By: Martin Merritt, esq.
Past President, Texas Health Lawyers Association
Past Chair, DBA Health Law Section
martin@martinmerritt.com
“Please Tell Me you Didn’t. . . How to Keep Clients Out of the Jailhouse, Poorhouse and Lawyers Out of the Nuthouse” -Blog
As you can tell, I love talking about health law & litigation issues, and general wellbeing, if you have any health law questions or better yet, need to refer a case, just call or drop me an email and I will happily talk.
“There is already a Buster Keaton movie about it.” Last week, I wrote about the targeting of the United Healthcare CEO in Manhattan. What followed was an outpouring of sympathy– for the shooter. Some even made jokes about the McDonalds employee who tipped off the police. (“Don’t go to that McDonalds, it has rats.”) People don’t like health insurance companies.
One of my clients office managers wrote me, “they aught to make a movie about all of this.” Well, Adrianne, they already have (sorta). So pull up a chair and some popcorn, and I will tell you how Buster Keaton figures into it.
The Dallas Bar Association Headquarters is located in a mansion across the street from my building. If you have ever seen a photo of our skyline, I am in the big skyscraper with a hole in the top.
So close, if my building ever fell over, the DBA Headquarters might just survive the way Buster Keaton did in a silent film from 1928. In the film, a house facade falls over onto Buster, but he survives without a scratch, because he just happened to be standing where the only loophole, an open window, was carved out of the façade. (Like “Chekov’s gun,” Buster Keaton’s loophole is gonna figure prominently in our plot when the curtain falls on Act III.)
Bonnie & Clyde. One of the top 100 movies of all time is 1967’s Bonnie & Clyde, starring Faye Dunaway and Warren Beatty. The film is about a real-life gang of bank robbers who operated about the same time Buster Keaton was shooting silent films. In 1934, police shot Bonnie & Clyde, a whole bunch of times, to stop them from robbing banks. Like with the healthcare CEO shooting, many people sided with the bank robbers. People hated banks.
I know this, because the Dallas Bar Association Mansion is next to my building. In 1934, the Mansion was known as the Sparkman-Holtz Funeral Home, the location of the funeral of Clyde Barrow. If you walk in the front door, turn to the left, you will find a vestibule, with three photos depicting the crowd that had gathered outside the mansion.
People lined up to get a glimpse of one-half of the outlaw couple (or what was left of him), some saw Clyde as sort of “folk hero.” In the Great Depression, people hated banks even more than we hate health insurance companies, because 9,000 of them failed, and people lost everything. (There was no FDIC insurance back then.) Add to that, almost everyone knew someone whose farm had been seized by a bank foreclosure. So people really hated banks.
Tax and spend: Giving a toddler a book of matches. Willie Sutton, another bank robber was asked in 1933, why he robbed banks. He answered, “because that’s where the money is.” But more importantly for our purposes is “what kind of bank notes” Bonnie & Clyde were stealing. There actually was gold backing up the value of the bank notes.
Until the 16th Amendment created income tax in 1913, the federal government didn’t really have much spending power. At first, Congress didn’t know what to do with it.
Much like like giving a toddler a book of matches, sure, Congress could burn down the house with it, but it would take a while to figure out how. That’s why the idea of using tax dollars to create the FDIC to insure the bank accounts Bonnie & Clyde robbed, or even to fund an FBI to catch bank robbers, took a while to catch on. Government growth happened gradually.
At first, there was no federal spending on much of anything at all other than necessities. Because of the gold standard, the government couldn’t just print money out of nowhere. If the government spent money, on a war for example, it had to raise taxes. Printing money out of nowhere would be more like giving a toddler a flame thrower. (And nobody could be that stupid.)
The first “Buster Keaton” healthcare loophole. Funny thing about health insurance, Dallas also happens to be the home of the first private health insurance. In 1929, Dallas’ Baylor Hospital began offering polices to teachers. Things stayed that way for a while. Then, all hell broke loose December 7, 1941.
During WWII, there was a shortage of workers, which would have resulted in “wage inflation,” because that’s how supply and demand works. The government couldn’t afford to raise taxes to pay inflated prices for workers because the government was the one paying the employers to build war materials (you can’t pay your bills by taxing yourself, that’s not how math works).
So, instead, the government “froze wages,” while carving out a loophole in the IRS rules, like Buster Keaton’s house, that allowed employers to offer fringe benefits, like healthcare, without those benefits being counted as “wages” which were of course frozen. It’s a head scratcher, but it worked. In large part, because people with jobs are the most healthy people, who don’t usually need a lot of care.
And that’s how employers got into the health insurance business. (The elderly, that’s another story.)
The second Buster Keaton loophole. Until 1965 there was no health insurance for people without jobs, meaning the elderly or disabled. The AMA’s doctor members were adamantly opposed to government provided health care, on the grounds that the government would micromanage every aspect of a physician’s practice. So, in a nutshell, doctor-backed conservatives didn’t want Medicare, and liberals, like President Kennedy did. Congress was deadlocked.
But “dammit” (if it didn’t happen again in Dallas), President Kennedy was gunned down in 1963. Which led Congress, motivated more by public sympathy than sense, to pass Kennedy’s hoped for Medicare and Medicaid in 1965.
In order to appease the AMA, the first section of the statute, 42 USC 1395, contains the government promise of “non-interference” with practice of medicine. To pass Medicare, Congress had to promise Doctors and hospitals they could charge anything they wanted and the government paid them. (Besides, people smoked like chimneys back then, who’s gonna live much past 65 anyway?)
Well, it only took until the early 1970’s, for all this government spending to bring he house down on the US Treasury. What to do? Enter Buster Keaton loophole number two: We’ll just print money out of nowhere, like stupid people. The Nixon administration realized we could promise anything and still pay our bills, if we just charged everything on a credit card, without regard to having tax-payer gold in the bank to back it up.
The Gold Standard: Giving a toddler a “flame thrower. If income taxes and spending were like giving a toddler a match, getting Congress off the gold standard was like giving flame thrower to a toddler. Once it figures out how to use it, you really don’t want to stand in its way.
Economics 101: If you flood a system with money, the price of everything will go up to a level known as “all the market will bear.” With Medicare blowing money left and right, inflation followed. How stupid are we? When George Bush (the 2nd) signed Medicare Part D into law in 2003, Congress forbade Medicare from negotiating volume discounts from big pharma. (Stop complaining. It’s not real tax-payer money anyway.)
But, this still doesn’t explain why we hate health insurance.
“A War of All Against All.” But there is a catch. While Medicare spending blew the roof off prices, employers can’t print money they don’t have, they aren’t the government. So they both hired private health insurance companies to ration care in the form of claims administrators who manage care through PPO’s and HMO’s (they force providers to provide care for less pay), which only helped so much.
The only way for the government and employers to make ends meet, is if insurance companies “fudge” about coverage. Which is why we hate them. When we are issued a health insurance card, it comes only with a “promise” that our health insurance company “might” pay the bill if there is money in the bank after insurance companies pay themselves. And in the case of UHC, it appears claims were being denied at at rate of 32 percent. Twice the national average. That’s why we hate them.
Notice too, the trick is to direct this hate by getting someone else to do the dirty work. The public hates the insurance company, not the government or the employer. That’s why they do it this way.
Authors Bartlett and Steele describe our system in their book Critical Condition– How Health Care in America Became Big Business and Bad Medicine, New York: Doubleday (2004.)
“The American Healthcare System is a war of all against all, where insurers cheat patients, patients cheat doctors; doctors cheat insurance and everybody cheats the government.”
The final Buster Keaton loophole. But, you aren’t necessarily expected to be stupid enough pay your medical debt. There is a loophole: Bankruptcy. In America, 66.6 percent of bankruptcies are due to medical debt, 78 percent of these people had health insurance that didn’t do what it promised. Or, when you die, the debt dies with you. After all, that’s what would happen if there were no hole at all, in the house that fell on Buster Keaton.