By FRITZ LOEWENSTEIN. M.D.
January 26, 2006
Assuming health care, like food and shelter, is a necessity of life, the nation's present health care system, if it can be called a system, has failed miserably.
It is inefficient and far too costly. More than 45 million people are without health insurance and receive haphazard medical care if they receive any at all in this wealthiest of countries. Those on Medicaid also receive inferior care and many doctors and almost all dentists deny care to Medicaid recipients.
Many hospitals and health maintenance organizations (HMOs) are profit-making institutions. They operate under constant pressure to limit services in order to reward stockholders. In other respects too, they incorporate some of the worst features of big business — overpaid executives, some of whom have been indicted for fraud; questionable accounting practices; takeovers of plans with sudden changes in costs and benefits; and termination of programs due to bankruptcy.
Approximately 25 percent of every health care dollar spent in the United States goes to administrative costs, which add up to $294 billion annually. Canadian Provincial Plans spent proportionally less than one-third that amount. In the Medicare program, only 6 percent of total expenditures go to administrative costs.
HMOs, hospitals and drug companies spend huge amounts of money on advertising and promotion, with all the expenses ultimately borne by the consumer. Health insurance premiums, already high, have risen an additional 27 percent for individuals and 16 percent for families during the past year. Small-business owners are no longer buying health insurance for their employees, and increasing numbers of workers cannot afford to pay the premiums.
Many companies now prefer to hire part-time workers in order to avoid paying for health insurance. As a result, more of the working poor are left without coverage and middle-class families are increasingly anxious about possible financial ruin that may result from a serious illness.
Clearly, we need to reform the system. A publicly administered program of universal health insurance, similar to Medicare, would eliminate most of the inequities and inefficiencies. A California study showed that such a plan would cover all that state's residents, including the 6 million uninsured, and save over $7 billion annually in health spending.
Most polls have shown the public favors such a course. Funding would need to come from payroll and income taxes, but premiums and deductibles would be small and the overall cost to business and individuals would be much lower than they are now.
Achieving this will not be easy. Presidents Truman and Clinton tried and failed. The health insurance industry has powerful lobbies in Washington and in state capitals who influence lawmakers to oppose change. Adding insult to injury, the cost of that lobbying, harmful to the consumer, is also borne by the consumer.
However, there are encouraging signs. The Journal of the American Medical Association has taken a strong stance in support of the development of government-supervised universal health insurance. The Institute of Medicine of the National Academy of Sciences also has called for a universal health care plan.
To those who disapprove of government involvement in health care, it should be pointed out that Medicare is both fair and practical, and extension of the program to cover the entire population would be entirely reasonable. The savings in administrative costs alone would amount to many billions of dollars annually.
I know of no patients who ever failed to enroll in Medicare, whereas many patients have complained of lack of coverage, difficulty in obtaining benefits, and high premiums in the private plans.
The recently enacted modification of Medicare by the Bush administration and narrowly passed by Congress takes the program in exactly the wrong direction by introducing private plans. Furthermore, the drug provisions give high rewards to the pharmaceutical industry at the expense of the consumer.
In short, we must adopt a nationwide, single-payer system supervised by the government. But for that to happen, intense pressure needs to be applied to legislators by an informed public.
Loewenstein is a retired physician in Binghamton, NY.
© 2005 Binghamton Press & Sun-Bulletin – Binghamton, NY
The Business Journal (Milwaukee)
From the September 2, 2005 print edition
By Jack Lohman and Dr. Eugene Farley
It is by historical accident that U.S. businesses provide health care to their employees, and it has now placed them at a serious disadvantage when competing globally or against imports whose manufacturers do not have to add this extra 8 percent to 15 percent to the price of their products.
In other countries, health care is a taxpayer burden. It is here too, but we pay through many circuitous routes that have caused jobs to leave the country. We add these costs to our product prices, and it makes us uncompetitive with products that come from countries that already have taxpayer-paid medical systems. Corporations in Canada pay only an $800 annual per-employee tax. The result, as just one example: The Big Three auto companies now make more cars in Ontario than in Detroit, and Toyota just selected Canada over the United States for its new Rav4 manufacturing plant. Jobs are leaving our country because they are doing it right and we are doing it wrong!
The United States must adopt a universal health care system like Canada’s, but long wait times do not have to be a part of our system. We can do better and we will do better. With universal coverage, Canadians have longer life expectancy (by two years), 35 percent lower infant mortality, and 100 percent of the citizens are covered with 40 percent less in total costs. They’ve paid for it with a system that has 8 percent rather than 30 percent administrative costs. More than 90 percent of the patients love it, as do most of the physicians.
But who would pay for our system? The same people who are paying for it today: the taxpayers. We all pay for our health care system, which costs $1.6 trillion each year nationally, and 100 percent of this money comes from we the people, through taxes, premiums, co-pays, deductibles, purchases, employer tax breaks and the other methods we use for collecting money. When we buy product, that company adds its health care costs to the price and we pay at the cash register.
Jobs at stake
But that added price is killing American jobs, and if the feds aren’t willing to fix it the state must. We are only talking about changing how we collect and use the same health care money. Such a system would also replace our Medicaid and BadgerCare costs, assume 40 percent of worker compensation costs, and even replace Medicare if the feds were willing to buy in.
Even if it were zero savings we’d be market winners. And we’d have more than adequate coverage, though it would not cover non-essential lifestyle enhancement surgeries or drugs. Gap insurance would be an option for employers and those wanting to pay for those procedures themselves. That leaves a job for the 400 insurance companies.
Once we eliminate employer-paid medical coverage, which now represents from 8 percent to 15 percent of U.S. employee costs, companies and jobs will stop leaving the state and new companies and jobs (and the tax revenues that result) will start flowing into the state. A properly run universal health care system is the most business-friendly and public-friendly system available.
If our state is the first to do this we will gain jobs from other states. If we are last, they will get our jobs. We must be the leaders, and business leaders must sideline the health care interests to make it happen here.
Jack Lohman of Colgate is the retired CEO of an independent diagnostic lab. Dr. Eugene Farley is a retired physician in Madison.
It is the paradox of America's medical system: While hands can be transplanted and the tiniest babies kept alive, many people cannot afford to see a doctor and live with the threat of financial ruin if they get sick.
Francene Shepard of Louisville had a heart attack in 1999, needed stents to open blocked arteries and ran up about $50,000 in medical bills that went unpaid.
Ian Copeland, a 27-year-old self-employed carpet cleaner who lives in Louisville, goes to the emergency room when he's sick because he cannot afford a private doctor.
"It's a gamble," said his mother, Michelle Copeland. "If something happens, it could be devastating."
Such stories are increasingly common and are leading to growing support among some politicians and medical groups for implementing a national health system offering care for all, including the 45 million Americans and more than half a million Kentuckians without health insurance.
Earlier this month, the Kentucky House Health and Welfare Committee voted to urge Congress to pass a bill, introduced by Democratic Rep. John Conyers Jr. of Michigan, that would expand Medicare to cover all Americans.
The bill would create a "single-payer" health-care system, publicly financed and privately delivered. All Americans would have access regardless of employment, income or health. Each year, the program would set reimbursement rates for health-care providers and negotiate the cost of prescription drugs.
Critics say such a measure would be too costly and unwieldy, but the passion of supporters was evident when the Kentucky House committee vote was called, and Rep. Kathy Stein, D-Lexington, answered: "Hell, yes!"
Conyers' office and the group Physicians for a National Health Program are watching Kentucky and hoping that the General Assembly will back the effort.
"It would be historical to have a Southern state endorse universal health care and medicine for all," said Joel Segal, a legislative assistant for Conyers who handles health-care issues. "This is a life-and-death crisis for many people."
A possible groundswell
A 2002 report by the Institute of Medicine, which advises the federal government on health issues, said 18,000 adults die each year because they lack health insurance. Overall, the United States has a lower life expectancy than several countries, including Canada and the United Kingdom, that have national systems.
"The health-care system is in a deepening crisis," said Dr. Steffie Woolhandler, an associate professor of medicine at Harvard University and co-founder of Physicians for a National Health Program. "The public is quite fed up."
There are signs that the idea of a national system has increasing support here:
A poll last year by the Pew Research Center found that 65 percent of Americans favor national health insurance, even if it means higher taxes.
An Indiana University poll, published in the Annals of Internal Medicine in 2003, said 49 percent of doctors support government legislation to establish national health insurance, while 40 percent oppose it.
Membership in Physicians for a National Health Program, meanwhile, has risen from about 10,000 to 14,000 in recent years.
City councils have passed resolutions in support of the Conyers' bill in Morehead, Ky.; Baltimore; and Erie, Pa.
Locally, Conyers' proposal has gained support from the Kentucky Psychiatric Medical Association, the Louisville-based Falls City Medical Society, and Dr. Adewale Troutman, director of the Louisville Metro Health Department.
A faction of the Kentucky Medical Association also supports the idea of a national health system, said its president, Dr. Daniel Varga. And although Varga and others say they doubt that the United States will be ready, philosophically, to enact a national health plan anytime soon, experts say the debate points to a growing dissatisfaction with the status quo.
That sentiment has been reflected in polls such as one released last week by the Center for American Progress and the Service Employees International Union, which found that nearly nine out of 10 Americans think the current system is broken.
Opposition to proposal
Although opponents agree that the problem of the uninsured must be addressed, they say a national system would drive up taxes, stifle medical innovation and lead to waits for services.
"If you think you can get free health care and you don't have to pay for it in some way, you're being naïve," said Robert Moffit, director of the center for health policy studies at the Heritage Foundation, a Washington-based conservative think tank.
Moffit pointed to a proposal for a state-level universal plan in Oregon that would have required a new personal income tax of as much as 8 percent and a payroll tax for businesses of 3 percent to 11.5 percent.
In addition to tax increases, Moffit said, "once the health-care dollar becomes a part of the federal budget, it competes with education and other priorities."
State Rep. Bob DeWeese, R-Prospect, a retired physician who voted against the Conyers resolution in the Kentucky House committee, also expressed concern about rising taxes.
He said something must be done about the growing number of uninsured Americans, but "we don't have to change the whole system to fix this problem."
Proponents argue that a national health plan would save money. In recent years, increases in insurance premiums have far outpaced inflation. A summary of the Conyers bill says 95 percent of families would pay less for health care under the plan than they do today.
Moffit argued that ultimately, the quality of care would suffer with a national setup, partly because such systems generally don't invest as much in medical technology.
He also pointed to waits for services. One recent survey by a Canadian economic think tank called the Fraser Institute -- which seeks to bring attention to the issue of market competition -- found that waiting times there between referrals and treatment averaged 17.7 weeks across specialties last year.
Proponents of national health care say that concern is overblown.
But Julia Costich, chairwoman of the department of health services management at the University of Kentucky, said the Conyers bill stands little if any chance of passing, partly because it calls for such sweeping change.
"I applaud their ambition," Costich said of proponents, "but it seems very far-fetched."
Kentucky is not the first state to show support for a government-run health system. Some states have gone so far as to move toward their owns plans. In Oregon, where voters rejected a single-payer proposal in 2002, supporters are pushing for another measure in 2008.
In Ohio, a coalition claims it has collected tens of thousands of signatures in support of such a plan and hopes to put the issue on the ballot next year.
Maine already has a program offering affordable health-care coverage that aims to cover all uninsured residents eventually.
Dr. Garrett Adams, a retired physician who heads up the Kentucky chapter of Physicians for a National Health Program, said universal health care is a matter of fairness and humanity. His group prefers a national system to state efforts.
Adams said the problems faced by the uninsured are particularly acute in Kentucky, which was shown in a recent Courier-Journal investigation to be among the least healthy states in the nation.
"This is so wrong," Adams said. "They're real lives. They're people."
Shepard, a 51-year-old home health aide who spoke before the state House Health and Welfare Committee, said that since her heart attack, she has been diligent about getting care at the Family Health Centers' Portland clinic.
But with a low income, specialized care can be a struggle.
A national program would help her "and others like me who fall through the cracks," she said in an interview.
One patch of common ground for supporters and opponents is the belief that the current U.S. system has serious problems.
A 2003 ABC News/Washington Post poll showed that more than half of Americans are dissatisfied with the quality of health care, the first majority in three polls since 1993.
Sandie Limpert of Louisville, a 53-year-old graduate student who has gone half her adult life without health insurance, said she believes the system is in such disarray that a major overhaul would be better than small reforms.
"It's like we're trying to plug our fingers into the dam," she said. "But it's only a matter of time before the whole thing cracks and explodes."
Reporter Deborah Yetter contributed to this story.
Reporter Laura Ungar can be reached at (502) 582-7190.
Wednesday September 14, 6:33 pm ET
By Matthew Daly, Associated Press Writer
Starbucks to Spend More on Health Care Than Coffee, Company's Chairman Says
WASHINGTON (AP) -- Starbucks Corp. will spend more on health insurance for its employees this year than on raw materials needed to brew its coffee, the company's chairman said Wednesday.
Howard Schultz, whose Seattle-based company provides health care coverage to employees who work at least 20 hours a week, said Starbucks has faced double-digit increases in insurance costs each of the last four years.
"It's completely non-sustainable," he said.
Schultz made the comments Wednesday at a meeting with Sen. Patty Murray, D-Wash., and Rep. Adam Smith, D-Wash. The event was one of several organized by Schultz and other executives to call attention to what they called a growing health care crisis.
"I would hope congressional leaders put this at the front of their agenda," said Schultz, noting that a majority of the estimated 45 million uninsured Americans have jobs.
Later, Schultz and other executives, including Costco CEO Jim Sinegal; Dawn Lepore, president and CEO of Drugstore.com; and Ivan Seidenberg, chairman and CEO of Verizon Communications Inc., attended a health care summit at a Senate office building.
Meanwhile, the Kaiser Family Foundation reported Wednesday that the growth rate of health insurance premiums failed to reach double digits this year, the first time that's happened since 2000.
Still, premiums rose much faster than overall inflation and wage growth, the report said.
The foundation, which specializes in health care research, said premiums increased 9.2 percent between spring 2004 and spring 2005. Such an increase could devour much, if not all, of the 2.7 percent increase the average employee saw in wages.
"There is some good news, I suppose. The rate of growth is slightly lower than last year," said Drew Altman, the foundation's president and CEO. "The bad news is that's the only good news, because premiums are still going up 3 times faster than wages."
Schultz said Starbucks expects to spend about $200 million this year for health care for its 80,000 U.S. employees -- more than the total amount it spends on green coffee from Africa, Indonesia and other countries.
Starbucks has about 100,000 employees worldwide, Schultz said, including about 65 percent who work part-time. Increasingly, the company is hiring older workers, who are attracted in large part by the company's generous benefits, he said.
Schultz said Starbucks' benefits policy is a key reason it has low employee turnover and high productivity.
He declined to endorse any specific legislation, saying his goal was to raise awareness of the problem. But whatever solution is adopted, he said, "Every single American needs to have access to health insurance -- full-stop."
Associated Press writer Kevin Freking contributed to this story.
Kaiser Family Foundation: http://www.kff.org
by JAMIE LINCOLN KITMAN
[from the April 17, 2006 issue of The Nation]
General Motors is headed for the wall. One of America's largest corporations recorded its biggest losses ever as its US market share dropped to the lowest levels since before it overtook Ford in the 1920s. GM's executive team, led by chair and chief executive officer Richard "Rick" Wagoner, has sought to paint the company's difficulties as the result of unforeseeable changes in consumer preference and the rising cost of healthcare, but neither is the case. GM's faulty product mix--too many SUVs and not enough superior car products--rests squarely on its management's shoulders. As for skyrocketing healthcare costs, GM's officers have failed to advocate a remedy that is not just in their workers' interest but in their shareholders' too--national healthcare.
The corporation says that employees' private healthcare plans cost about $1,500 for every car it sells. In every other area of cost, GM managers see their duty as paying the lowest prices possible. If one of its competitors buys dashboard moldings more cheaply in China, GM demands without hesitation that its suppliers deliver it moldings at the same price or it takes its business to China, as it has increasingly done in recent years. Yet it seems institutionally unwilling to speak up for the national healthcare that would save it tens of billions in America, where it spends nearly $6 billion a year on healthcare.
The corporation's reticence seems even more peculiar in view of its experience building cars in Canada, a country that adopted a single-payer healthcare system more than thirty years ago. As Morton Mintz reported in these pages, top executives of the Big Three US automakers' Canadian units and the leader of the Canadian autoworkers union proclaimed, in a "Joint Letter on Publicly Funded Health Care," that the country's single-payer healthcare system "significantly reduces total labour costs...compared to the cost of equivalent private insurance services purchased by US-based automakers" [see Mintz, "Single Payer: Good for Business," November 15, 2004]. At a press conference Michael Grimaldi, president and general manager of GM Canada and a GM vice president, called single payer "a strategic advantage for Canada" and its biggest export industry, automobile manufacturing.
GM's US management is not alone in dropping the ball on national healthcare. Few executives have come out for it, though many corporations and their shareholders would benefit. And instead of confining their energies to negotiating the terms of the givebacks they are being asked to sell to their members, the leaders of the United Auto Workers' union would be well advised to lobby more vigorously for the cause of universal healthcare, which they've only lately endorsed.
General Motors has a unique role in America, however, and its leaders a special sort of bully pulpit, as they demonstrated following the September 11, 2001, attacks on the World Trade Center. As a nation stood by, stunned, GM launched a massive patriotic advertising campaign that stimulated an unprecedented SUV-buying frenzy. If nothing else, the success of this campaign showed what GM can do to forward a cause if it wants to.
When queried about government health insurance, Wagoner has said that he feels it inappropriate to inject GM into political debates. That statement must tickle those who remember the supposedly recalcitrant chairman stumping the nation on behalf of George W. Bush's second round of tax cuts or his corporation's outspoken positions against emissions regulations, fuel economy standards and the Kyoto treaty--indeed, against the very existence of global warming.
Few will remember that GM, along with Ford and Chrysler, was actually standing in the wings to endorse the ill-starred national healthcare plan forwarded by the Clinton Administration in 1993. When it crashed and burned, the Detroiters quietly let themselves out the back door.
It may be that Wagoner and company fear the opprobrium they'll face at their country clubs if it becomes known that they're advocating something that sounds like socialism--even if national healthcare is a given in almost every capitalist land. Yes, it's true that such a system would not only benefit GM and its workers but also hundreds of millions of un- and underinsured Americans.
But in the long-established matter of the responsibility of the corporation and its officers to shareholders--which may be summarized briefly as "money talks, everything else walks"--there can be no argument that passing the cost of one's workers' and retirees' healthcare to the federal Treasury makes anything other than complete business sense.
Shareholders, unite! Right-wing ideology shouldn't be allowed to trump cost reduction and profit. Especially when, to paraphrase a former GM chair, What's good for General Motors is also good for America. And vice versa.
Multiple Insurers, Multiple Plans Create Expensive, Draining Hassle
By Benjamin Brewer – The Wall Street Journal – April 18, 2006
A recently approved Massachusetts plan designed to force all residents to get health insurance was a step in the right direction, but it doesn't go far enough.
Under the Massachusetts approach, there will still be a maze of plans provided by any number of insurers. That multiplicity is the problem. Multiple insurers and multiple plans create layers of unneeded expense and bureaucracy related to billing, collections and the entire assembly line of middlemen between the service rendered and the payment.
The solution that would really put health-care dollars, and providers, to their best use would be a single-payer system – namely, government-funded health coverage for all.
It took me a while to conclude that a single-payer health system was the best approach. My fear had been that government would screw up medicine to the detriment of my patients and my practice. If done poorly, the result might be worse than what I'm dealing with now.
But increasingly I've come to believe that if done right, health care in America could be dramatically better with true single-payer coverage; not just another layer – a part D on top of a part B on top of a part A, but a simplified, single payer that would cover all Americans, including those who could afford the best right now. Representatives and senators in Washington should have to use the same system my patients and I do were they to vote it in.
Doctors in private practice fear a loss of autonomy with a single-payer system. After being in the private practice of family medicine for 8 1/2 years, I see that autonomy is largely an illusion. Through Medicare and Medicaid, the government is already writing its own rules for 45% of the patients I see.
The rest are privately insured under 301 different insurance products (my staff and I counted). The companies set the fees and the contracts are largely non-negotiable by individual doctors.
The amount of time, staff costs and IT overhead associated with keeping track of all those plans eats up most of the money we make above Medicare rates. As it is now, I see patients and wait between 30 and 90 days to get paid. My practice requires two full-time staff members for billing. My two secretaries spend about half their time collecting insurance information. Plus, there's $9,000 in computer expenses yearly to handle the insurance information and billing follow up. I suspect I could go from four people in the paper chase to one with a single-payer system.
It would be simpler and better for the patient, and for me, if the patient could choose a doctor, bring their ID card with them, swipe it in a card reader at the time of service and have the doctor get paid on the spot with electronic funds transfer.
Instead, patients have to negotiate a maze of deductibles, provider networks, out-of-network costs, exclusions, policy riders, ER surcharges, etc. Wouldn't a card swipe be simpler? No preexisting conditions to worry about. No indecipherable hospital bills. One formulary to deal with and one set of administrative rules to learn instead of 300.
With a single-payer system, there are concerns about waiting times for procedures and not getting access to the "best doctors." These are real issues, but not unsolvable ones. We have these disparities now. Fact is, they are mostly a matter of geography, insurance status and personal wealth.
A single-payer system would increase access to care for the uninsured and the underinsured, including the working poor. It would lower total health costs, in part by replacing 50 different state Medicaid programs and umpteen insurers with one system. This approach has the potential to improve quality and lower costs by improving care for chronic illnesses such as diabetes, high blood pressure and heart disease.
Such a system of care would rely on evidenced-based interventions, that is, providing the right care at the right time to the right patients, according to generally accepted best practices, and it would reduce the disparities in access to and quality of care among ethnic groups. Better tracking of chronic diseases, outbreaks and identification of bioterrorism would also be benefits.
There are powerful forces that oppose a single-payer system – the health insurance industry for one. The insurance industry got its share of the Medicare drug benefit pie, as did the pharma industry. It would have been better and simpler for the government to design one plan with a standard drug fee schedule that everyone could understand, as the government does with care that doctors provide to Medicare patients. But that's not the way it happened.
Doctors have been supportive of the idea of universal access to care, but not necessarily a single-payer system. Some fear delays in obtaining necessary testing and surgeries. What I suspect they fear most is a loss of income and the fear of the unknown.
A single-payer system would admittedly lower fees for subspecialty care, such as radiology and cardiology. But if more doctors went into family medicine or obstetrics and fewer into subspecialties like plastic surgery, that shift might help correct the physician manpower imbalances that exist now. That wouldn't necessarily break my heart.
I suspect doctors would be more likely to support a single-payer system if national malpractice reform was part of the package – which it should be.
I used to think a single-payer system would keep my income down and inject bureaucracy into my medical decision-making. But with the efficiency it could bring, it would at worst be an economic wash; more likely, the trimmed costs would more than make up for any foregone revenue. As for autonomy, I'm already struggling to maintain it amid the interference of insurers.
On the whole, the efficiency – and equality – that a single-payer system would provide would more than compensate for its shortcomings.
THE DOCTOR'S OFFICE
The Doctor's Office is a first-hand online column about the issues, challenges and rewards facing physicians today. It's written by Benjamin Brewer, a doctor with a family practice in the rural village of Forrest, Ill. Send your comments and questions to Dr. Brewer at email@example.com
Dave Pavlick's full schedule and details on how you can help will be posted here soon. Please check back. In the meantime, please watch the video for more information.
May 1, 2006
New York Times
For lower-income working Americans, lack of health insurance is quickly becoming the new normal. That's the implication of survey results just released by the Commonwealth Fund, a nonpartisan organization that studies health care. The survey found that 41 percent of nonelderly American adults with incomes between $20,000 and $40,000 a year were without health insurance for all or part of 2005. That's up from 28 percent as recently as 2001.
Many of the uninsured reported spending their entire savings on health care and/or that they were having difficulty paying for basic necessities. And most uninsured adults reported cutting corners on medical care to save money — failing to fill prescriptions, skipping medications, going without preventive care.
Here's the other side of the same coin: health insurers' business is lagging, reports The Wall Street Journal, as "rising premiums and medical costs push more of their traditional-employer customers to shun or curtail company health benefits." And some investors are feeling the pain. Aetna's stock price fell sharply last week, on news that its "medical cost ratio" — a term I'll explain in a minute — rose from 77.9 to 79.4.
Taken together, these stories tell the tale of a health care system that's driving a growing number of Americans into financial ruin, and in many cases kills them through lack of basic care. (The Institute of Medicine, part of the National Academy of Sciences, estimates that lack of health insurance leads to 18,000 unnecessary American deaths — the equivalent of six 9/11's — each year.) Yet this system actually costs more to run than we would spend if we guaranteed health insurance to everyone.
How do we know this? The medical cost ratio is the percentage of insurance premiums paid out to doctors, hospitals and other health care providers. Investors are upset about Aetna's rising ratio, because it leaves less room for profit. But even after the rise in the cost ratio, Aetna spends less than 80 cents of each dollar in health insurance premiums on actually providing medical care. The other 20 cents go into profits, marketing and administrative expenses.
Other private insurers have similar ratios. And here's the thing: most of those 20 cents spent on things other than medical care are unnecessary. Older Americans are covered by Medicare, which doesn't spend large sums on marketing and doesn't devote a lot of resources to screening out people likely to have high medical bills. As a result, Medicare manages to spend about 98 percent of its funds on actual medical care.
What would happen if Medicare was expanded to cover everyone? You might think that the nation would spend more on health care, since this would mean covering 46 million Americans who are currently uninsured. But the uninsured already receive some medical care at public expense — for example, treatment in emergency rooms that would have been both cheaper and more effective if provided in doctors' offices.
And Medicare manages to spend much more of its funds on medicine, as opposed to other things, than private insurers. If you do the math, it becomes clear that covering everyone under Medicare would actually be significantly cheaper than our current system.
And this calculation doesn't even take into account the costs our fragmented system imposes on doctors and hospitals. Benjamin Brewer, a doctor who writes an online column for The Wall Street Journal, recently commented on the excess expenses he incurs trying to deal with 301 different private insurance plans. According to Dr. Brewer, he currently employs two full-time staff members for billing, and his two secretaries spend half their time collecting insurance information. "I suspect," he wrote, "I could go from four people in the paper chase to one with a single-payer system."
Many pundits see red at the words "single-payer system." They think it means low-quality socialized medicine; they start telling horror stories — almost all of them false — about the problems of other countries' health care. Yet there's nothing foreign or exotic about the concept: Medicare is a single-payer system. It's not perfect, it could certainly be improved, but it works.
So here we are. Our current health care system is unraveling. Older Americans are already covered by a national health insurance system; extending that system to cover everyone would save money, reduce financial anxiety and save thousands of American lives every year. Why don't we just do it?
By Kip SullivanViews > May 4, 2006 > In These Times - Web Only
Odds are good that Romney will rue the day he took credit for this bill.
Legislators around the country are looking to the law recently passed in Massachusetts for answers on how to cope with the health care crisis in their states. Will Massachusetts really be the first state to achieve universal health insurance? Should Republican voters across the country see this legislation as evidence that Republican Governor Mitt Romney, who is likely to seek his party’s nomination for president, is an effective leader, or a “Republican In Name Only” who believes in too much government?
Proponents of the new law say it will result in near-universal coverage in the state by 2010, reducing the uninsured rate in Massachusetts to 1 percent from its 2004 rate of 11 percent. Beginning July 1, 2007, the law will require uninsured Massachusetts residents to either buy health insurance or face fines. Romney signed the bill on April 12.
The law has drawn an enormous amount of media coverage, much of it superficial. On April 12, the Associated Press reported, “The bill, intended to extend coverage to Massachusetts’ estimated 550,000 uninsured, is being touted as a national model, thrusting the state to the forefront of the national debate about how to provide near-universal health care coverage without creating a single government-controlled system. It’s also a political coup for Romney as he weighs a potential run for the Republican presidential nomination in 2008.”
Romney, who has repeatedly stated that the bill represents his thinking more than that of the Democratically controlled House and Senate, told the New York Times, “This is really a landmark for our state because this proves … that we can get health insurance for all our citizens without raising taxes and without a government takeover. The old single-payer canard is gone.”
However, Romney’s expectations of the law are going to be dashed, and his obituary for single-payer will prove to be premature. The fundamental flaw of the Massachusetts law is that it does little to reduce health care cost inflation. The bill attempts to improve coverage by funneling money through the bloated insurance industry. Insurance companies allocate roughly 20 percent of their revenue to cover their administrative costs (which include marketing, telling doctors how to practice medicine, providing dividends, and financing high management salaries). That is 10 times the overhead of Medicare, which allocates only 2 percent of its expenditures to overhead, and about 20 times that of Canada’s single-payer system, which allocates 1 percent. Moreover, a system of multiple insurers drives up the administrative costs of clinics and hospitals. This is especially true if all or most of the insurers practice managed care.
Nor is it likely that lowering the uninsured rate in Massachusetts will lower total health spending and premium inflation. Although the argument is often made that the cost of extending coverage to the uninsured will be more than offset by the reduction in medical costs due to improvements in the health of the formerly uninsured, there is little evidence for this claim. It is true that having health insurance is associated with better health. But it is also true that the insured use many more medical services than the uninsured do—some studies have estimated nearly twice as many.
The failure of the Massachusetts law to cut health care costs will be aggravated by its method of reducing the number of uninsured: It requires all Massachusetts residents to buy health insurance. Health insurance, in other words, will be treated like car insurance—you have to have it or you’ll be in violation of state law and subject to a fine.
This provision, known as an “individual mandate,” is supported primarily by Republicans. AFL-CIO president John Sweeney characterized it as a regressive measure that only Gingrich Republicans would support. “Forcing uninsured workers to purchase health care coverage or face higher taxes and fines is the cornerstone of Mr. Gingrich’s health care reform proposals,” Sweeney said. “It is unconscionable that Massachusetts has adopted this misguided individual mandate.”
To meet their obligations under the mandate, most employed Massachusetts residents will continue to buy health insurance from their employer. But because the law does little to reduce premium inflation, employer flight from the health insurance market will continue, forcing more and more employees to purchase insurance on their own. In Massachusetts today, it costs employers about $4,000 per year to insure an employee without dependents and $11,000 a year to insure an employee with dependents.
So, how will the state’s uninsured be able to afford such a big-ticket item? The law requires the state to pay the entire premium for those under the federal poverty level (about $10,000 in annual income for an individual), and to provide sliding scale subsidies for those between poverty level ($20,000 for a family of four) and 300 percent of poverty (about $29,000 for an individual). Unfortunately, it is impossible from reading the law to know what the minimum level of coverage will be, how much insurance companies will charge for it, and how much the subsidy will be for any given income level. The law merely tells us that a state board with the odd name “board of the connector” will determine what constitutes “minimum creditable coverage,” and that this board will determine how big the subsidies have to be to make the coverage “affordable” to residents. (The term “connector” in the board’s title reflects its central task of assembling individuals who don’t have insurance through work and small employers into a large pool so that they can purchase insurance at the lower rates large employers get.)
To get some sense of how the law is going to work, we must turn to statements by the lawmakers who wrote it. They claim they can reduce insurance premiums for individuals, for example, from $4,000 down to $2,400 a year. This seems extremely unlikely. The only way the Massachusetts insurance industry can reduce premiums even a little, never mind by 40 percent, will be by offering substantially reduced coverage. This will not endear residents to Governor Romney and his “model” legislation. If, on the other hand, coverage is not reduced and premiums therefore remain near current levels, subsidies will have to be raised, which means taxes will have to go up, which won’t endear Romney to Massachusetts residents or to voters, especially Republican voters, in other states.
What will probably infuriate residents most will be the enforcement of this bill. The bill requires employers, providers, and residents to make reports to the government about who has insurance, and it punishes the uninsured with fines enforceable by the Department of Revenue. Residents who don’t have insurance in 2007 will lose their personal income tax exemption (worth about $150). In succeeding years they will be fined half the price of the cheapest health insurance policy that the “connector” deems to be “creditable coverage”: about $1,200 if premiums indeed fall to the $2,400 range, and closer to $2,000 if premiums are in today’s $4,000 range. Penalties for families will apparently be even higher.
The spectacle of hundreds of thousands of Massachusetts residents having to buy insurance with awful coverage that they cannot afford, and many refusing to buy insurance and taking steps to avoid paying their fines (such as not filing income taxes) will come into focus in the latter half of 2007 and the first half of 2008—that is, in the year leading up to the 2008 Republican national convention. The media, in short, will have plenty of time to unearth horror stories about Romney’s “model” legislation. Odds are good that Romney will rue the day he took credit for this bill.
Kip Sullivan sits on the steering committee of the Minnesota Universal Health Care Coalition. He is the author of The Health Care Mess
, available at authorhouse.com
I am Patricia Moss and I am the proud president of AFSCME Ohio Council 8 representing 41,000 public employees in Ohio. Nationwide AFSCME represents more than 1.3 million working Americans.
Our members like most Ohioans find themselves in the midst of this fight for affordable, quality health care. As so many speakers will tell you today there are 1.3 million Ohioans without health care. Every 8th person you pass on the street in Ohio does not have health insurance. Count them the next time you go for a walk.
Many of you may think that union represented employees don’t need to be concerned about health care coverage. Well those days, if they ever existed, are gone. Across the nation, in states where we have the data, we see a growing number of union represented public employees on Medicaid—the government health care program for low income individuals who do not have health care.
Ohio unfortunately does not collect data on the number of public employees on Medicaid, so we don’t know the numbers. But we know they exist as public employers continue to reduce their health care benefits.
In Texas where we do have data, 15 of the 20 employers identified in the state's report of employers with employees whose children are on Medicaid, were public employers—mostly school districts.
In Massachusetts the City of Boston is number 6 on the list of employers with 50 employees or more who have employees using public health assistance.
How can it be that public employers, which have historically offered decent health care benefits, are now beginning to contribute to the nation's uninsured working population? Strapped for cash, many states are reducing their own employees' access to health benefits by relegating them to part-time or temporary status, or increasing their contributions to a point where they simply cannot afford health care.
After 5 years of double digit health care cost increases, no longer are public employers willing to allow employees to keep their health care in exchange for giving up wage increases. Every where we look, we see that the deal is off—a deal that cost our members year after year of wage increases.
And there is a growing number of public employees whose entire paycheck goes for their share of the health care premium. Some find that even after giving their entire paycheck to cover health care, they still owe their employer money for their health care.
We know that 46 million Americans have no health insurance. Another 16 million are in a new category of underinsured. That means these folks spend more than 10% of their income on health care costs.
With escalating health care costs and massive cost shifting to employees we are not only a nation of insured and uninsured, we are a nation of those who have insurance and can afford to use the benefit and those who are insured but cannot afford to use the benefit due to escalating deductibles, co-insurance and co-pays.
Indeed 21% of adults both insured and uninsured have medical debt they are paying off over time. For 44% of them the debt is in excess of $2,000. And no surprise the number one reason for bankruptcy in this country is due to medical expenses.
With every percentage increase in health care costs it is likely that 500,000 people are added to the uninsured as employers either stop offering health care or make it so costly that employees cannot afford to enroll in it.
We have an employer-sponsored health care system in this country. People generally get their health care through their employment. Yet nearly 40% of US employers do not offer health care coverage to their employees. Nearly 60% do not offer retiree health care benefits.
Of course if you are uninsured you are less likely get needed medical treatment or fill your prescriptions. Because of that the National Academy of Sciences estimates that lack of health insurance leads to 18,000 preventable deaths in the United States. That is equivalence of the losses suffered through 6 9/11’s each year.
This lack of health care coverage has serious impacts on our nation’s ability to compete in the global market place. Benefits cost in the United States equals 29% of payroll. While in Japan, Canada and the United Kingdom it is closer to 17%. And the reason for this increased benefit cost in the United States is due to the cost of employer sponsored health care.
Starbucks spends more on health care for their employees than they do on coffee. The auto industry spends more on health care than it does on steel for its cars.
Every car built in America has an additional $1200 in costs due to our inefficient health care system. That makes it very difficult for our auto industry to compete in the global market place. And is it any wonder that GM had its bond rating downgraded to junk bond status—because of its staggering health care costs for its employees and retirees.
So at the same time we are losing our manufacturing sector in the US due to this health care crisis, the number of citizens on Medicaid due to lack of health insurance is increasing. In Ohio the number of non-disabled adults on Medicaid increased by 31% in the last 6 years. These are people who either lost their job or lost health care because their employer stopped offering it or made it too expensive for the employee to afford. So we lose the tax base provided by the manufacturing sector that helps fund programs like Medicaid at the same time we are experiencing increased demand on such programs. This is a public policy disaster.
And while our manufacturing sector cannot compete globally, foreign manufacturers are not building plants in America either. In fact, when Toyota was deciding where in North America to place its next auto factory it by-passed numerous offers of tax subsidies in the United States and opted for Canada due in part to its national health care system. Canadian workers are $4 to $5 cheaper to employ in large part because of the taxpayer-funded health-care system in Canada.
So while we are in the midst of this health care crisis what does the Ohio Legislature offer us as solutions?
First for school employees the legislature wants to take our members’ right to negotiate health care benefits away. HB 66 once fully enacted will strip hundreds of thousands of school employees of their right to negotiate over health care benefits. These are the same people who have year after year sacrificed wage increases to keep affordable health care. This no solution to the health care crisis we face in Ohio. And if you want to help stop this plan please sign one of the post cards to the Speaker of the House and the President of the Senate circulating in the audience urging them to keep their hands off our health care and we will make sure they get delivered.
The second solution this legislature has offered us is to force every public employer to offer a high deductible health savings account. These accounts do nothing to help the 1.3 million Ohioans who do not have health care. HSAs do nothing to add needed improvements to the health care system.
HSAs will negatively impact employers’ traditional health care plans as healthier employees leave those plans for the HSAs. HSAs will also make lots of money for countless brokers who manage these accounts. And for those who can afford them, they will provide some tax relief. For those who can’t afford to put $1,000 to $2,000 a year in an HSA they will simply not select health care. And if their income is low enough they will end up on Medicaid.
So while HSAs will reduce the amount of tax dollars coming in, they will also increase the demand for Medicaid. This is not the kind of public policy that our lawmakers should be setting as we address this health care crisis.
We need real health care reform. We need to deliver a wake up call to this legislature that this health care crisis must be addressed. My union, AFSCME Ohio Council 8 will continue to link arms with organizations that are fighting for affordable, quality health care.
So many of our great social programs like Social Security, Medicare, unemployment insurance, the public school system and workers compensation came about because labor unions joined with others to advance these causes. We will win this fight because of our joint efforts and you can count on AFSCME to be at the front of this fight.