Notes on the Status of Health Reform

The election of Obama raised expectations for sweeping health reform sky high.  But in spite of several self-imposed deadlines, Senate and House health reform bills were not ready by the time of the August Congressional recess, when passionate local debate erupted at Congressional home district town hall meetings. 

The Onion pierced the din with truth: “After months of committee meetings and hundreds of hours of heated debate, the United States Congress remained deadlocked this week over the best possible way to deny Americans health care.”

If the goals are health care for all and reduced costs of care, the measures being prepared in Congress will not reform the health system.  Instead they amount to a massive taxpayer subsidy for the private health insurance industry. 

In 2007, more than one of five working-age people were uninsured for a year or longer.  One of six working people had health insurance insufficient to meet the expenses of a serious illness.  And there were 8 million uninsured children in the United States.  At least 5 million more people lost their health insurance in 2008 and 2009 thanks to galloping unemployment — on top of years of progressively unaffordable health insurance, inadequate coverage, and steep out-of-pocket costs.  The failing economy further accelerated the crisis in health care through devastating state and local cutbacks in safety net care. 

Yet the Congressional bills that have come through committees, whose key provisions would not start until 2013, offer precious little relief for these ills. 

Against this background, a nascent mass movement for single-payer national health insurance, plugging away for decades, steadily accumulates new force.  Single payer would deliver all necessary care for all individuals, lifelong, with no co-pays and no deductibles, through a system in which health care would be publicly financed but privately delivered.  By eliminating private insurance, single payer would save an estimated $400 billion annually in health spending.  The single-payer bills in Congress are HR 676 and S 703.  HR 676 has 86 co-sponsors and has been endorsed by over 500 labor bodies, including 39 state AFL-CIO federations. 

Whether a bill passes or flounders this fall, the details in the proposals that have come through Congressional committees have little connection with the popular expectations and grassroots clamor this summer.  If Congress enacts reform, in 2013, individuals will be required to purchase health insurance.  This is the centerpiece of the “reform.”  The proposal has come straight from the insurance industry: criminalize the uninsured and subsidize unaffordable private insurance premiums with public funds. 

Massachusetts as a Model

An “individual mandate” was enacted in Massachusetts under Governor Mitt Romney in 2006.  All residents of the state were required to join the private insurance risk pool or pay a fine.  (The state purchased health insurance for everyone with incomes below 150% of the federal poverty level and subsidized those making between 150% and 300% of that level.)  This was said to reduce costs through an expansion of the risk pool.  It did not. 

A new state agency, the Commonwealth Health Insurance Connector, was established to match individuals to private insurance plans.  The Connector employs more state workers to assist with the purchase of private health insurance than the province of Ontario’s Medicare employs.  Canada’s Medicare is the agency that pays for all necessary medical services for all residents.  Ontario’s Medicare overhead is 1.3%.  In Massachusetts, the Insurance Connector adds 4.5% in administrative cost to each policy it brokers. 

The Massachusetts reform went into effect in 2007.  As of March 2008, 40% of those uninsured in 2007 remained without coverage.  High-deductible policies lowered premium costs by shifting more of the expense onto individuals.  Physicians for a National Health Program found that a healthy 43 year-old man making just over $31,000 a year would have to pay $5,096 before any insurance coverage kicks in, with additional co-pay and co-insurance costs. 

In Massachusetts when you lose your job you still lose your health insurance, the reform does not protect you from financial ruin when illness strikes, and health insurance remains far too expensive. 

Neither is the program sustainable for the state.  As the state budget deficit rises into the billions, funding for safety net programs and institutions has been slashed to keep the individual mandate afloat.  Services that have been cut include care for the poor, emergency and primary care, mental health, and addiction care.  A 2008 survey of opinion intended to bolster the program found that, of those directly affected by the reform in Massachusetts, 56% opposed the individual mandate and 50% said that it “is hurting” the uninsured.  In July 2009, moreover, the state revoked subsidized health insurance for 30,000 legal immigrants

For Healthy Profits

The “individual mandate” is a financial bonanza for the insurance industry just at time when the relentless rise in premiums, far ahead of wages, began to hit a ceiling of unaffordability. 

An April 2008 New York Times business column about sagging profits at UnitedHealth carried a frank appraisal of the declining employer-sponsored private health insurance market.  “It is never a good thing if many of your customers can no longer afford what you’re selling,” Reed Abelson wrote.  “In recent years despite soaring medical costs, insurers have made big profits by keeping premiums well ahead of health care inflation.  But analysts say that business strategy may be reaching its limits, with companies finding it harder to raise prices without losing substantial numbers of customers.”

The article closed with a quote from a health business analyst: “The hail Mary may be that we turn to some sort of universal care.”

Shortly after the Presidential election, the insurance industry officially embraced health care reform.  A November 2008 press release from Blue Cross Blue Shield read: “The Blue Cross and Blue Shield Association (BCBSA) and the 39 member Blue Cross and Blue Shield companies today announced support for every individual being required to have coverage and all insurers being required to accept everyone regardless of their health status.”

If the government would only criminalize the uninsured and pay the premiums for the poor, the industry said, it would stop denying people insurance coverage because they are ill.  The industry further promised that women would no longer be charged more than men for health insurance — again, if and only if the federal government would deliver paying customers — and guarantee the payments too. 

But there is growing recognition that the “reform” is most of all “truly meaningful” for the profitability of the Blue Cross Blue and Shield Association and its competitors.  BusinessWeek announced on its front page: “The Health Insurers Have Already Won: How UnitedHealth and rival carriers, maneuvering behind the scenes in Washington, shaped health-care reform for their own benefit.”  A Los Angeles Times headline read: “Healthcare insurers get upper hand.  Obama’s overhaul fight is being won by the industry, experts say.  The end result may be a financial ‘bonanza.'”

Details of the Swindle

Congressional proposals include a minimum annual tax of $750 and/or a tax of 2.5% of adjusted income upon people who don’t purchase health insurance.  For those who still could not afford the premiums, a hardship waiver could be requested.  The Senate HELP bill defines “unaffordable” as 12.5% of income or more. 

Companies that presently arrange skimpy policies, for example the very high deductible plans like what Wal-Mart offers, would be protected by a grandfather clause and exempted from regulations setting forth minimum covered benefits.  Recognizing that the costs of health insurance are a nonstarter for individuals, subsidies for private health insurance policies would be granted for people whose incomes are 400% of federal poverty or less.  And tax credits would be given to small employers to subsidize the employer share of insurance premiums and grant payments to employers whose plans cover retirees aged 55-64. 

But as the Congressional Budget Office began adding up the price tag — over a trillion additional dollars in costs over the coming decade — lawmakers moved to scale back the subsidy.  According to the Los Angeles Times, “In May, the Senate Finance Committee discussed requiring that insurers reimburse at least 76% of policyholders’ medical costs under the most affordable plans.  Now the committee is considering setting the rate as low as 65%.”

Bankruptcies in the United States in 2009 will affect 3.8 million people.  Two-thirds are the result of debt due to illness — more than three-fourths of them have health insurance.  To prevent this, HR 3200 would cap personal costs (at $5,000 for an individual and $10,000 for a family) — but only for covered services, not all out-of-pocket costs. 

On top of this, the proposal would shift more costs to individuals.  Invoking “shared responsibility,” the House bill calls for employers to pick up at least 72.5% of the premium for an individual policy and 65% of the premium for a family.  The Senate HELP bill would require employers to offer to pay 60% of the insurance premium.  Consider that 40% (the direct cost to the employee) of the market price for insurance coverage for a family of four would equal two-fifths of about $16,000 — $6,400 annually or $533 per month.  Plus co-pays, deductibles, and the rest of the usual unaffordable out-of-pocket expenses. 

Another feature of proposed bills is a government “exchange,” through which employers and individuals would be encouraged to purchase insurance.  Individuals would not be allowed to use the exchange if their employers offer health insurance, including plans that were grandfathered.  This agency would add yet another layer of expensive bureaucracy to the presently dysfunctional system, just as the Connector did in Massachusetts. 

None of these changes would start until 2013.  Some of the provisions that would begin in 2010 include new taxes, increasing Medicaid payment for primary care services to 80% of Medicare rates, and prohibiting insurance companies from recissions — rescinding policies for reasons other than nonpayment of premiums (often the allegation of failing to disclose a pre-existing condition.)

“Public Option” Posturing

The “public option” refers to an idea that people and employers should be allowed to purchase insurance from a public program along the lines of Medicare.  Proponents believe this would pressure the entire insurance market to reform itself.  On moral grounds, supporters of the public option advance arguments similar to single-payer proponents: insurer profits amount to blood money, for every penny earned by the company is a penny’s worth of care cheated from the effort to make a human being healthy.  In comparison, a public program with the lowest possible overhead, its finances open for scrutiny, presents a morally defensible means of paying for care. 

But the public option amounts to a moral posture, not a workable reform.  Single payer would eliminate the insurance industry from health care; a “public option” cannot.  A “public option” won’t liberate the resources squandered by the private insurance companies.  Instead, it adds duplicative waste in administrative overhead to the system. 

The most relevant evidence comes from the state of Maine.  Maine has offered a “public option” since 2003.  In six years this program has managed to cover only 10% of the uninsured and has not forced its competitors to lower costs. 

Perhaps the idea of a “public option,” as a clever market-based scheme, reveals something about popular ideological illusions, for it relies upon a crude kind of “free markets equal low costs plus high quality.”  Of course this is not the way the market works.  The laws of the health insurance market, in particular, dictate that the successful competitor will avoid insuring people who are sick and/or poor while recruiting customers who are healthy and wealthy. 

Does it really make sense to believe that a “public option” tossed amid the heavily monopolized insurance market in the U.S. would stand a chance at competing for the healthy and wealthy patients? In the best case scenario, wouldn’t such a program instead drive the system toward officially sanctioned disparities in care?

Historical note: once upon a time, as Medicare gained momentum required for Congressional passage, the “public option” was put forward by the AMA, Ronald Reagan Republicans, Dixiecrat Democrats, and other right-wing opponents of Medicare.  The idea was to let seniors voluntarily purchase insurance from a public plan, in addition to private insurers, instead of enrolling all seniors in Medicare.  Does it make sense to now embrace a proposal that was objectionable over 45 years ago?

Topsy Turvy

The “public option,” more a political posture than a specific proposal, has given liberals and progressives a reason to support a reform that would be, at its heart, a spectacular bailout for a failing financial services industry, in which the government will hawk the product, coerce customers, and subsidize payments to companies.  But the White House seems prepared to jettison even the “public option” in exchange for bipartisan support for the individual mandate, in spite of “public option” supporters’ moral indignation. 

Prevailing Democratic Party wisdom holds that the tragedy of the Clinton heath reform effort was a failure to maneuver legislation through Congress quickly, thanks to too much deal-making behind closed White House doors.  The “nuance” of the Obama administration was to move the deal-making behind the closed doors of Congressional committees.  Meanwhile the White House, in parallel, also sought closed-door deals palatable to “stakeholder” profiteers, hoping to expedite bipartisan compromise.  History seems to have repeated itself — if the first time tragedy, this time farce. 

The Los Angeles Times reported that former Louisiana Congressman Billy Tauzin, President and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), visited the White House six times.  In exchange for a pharmaceutical industry promise to forgo $80 billion in profit over 10 years, Tauzin told the Los Angeles Times, the President promised not to allow importing of drugs from Canada or Europe and not to reform Medicare Part D.  (Medicare Part D has been another government-delivered industry bonanza — for it prohibits the government from bargaining for drug prices.)   In return, PhRMA has pledged $150 million in advertising in support of the Presidents’ reform effort. 

Yet the Right, in response to the industry-friendly proposals moving through Congress, has attacked the entire reform (not just the public option) as if it were single-payer national health insurance!  In the resulting gyrations, when PhRMA lobbyist and former House Republican leader Dick Armey joined the chorus of conservative talking heads attacking the Congressional bills as a “government takeover of health care,” PhRMA forced his resignation from the lobbying firm. 

Because the reform discussions have included Medicare cuts, the Right also found fertile ground among seniors.  A Democratic Party-friendly poll found that 39% said “yes” when asked “Do you think the government should stay out of Medicare?”

So, at the end of August, the Republican Party took the position of “hands off Medicare.”  To leave in place “Medicare Advantage” (which pays private insurance companies 12 to 17% more than it pays for the costs of care of traditional Medicare) and Medicare Part D (another huge giveaway to the drug and insurance industry), the Republican Party tied itself in knots after decades of calling for the abolition of Medicare. 

Also in the name of “keeping the government out of health care,” the Republican Party came out in defense of the Veterans Administration, a socialized health care system directly owned and operated by the federal government. 

In August, the Congressional Budget Office released a study that underscored once again evidence of superior quality of care at the VA: better than Medicare, better than private practice, and better than managed care. 
If we were to engage in a truly evidence-based debate over how to pay for health care using a “uniquely American” model, it would be a debate between single payer, based on the Medicare model, and socialized medicine, like the VA. 

From “Off the Table” to “On the Floor”

Single-payer national health insurance, after more than 20 years of accumulating evidence, now accumulates unprecedented popular support.  Although polls have shown for decades that a majority, including physicians, favor national health insurance, the depth and passion of grassroots activism for the proposal is something new.  For the first time, this fall, single payer may be voted on the floor of the House of Representatives. 

At the end of July, as the Energy and Commerce Committee completed deliberations on HR 3200, Representative Anthony Weiner of New York, with six others, put forward an amendment to replace the text of HR 3200 with the text of HR 676.  Committee Chair Waxman interrupted to say that House Speaker Nancy Pelosi offered to allow single payer to be voted on by the entire House of Representatives if the amendment were withdrawn from the Committee.  Weiner accepted.  Perhaps the prospect of defeating single payer on the floor of the House of Representatives seems, to the Democratic Party leadership, a way to at last get single payer off the table. 

Single-payer activists have welcomed this turn of events, however, for it was the direct fruit of grassroots mobilization.  The proposals before Congress, with the exception of HR 676 and S 703, will simply not work.  Whatever happens in Congress this fall, the system will grow more dysfunctional.  And with expectations for fundamental reform now raised even higher, excellent prospects to build a movement for single-payer national health insurance will persist. 

Andrew D. Coates, MD is a member of Physicians for a National Health Program.