Cure a Sick Healthcare System
July 23, 2004
In These Times
Cure a Sick Healthcare System
Universal coverage under National Health Insurance would not increase health costs
By Steffie Woolhandler and David Himmelstein
Like Capistrano’s swallows, the Democrats always return to health reform. Unfortunately, this year they’re showing little more brain power than the birds.
Don’t get us wrong, we’re no fans of President George Bush’s health agenda: Ship tens of billions of federal dollars to a panoply- of healthcare firms privatize Medicare and dangle skimpy tax credits in front of the 44 million uninsured. But Kerry seems intent on refilling a failed prescription for reform: by proposing to give hundreds of billions to private insurers in exchange for measly coverage for some of the uninsured.
Our healthcare system is so sick that even people with good insurance are feeling the fever. Premiums for employers and their workers are rising 12 percent, even 18 percent per year. Employers have downsized coverage by super-sizing copayments and deductibles. Insurance often proves illusory when it’s most needed—payment denials, visit limits, loopholes and policy cancellations leave millions stuck with huge medical bills despite what they thought was good coverage. Most people’s choice of doctors and hospitals is restricted. Seniors can’t afford drugs, Medicaid recipients face draconian cuts and everyone’s rushed out of the hospital.
Investor-owned healthcare has flourished, despite definitive evidence that it raises both costs and death rates. And bandit CEOs regularly raid our health system, making off with seven- and even eight-figure incomes as their reward for cooking the books, defrauding Medicare and abusing patients to inflate profits.
Bush’s signal healthcare achievement, passage of the $534 billion Medicare drug bill, already is unravelling. Double-digit yearly price increases—even for older drugs—already have eaten up the paltry savings (about 15 percent) available from the recently introduced Medicare drug discount cards. Even the massive flow of federal funds that will commence in 2006, when the full drug benefit kicks in, will only get seniors back where they started last year in terms of drug spending.
Why will $534 billion in new federal spending (over 10 years) buy so little? First, the new drug coverage will be purchased through private insurance plans with overhead costs that average four times Medicare’s. Second, the bill prohibits Medicare from negotiating with drug companies to lower their prices (and effectively bans imports of Canadian drugs on the preposterous pretext that they’re unsafe). Both the Canadian government and our own Defense Department have used their purchasing clout to garner volume discounts. Prohibiting such bargaining assures drug firms of hundreds of billions in excess profits.
Finally, the bill hands Medicare HMOs—which have been ripping off Medicare for years—an extra $46 billion. Since 1985, Medicare has paid HMOs for seniors who choose to enroll. The payment formula has allowed HMOs to collect far more than it would have cost the taxpayers to care for these seniors in the traditional Medicare program. The Congressional Budget Office and the General Accounting Office have estimated these extra costs at about $2 billion per year. Yet HMOs—burdened by administrative overhead far higher than Medicare’s—complained they couldn’t make a profit from Medicare patients.
Bush’s solution? Send them more money. So in 2004, Medicare will pay HMOs an extra $552 above the cost of traditional Medicare for each senior they enroll, according to an estimate by the Commonwealth Fund.
Incredibly, the Republicans (and many Democrats) describe this corporate welfare program as a “pro-competition” health policy. Drug firms are granted patents that shield them from generic competitors, foreign drug imports are banned, government is precluded from negotiating over prices and HMOs are given huge subsidies to compete unfairly against Medicare—all in the name of competition.
Sadly, many Bush initiatives merely continued Clinton’s policies. Kerry promises more of the same. He proposes to spend about $65 billion annually to expand coverage through two mechanisms: One, offer government subsidies for private insurance; two, expand Medicaid. As a nod to middle-class Americans, he’d try to hold down private premiums by having the feds pick up the tab for any patient whose care costs more than $50,000—a misguided effort that shifts some costs to the taxpayers but leaves control in the hands of private firms. Kerry’s massive new spending would leave at least 17 million uninsured (by his own estimate) and tens of millions more with inadequate coverage, and stimulate the malignant growth of healthcare costs.
In contrast, a single payer national health insurance (NHI) program could simultaneously cover all of the uninsured, upgrade coverage for most other Americans and save money. Under NHI, everyone would be covered for care at any hospital, doctor’s office or clinic without copayments or deductibles. Patients would enjoy a free choice of provider, and doctors and nurses would be freed from the massive bureaucracy that encumbers care and wastes money. For-profit ownership of hospitals and other clinical facilities would be proscribed, and private health insurers and most HMOs would be eliminated—saving billions now squandered on profits and executives’ incomes, while upgrading quality.
Surprisingly, universal coverage under NHI would not increase health costs. At $6,200 per capita, Americans already spend nearly twice as much for care as do Canadians, Australians, Germans, Swedes and the Swiss—all of whom enjoy universal coverage and lower death rates than ours. Much of the cost difference is due to our mammoth health bureaucracy, which wastes upward of $300 billion annually. NHI could slash bureaucracy by replacing the current welter of private plans with a single public payer and simplifying payments. Even the Congressional Budget Office and the General Accounting Office concede that NHI could save enough on bureaucracy to cover all Americans for what we’re now spending.
On the contrary, Kerry’s plan would actually boost bureaucracy. He’d funnel hundreds of billions of additional public dollars through wasteful private plans. And he’d do nothing to cut the tens of billions that doctors and hospitals waste on insurance paperwork. Kerry claims administrative savings for his plan—through computerized billing and claims processing. But such claims are not credible; more than two-thirds of all healthcare bills already are filed electronically. It’s not sending the bill that’s expensive. It’s the insurance advertising and sales, utilization review, eligibility determination, obtaining pre-approvals for referrals, cost-tracking, and co-payment collections. All would continue under Kerry.
For the 85 percent of Americans who currently have insurance, Kerry offers virtually nothing. No plausible plan to upgrade their coverage, slow premium increases, bring down drug costs, improve quality, or ex-pand the number of nurses. He’d just ask tax-payers facing skyrocketing premiums to chip in for the coverage of the uninsured.
Much of what Kerry is pro-pos-ing already was tried, and failed miserably. Medicaid expansion has been pushed by Democrats for decades. Since 1987, 11.4 million people have been added to the Medicaid rolls, and Medicaid spending has risen from $50 billion to $228 billion, eating a hole in state budgets. Yet the number of uninsured has grown by 10.2 million people during this period, and Medicaid has remained second-class coverage, segregating the poor. On many measures, Medicaid patients fare no better than the uninsured. Medicaid should be replaced by mainstream coverage, not expanded.
Subsidies for private coverage also have a dismal track record. A 2002 federal program offers to pay 65 percent of premium costs for workers who’ve lost jobs due to foreign imports. As of December 31, 2003, 8,874 of the 500,000 eligible workers were taking advantage of the subsidy. With private coverage costing about $10,000 per family, few low-income workers can afford insurance, even with a big boost from government.
NHI isn’t just good policy, its good politics. According to a recent Washington Post/ABC News poll, 62 percent of Americans favor “a universal health insurance program, in which everyone is covered under a program like Medicare that’s run by the government and financed by taxpayers.”
Of course, NHI would be a death blow to the health insurance industry and it would threaten the super-profits of powerful drug and hospital firms. Presumably, that is why only Ralph Nader and Dennis Kucinich have been willing to buck the special interests, and say what Americans long to hear about health care: NHI can succeed. Healthcare is a right, not a commodity.