Healthcare in America: Affordability, pt. 1

Good day, family and friends!

Well, its been over 2 months since my last post. For those of you who have been following this series, I apologize. However, I receive no compensation at all for my blog and activities that pay the bills must come first.

As I started looking into the affordability of healthcare in America, the question I started with was, "why does it cost what it costs?" There are as many different opinions as to 'why' as there are corrupt politicians in government. Some have claimed that costs are set and controlled in secret by a consortium of medical insurance corporations and pharmaceutical companies with a goal of padding the bottom line. Some claim that the healthcare providers themselves are just greedy individuals who are demanding every dime the traffic will bear. President Obama even went so far as to suggest that physicians are performing unnecessary surgeries in order to collect higher fees from MedicAid/MediCare. In fact, the truth is that modern medical technology is simply very expensive to develop, learn, acquire, and maintain, and that rampant insurance fraud and out-of-control litigation makes healthcare coverage prohibitive for the underwriters.

So, let's start with the physicians. Most physicians start their careers at least $200,000 in debt from their education. Additionally, the average start-up cost for a new medical clinic for a General Practitioner is between $300K and $500K. If the clinic is for a medical specialty (e.g.: Endocrinology or Orthopedic Surgery), add another $200K - $300K. This means that a new doctor opening a new clinic incurs between $300K and $800K in additional debt before they ever see a patient. This plus the desire to have access to a pool of experience causes most new physicians fresh out of their residency to become employees of an established clinic.

While it is true that these highly-trained medical employees usually do make a salary in the low six-figures, they earn every penny of it. These men and women are usually the ones pulling the long and undesirable shifts. Most averaging 68 hours of work per week and only 8 days total of vacation in the first five years after they complete their residency. These new members of the clinic are usually the ones on call during the holidays. Basically, they work hard to establish themselves with their patients and the local hospitals at which they have privileges. In other words, they are 'paying their dues.' On top of that, most physicians spend an average of 36 hours per year in additional training on new procedures, equipment, and medications.

In addition to the cost of employing these medical professionals, the clinics themselves also have a staff of highly-trained nurses, physicians' assistants, and medical receptionists/clerks to pay. Their overhead also includes items such as the facilities themselves, routine medical equipment maintenance, cleaning crews that specialize in medical facilities, and medical/laboratory courier services. Finally, they usually have at least two medical billing specialists just to deal with the complexities of the plethora of insurance options available to their patients. After all that, most medical clinics (with the exception of clinics specializing in 'elective' procedures) barely clear a profit of 6% at the end of the year. Not exactly an easy way to get rich quick, is it.

Next time, I'll look at what goes into the cost of healthcare insurance and address the abominable suggestion made by the President.

Until then, best regards...



© James P. Rice 2009