lifelong deeds supporting and advocating for abortion goes to show just some of all that.. He’s just not someone who would sell himself short or compromise his intentions!! But what gets me is that Obama promised not to increase taxes… Evidently the Chinese will be paying for it all.. So what’s the problem?

    July 29, 2009 at 2:25 pm |
  16. putmeonthedailyshow

    we need a public option. That way, we only have a berucrat between the people and a doctor instead of a big fat insurance company. Hot damn.

    July 29, 2009 at 2:18 pm |
  17. Joan Swanson

    Maybe you better look into the effect6s of the health care bill on senior citizens. It gives the government power to "euthanize" us. They can refuse a bypass or treatment for cancer because we are old and not expected to live long enough to warrant the expense. I think the solution to this is to take the health care and the full pay salary from our elected officials and let them live on Social Security. That would save millions of dollars. They are there to look out for us but instead they look out foe themselves. Another big savings is STOP giving illegals our Social Security. What did they pay in to it? NOTHING If they are here illegally, ship them back to where they came from!!!!! I am tired of pressing 1 for English. If you can't speak the language then learn it or get out. This is OUR country.
    This will probably not hit the news but I am sure millions of people agree

    July 29, 2009 at 2:17 pm |
  18. Larry

    I'm still waiting for this health care plan to be on the net so I can read it myself. Obama's townhall today where he said he wants pharmaceutical companies to drop their patent rights from 12 to 7 years sounds incredibly insane. What does that do to clinical trials? What incentive is there to work on the development of orphan drugs? He suggests that doctors get reimbursed based on patient outcomes; how does he determine that in the case of psychiatric illness?
    He makes a great speech to the converted but where is the substance; why are they applauding his every word?
    No I'm not a republican, I'm an american citizen and president obama works for me.

    July 29, 2009 at 1:48 pm |
  19. Michael C. McHugh

    Before 1920, the idea of health insurance was mainly socialized medicine, public hospitals, or national health insurance of the kind Bismarck passed in Germany in the 1880s. In fact, Germnay was the first modern welfare state, which many other Western countries started to copy in the 20th Century. For example, Teddy Roosevelt proposed Sociial Security, national health insurance and public housing in 1912, basing it on his extensive knowledge of what was happening in Germnay and other European countries ta the time. He was right, too.

    July 29, 2009 at 1:39 pm |
  20. Sandy McIntyre

    Very interesting! However, we can all write books, talk, document until we're blue in the face. Until someone actually DOES something the point is mute.

    July 29, 2009 at 1:38 pm |
  21. Joy

    What would happen if we stopped helping those that are not in this country legally and see how much money that saves. When I was sick, undiagnosed for 10 months, every time I went to the hospital there were always a bunch of people that couldn't even speak english and when asked if they worked or had insurance, they always replied with "no job, medicaid". Tell me why my taxes go more towards those who don't work and are not legal instead of it going to my healthcare or even my retirement?
    Obama was handed the US in pieces. You can't expect him to fix it all by himself and in only 7 months! Especially if no one is willing to help make the changes needed to make this country better.

    July 29, 2009 at 12:59 pm |
  22. Melissa

    Its not business held hostage by the insurance companies, its the regular people. The insurance companies ARE a business. And thats the whole problem. Business' are more concerned with profit than they are with the people. People cannot live if they are dying from lack of proper health care. Its not like buying a car. You live or you die, there is no in between. And in order to live, you need health.

    Its the same reason companies charge so much more for food than its actually worth. Because they KNOW that people NEED it to survive and there's nothing anyone can do about their prices when business controls the world.

    Stop allowing the greed, you start actually doing your job and taking care of people.

    Government don't exist to be paper pushers, they exist to protect the people, sometimes from themselves.

    July 29, 2009 at 12:02 pm |
  23. Rocio- Canadian Citizen

    I chose to live in Canada because of its health care system, among other things. I pay high taxes, and the system is not perfect. BUT it is worth it: myself, my spouse and my children: all of us are greatful each time we go to the hospital: best medical care in the world. Shanon's story is sad, but it does not represent the millions of Canadians who are happy with our health care system...

    July 29, 2009 at 11:56 am |
  24. Jimmy

    You want employer mandated health care? Eliminate the fraud ridden waste of money employers are forced to pay for – WORKMANS comp insurance and replace that with Health insurance. That would solve a huge problem without adding any extra expense for employers. As an employer I would fully support the idea. We currently pay over $500 per month per employee for nothing. Health care covers all health needs and injuries, Workmans comp only covers on the job injuries. Since we can't afford to provide both, we only pay for workmans comp and can no longer afford health insurance.

    July 29, 2009 at 11:53 am |