Latest / Man in America Podcast / American Health Care Was Redesigned in 1973 to Profit From Your Sickness | America Hijacked EP05

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American Health Care Was Redesigned in 1973 to Profit From Your Sickness | America Hijacked EP05 · Man in America Podcast

• 0:13
  Speaker 1: In 2023, the CEO of NYU Langan Health took home about $22,800,000 in total compensation. Now NYU Langan is a nonprofit hospital. It pays no income taxes. The whole reason it gets that tax exemption is because it is legally supposed to exist to serve the community. But $22,800,000 from a nonprofit, from a hospital that doesn't pay taxes, And at the same time, at that hospital, the average registered nurse, the actual person who's in the room when you're sick, the one who's checking on you at two in the morning, the one who doesn't go home when the shift ends because somebody still needs him, she's making around $93,000 a year.
• 0:59
  Same nonprofit mission, same tax exemption. But here's the thing. This isn't some crazy outlier. That is just one of the better examples that we've found. And I wanna show you how we got here because this didn't happen by accident.
• 1:14
  And there's no way to see an alternative when you don't know how the health care system works and how it got to where it is today. There's a sequence. There's a timeline. And when you see the sequence, when you see how this thing was built, it stops feeling like a broken system and it starts feeling like a system that was designed to work exactly this way. And I wanna show you the specific moment that the door got cracked open.
• 1:37
  I wanna show you who was in the room, and I'm gonna play for you what was said. Welcome to Man in America, a voice of reason in a world gone mad. I'm your host, Seth Hullhouse. This is my America Hijacked series. It's an investigative history.
• 1:59
  We're digging through the archives. We're pulling the original documents and presenting the receipts, specific decisions, specific people, specific money. We go back to the exact moments when things change, find out who made the call and why, and then we follow the money until the bigger plan comes into focus. So let's go back to the beginning. Let us look at what we actually had Because I think a lot of people have no idea how different things were, and you can't understand what was taken from you if you don't know what you first had.
• 2:32
  Here's the thing about the nineteen forties and nineteen fifties that most people don't realize. The system that most working American families had was not some giant government program. It was not the result of one big health care bill. It came out of a war and a tax ruling. In 1942, the federal government froze wages.
• 2:50
  This was World War two. They needed to keep inflation down. So companies couldn't just raise the pay to compete for workers. So companies started doing something else instead. They started offering health insurance as a benefit.
• 3:02
  It was this workaround. It was a way that you could attract workers when you couldn't offer more money. But then the IRS stepped in and they made a ruling. If your employer paid for your health insurance, that benefit was tax free to you and the company could deduct it. But then Congress put that into the tax code in 1954.
• 3:23
  And overnight, this thing that started as a wartime workaround became one of the best financial deals available to the ordinary working family in America. Companies fell over each other to offer it. Workers started picking jobs partly based on the coverage. And by around 1960, more than 70% of the people in The United States had some form of private health insurance, most of it going through their employer. But think about what that actually meant.
• 3:48
  You got a job and health care came with it. Your whole family was covered. So you didn't spend Sunday night trying to decode a 47 page benefits booklet. You didn't call a hotline to find out whether your kid's pediatrician was in a network. You just had coverage.
• 4:02
  That was the deal. And look at what the prices looked like in that world. So there are real hospital bills from the fifties and sixties that people have found in old family papers. They've posted them online because they literally cannot believe what they're seeing. So one from 1955, a woman gives birth, stays three nights in the hospital, room, board, nursing service, the delivery room, the care of the baby, drugs, and medicine.
• 4:27
  The whole bill came out to $59.95. So let's round to $60. So $60. Let me break that down for you. Room and board and nursing was $27.
• 4:41
  Delivery room, $15. Infant care, $6. Drugs and medicine, $11.95. And that's it. That's the whole thing.
• 4:51
  Another bill from around 1963 shows a hospital birth with line items like $11 a day for the room and $2 for anesthesia. In total, it comes in at $46. On social media today, people share these old receipts because compared to now, they look like they're from another planet. Person health spending in the entire country in 1960 was about a $146 for the whole year. Health care was about 5% of the economy, so roughly $1 in every 20.
• 5:21
  And the way that care was delivered felt different too. In 1930, about forty percent of doctor patient encounters happened in the home. The doctor came to you. By 1960, that had dropped, but the idea of a family doctor who knew your name, knew your kids, and might come to your house when someone got sick, that was still normal. Historical fees schedules from that era show basic office visits in the 2 to $3 range with house calls being a little more.
• 5:48
  Hospitals were mostly run by churches, universities, cities, and counties, nonprofit community institutions. Their boards were not doing quarterly earnings calls with Wall Street analysts. The idea that the CEO of a nonprofit hospital will be making over $20,000,000 a year while paying no income tax would have sounded completely insane. So that's what we had. It wasn't perfect, but it was sane and pretty humane.
• 6:15
  But at least it was understandable. A system where a factory worker could have an employer coverage, go to a hospital run by his community or his church, have a major life event like the birth of a child, and pay a bill that a normal person could actually cope with. But then, gradually, that world got taken apart. By the late sixties, the numbers were starting to move in a different direction. Medical technology was advancing, and new surgeries, new machines, and new drugs.
• 6:45
  In 1965, president Lyndon Johnson signed Medicare and Medicaid into law. So that brought older Americans and low income Americans into the same third party payment system the workers already had. It was a big expansion of coverage, but it was also a big expansion of federal spending. In the early years, Medicare paid hospital costs based on their costs. If a hospital's costs went up, Medicare's payments generally went up.
• 7:12
  So physicians were paid based on what were called usual customary and reasonable charges, which tended to move upward as prevailing fees did. So now you have a giant federal money hose attached to hospitals and physician groups all across the country, and the implicit message is this. If your costs go up, we're coming up with you. Between 1960 and the early seventies, health care's share of the economy moves from about 5% towards about 8%. By the time that Nixon's in the Oval Office, health care costs are a political problem.
• 7:47
  Something has to be done. Now here's where things get really interesting to me because this isn't just some theory. It's not somebody's blog. This is a recording. 02/17/1971, the Oval Office.
• 7:59
  Nixon is sitting with his domestic policy adviser, John Ehrlichman. They're talking about health care. Ehrlichman is explaining this model called the Health Maintenance Organization, the HMO, using the Kaiser Permanent Plan as the example. The idea on paper sounds pretty reasonable. Instead of paying a doctor for every single visit and every single test, which seems to encourage doing more, you pay a flat amount per person per month to an organization.
• 8:30
  The organization is then responsible for that person's health. Because they get the same payment no matter what, they're supposed to focus on prevention, pay for health, not just for procedures. That's the sales pitch. But then Nixon asks the key question. He wants to know how the money works.
• 8:47
  And Ehrlichman says, and this is on tape, that in this model, quote, all the incentives are toward less medical care because the less care they give them, the more money they make. And Nixon's response is one word. Fine. That's it. That exchange is archived at the Nixon Presidential Library and transcribed by the Miller Center at the University of Virginia.
• 9:10
  The president of The United States is told in plain language that the business model of the new American health care system is built around giving less care, and he signs off. So on 12/29/1973, Nixon signs the Health Maintenance Organization Act into law. The law sets up federal grants and loans to help HMOs get started around the country. It required certain larger employers in areas where qualified HMOs existed to at least offer an HMO option to workers, and it preempted some state laws that had made it hard for these plans to operate. There was one important guardrail built in though.
• 9:49
  The federal startup grants were aimed at nonprofit HMOs. For profit HMOs were legal, but they did not get the same early federal support. The thinking was this, if we're gonna have a system where less care means more profit, at least don't seat it entirely with shareholder owned companies. That was the one protection that mattered, but it didn't last. Through the late seventies and eighties, deregulation becomes the buzzword in Washington.
• 10:18
  Airlines, trucking, finance, you name it, and health care wasn't an exception. For HMOs and managed care, this happens through a series of smaller changes rather than one big memorable bill. Amendments and policy choices gradually open up more federal support and favorable conditions to for profit HMOs and managed care companies alongside nonprofits. The practical effect is that the nonprofit preference in the original program gets eroded. And when that happens, Wall Street walks in.
• 10:48
  Insurance companies go public. They start trading on stock exchanges. Their executives now report to shareholders. And now the incentive that Ehrlichman described in the Oval Office in '71, the one where the less care you get, the more money you make, is operating inside companies that are explicitly designed to maximize profit for investors. On the ground, this is what people start to feel.
• 11:11
  Suddenly, you can't just go to any doctor. You have to go to a network doctor. If your doctor's outside that network, you pay a lot more or you have to switch doctors. So suddenly, your doctor can't simply order a test. They have to get prior authorization from an insurance company employee who has never met you and who is rewarded effectively every time they say no or slow things down.
• 11:35
  Deductibles, co pays, out of pocket maximums, prior authorizations, referral requirements, formulary tiers, a whole new language moves in between you and the person treating you, and almost none of it has to do anything with getting you well. All this is about managing the money flow, and the structure of the coverage flips. So in the late seventies, almost everyone with an employer coverage had a traditional indemnity plan. You went to the doctor or hospital of your choice, and the plan paid the bill. But by the late nineties, that kind of open choice plan had become a small minority.
• 12:11
  The vast majority of people with employer insurance were in the same form of managed care, HMOs, PPOs, similar. So the world where your employer coverage just worked quietly in the background, where you saw the doctor you trusted, where the billing was something a normal person can understand, that world is basically gone. But remember, all of this was sold as a way to control costs, but it didn't. Health care spending kept climbing, and in many ways, it climbed faster than the people who designed these reforms had even predicted. So let's put some hard numbers on this.
• 12:46
  In 1960, health care spending in The US was about a $146 per person for the entire year. Healthcare accounted for about 5% of the total economy. By 2023 and 2024, per person health spending was over $15,000 a year. Health care was consuming about 18% of the entire economy. We went from $1 and 20 going to health care to almost $1 and 5.
• 13:16
  Now let me show you what that looks like through two real stories put side by side. In 2023, a woman named Jenny Crothers went on a vacation to Florida with her family. She ended up in the emergency room with a medical scare, spent one night in the hospital, and went home. No major surgery, just an overnight stay and some tests. Then the bill arrived.
• 13:37
  Palm Beach Gardens Medical Center in North Palm Beach, Florida billed her nearly $50,000 for that single visit. She described it as a nightmare and had to bring in a bill negotiation company just to get the charges knocked down. Ginny's not one in a million freak event. She is what happens in America now when a normal person touches the hospital system in the wrong way. Now go back to 1955, that bill that we looked at in act one, A real bill, room and board, nursing service, $27.
• 14:07
  Delivery room, $15. Infant care, $6. Drugs and medicines, $11.95. So three nights in the hospital having a baby, total $59.95. In that 1963 bill, about $11 a day for the same room.
• 14:27
  $2 for anesthesia, totals around $46. So put side by side, Jenny's one night hospital stay in 2023 was nearly $50,000. A mother's three night hospital stay with childbirth in 1955 was about $60. Another mother's hospital birth bill in 1963 was about $46. And just to head off the inflation argument because somebody always brings it up, if you take $60 from the mid fifties and adjust it for inflation to today, you get somewhere in the range of 700 to $800, not $50,000.
• 15:06
  So no, this isn't just time passing. It's not just prices naturally going up. Something else happened to this system. On the patient side, more broadly, you see the same pattern everywhere. Analyses and consumer guidance show that in many areas, a single emergency room visit can generate bills of several thousand dollars even without a major surgery.
• 15:27
  Ambulance rides often come in at a thousand bucks or more, sometimes much more if they're out of the network. KFF and other surveys show a large number of Americans say that they avoid or delay care because of cost. They cut pills in half. They skip recommended tests. They hesitate to call an ambulance even when they might need one because they're afraid of what will show up in the mail three weeks later.
• 15:49
  Now look back at the top of the system. NYU Langan Health, nonprofit, tax exempt, the CEO made $22,800,000 in 2023. Over roughly a decade, his cumulative pay from that institution is estimated to be well into the 9 figures. Several of the executives directly under him each made between 4 and $5,000,000 in a single year. The typical registered nurse, around ninety to ninety five thousand dollars.
• 16:20
  Research on nonprofit hospitals found that in the February, the average CEO compensation climbed by over 30%, while wages for staff like nurses only grew a few percent in the same period. And then you have the insurance companies. In 2023, UnitedHealth Group reported about $22,400,000,000 in profit. Other big insurers like CVS Health, Elevance Health, and Cigna each reported profits in the billions. Add a handful of them together, and you're talking about well over $30,000,000,000 in profit in a single year from a system that was originally seeded with federal money aimed at nonprofits.
• 17:00
  This is not a broken system. A broken system fails by some accident. This system is performing exactly the way it was redesigned to perform after 1973 and after the changes of nineteen eighties. The core incentive is not your health. The core incentive is the bill.
• 17:19
  The less care they can deliver for a given stream of premiums and tax dollars, the more money there is left at the top. And remember what was said in the Oval Office. Ehrlichman told Nixon in plain language that in this model, the less care people get, the more money the plans make. And Nixon's response was fine. He signed the bill.
• 17:43
  Now here's the part that I think is actually encouraging. More Americans understand this now than at any point in my lifetime. People feel it when they get a bill that makes no sense. They feel it when they fight with insurance companies over basic things. They feel it when they hesitate to go to the hospital because they're afraid of what a piece of paper will say three weeks later.
• 18:03
  You're even starting to see this show up in the political world. RFK junior has been talking openly about how little nutrition and prevention get taught in medical schools and about tying federal funding and research dollars to schools that actually fix that. Whether you agree with him on everything or not, that's somebody inside the building saying out loud, yes, the priorities have been backwards for a long time. And in early two thousand twenty six, medical schools actually started committing to more nutrition education in response to that pressure. But here's the key.
• 18:33
  You don't have to wait for Washington to fix this. And honestly, wouldn't bet the health of my family on Washington fixing it. There are actually real things that you can do right now. One is called direct primary care. So these are doctors who have stepped outside of the insurance maze for most of what they do.
• 18:50
  Instead of billing insurance for each visit, they charge a flat monthly fee, often somewhere in the range of 50 to $100 for adults. But in exchange, you get real access. You can text them, you can see them when you need to, and they're not being paid to say no to you. It's the closest thing that we have today to the old family doctor model. Another is to build your own knowledge and relationships, know where your food comes from, pay attention to what you eat, understand the difference between a condition that requires a drug or surgery, and a condition that might respond to changes in how you live.
• 19:21
  We talked in a previous episode about how little time medical schools have historically given to nutrition and lifestyle. It's not going to change overnight, but that knowledge is out there and it belongs to you. I'm not telling you to ignore your doctor, I'm telling you to stop expecting a system that's designed around billing codes and quarterly profit targets to put your family's health first. The system was redesigned to extract money from your sickness. The response is not just to rage at the machine, the response is to need the machine less and to build something alongside that actually services you and your family.
• 19:55
  If you wanna be around people who are doing exactly that, building outside the system, preparing, sharing knowledge, building a real community, go to buildthearc.com. You go there, you sign up for a waiting list for when we're launching the Arc community because that's exactly what the community is being built for. And if you got something out of this episode, please just hit that like button on whatever platform you're watching. It genuinely helps this information to reach more people who need to hear it. And also share it with someone you care about.
• 20:21
  That's how the truth travels from one person to the next. Never underestimate the power of you and your connections. Thanks for joining me today. I'll see you next week for the next episode of our ongoing series. God bless you.
• 20:34
  God bless this country. We're gonna need it. Yes. The world is getting crazier every day. We know that.
• 20:45
  Every time you check the news, another crisis, conflict. So you can't control what happens out there. You should know that by now, but you can control how you prepare for it. And you can make sure no matter what happens, you have the basics covered in each one of these disasters that could reach your doorstep. Things like having food to eat when the shelves are empty.
• 21:00
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• 21:11
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• 21:23
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• 21:37
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