News & Opinion

Single-Payer FAQ

Is national health insurance “socialized medicine”?

No. Socialized medicine is a system in which doctors and hospitals work for the government and draw salaries from the government. Doctors in the Veterans Administration and the Armed Services are paid this way. Examples also exist in Great Britain and Spain. But in most European countries, Canada, Australia and Japan they have socialized financing, or socialized health insurance, not socialized medicine. The government pays for care that is delivered in the private (mostly not-for-profit) sector. This is similar to how Medicare works in this country. Doctors are in private practice and are paid on a fee-for-service basis from government funds. The government does not own or manage their medical practices or hospitals.

The term socialized medicine is often used to conjure images of government bureaucratic interference in medical care. That does not describe what happens in countries with national health insurance. It does describe the interference by insurance company bureaucrats in our health system.

Won’t this raise my taxes?

Currently, about 64% of our health care system is financed by public money: federal and state taxes, property taxes and tax subsidies. These funds pay for Medicare, Medicaid, the VA, coverage for public employees (including teachers), elected officials, military personnel, etc. There are also hefty tax subsidies to employers to help pay for their employees’ health insurance. About 17% of heath care is financed by all of us individually through out-of-pocket payments, such as co-pays, deductibles, the uninsured paying directly for care, people paying privately for premiums, etc. Private employers only pay 19% of health care costs. In all, it is a very “regressive” way to finance health care, in that the poor pay a much higher percentage of their income for health care than higher income individuals do.

A universal public system would be financed this way: The public financing already funneled to Medicare and Medicaid would be retained. The difference, or the gap between current public funding and what we would need for a universal health care system, would be financed by a payroll tax on employers (about 7%) and an income tax on individuals (about 2%). The payroll tax would replace all other employer expenses for employees’ health care. The income tax would take the place of all current insurance premiums, co-pays, deductibles, and any and all other out of pocket payments. For the vast majority of people a 2% income tax is less than what they now pay for insurance premiums and in out-of-pocket payments such as co-pays and deductibles, particularly for anyone who has had a serious illness or has a family member with a serious illness. It is also a fair and sustainable contribution. Currently, over 41 million people have no insurance and thousands of people with insurance are bankrupted when they have an accident or illness. Employers who currently offer no health insurance would pay more, but they would receive health insurance for the same low rate as larger firms. Many small employers have to pay 25% or more of payroll now for health insurance – so they end up not having insurance at all. For large employers, a payroll tax in the 7% range would mean they would pay less than they currently do (about 8.5%). No employer, moreover, would hold a competitive advantage over another because his cost of business did not include health care. And health insurance would disappear from the bargaining table between employers and employees.


Another consideration is that everyone would have the same comprehensive health coverage, including all medical, hospital, eye care, dental care, long-term care, and mental health services. Currently, many people and businesses are paying huge premiums for insurance that is almost worthless if they were to have a serious illness.


Won’t this result in rationing like in Canada?

The U.S. Supreme Court recently established that rationing is fundamental to the way managed care conducts business. Rationing in U.S. health care is based on income: if you can afford care you get it, if you can’t, you don’t. A recent study by the prestigious Institute of Medicine found that 18,000 Americans die every year because they don’t have health insurance. That’s rationing. No other industrialized nation rations health care to the degree that the U.S. does.

If there is this much rationing why don’t we hear about it? And if other countries do not ration the way we do, why do we hear about them? The answer is that their systems are publicly accountable and ours is not. Problems with their health care systems are aired in public, ours are not. In U.S. health care no one is ultimately accountable for how it works. No one takes full responsibility.

The rationing that takes place in U.S. health care is unnecessary. A number of studies (notably the General Accounting office report in 1991, and the Congressional Budget office report in 1993) show that there is more than enough money in our health care system to serve everyone if it were spent wisely. Administrative costs are far higher in the U.S. than in other countries’ systems. These inflated costs are directly tied to our failure to have a publicly-financed, universal health care system. We spend at least twice more per person than any other country, and still find it necessary to deny health care.

Who will run the health care system?

There is a myth that, with national health insurance, the government will be making the medical decisions. But in a publicly-financed, universal health care system medical decisions are left to the patient and doctor, as they should be. This is true even in the countries like the UK and Spain that have socialized medicine.

In a public system the public has a say in how it’s run. Cost containment measures are publicly managed at the state level by an elected and appointed body that represents the people of that state. This body decides on the benefit package, negotiates doctor fees and hospital budgets. It also is responsible for health planning and the distribution of expensive technology.

The benefit package people will receive will not be decided upon by the legislature, but by the appointed body that represents all state residents in consultation with medical experts in all fields of medicine.

What about medical research?

Much current medical research is publicly-financed through the National Institutes of Health. Under a universal health care system this would continue. A great deal of drug research, for example, is funded by the government. Drug companies are invited in when it comes to marketing successful new drugs. AZT for HIV patients is one example. All the expensive clinical trials were conducted with government money. When it was found to be effective, marketing rights went to the drug company. (This is a controversial practice because it means pharmaceutical companies enjoy significant profits on the back of taxpayer-financed research.)

Medical research does not disappear under universal health care system. Many famous discoveries have been made in countries that have national health care systems. Laparoscopic gallbladder removal was pioneered in Canada. The CT scan was invented in England. The new treatment to cure juvenile diabetics by transplanting pancreatic cells was developed in Canada.

It is also important to note that studies show that the number of clinical research grants declines in areas of high HMO penetration. This suggests that managed care increasingly threatens clinical research. Another study surveyed medical school faculty and found that it was more difficult to do research in areas with high HMO penetration.

Won’t this just be another bureaucracy?

The United States has the most bureaucratic health care system in the world. Over 24% of every health care dollar goes to paperwork, overhead, CEO salaries, profits, and other non-clinical costs. Because the U.S. does not have a system that serves everyone and instead has over 1,500 different insurance plans, each with their own marketing, paperwork, enrollment, premiums, rules, and regulations, our insurance system is both extremely complex and fragmented. The Medicare program operates with just 3% overhead, compared to 15% to 25% overhead at a typical HMO.

It is not necessary to have a huge bureaucracy to decide who gets care and what care they get, if and when everyone is covered and has the same comprehensive benefits. With a universal health care system we would be able to cut our bureaucratic burden in half and save nearly $150 billion per year.

How will we keep costs down if everyone has access to comprehensive health care?

People will seek care earlier when diseases are more treatable (and affordable). We know that the uninsured delay or avoid seeking care because they are afraid of health care bills. This will be eliminated under such a system. Undoubtedly costs of taking care of the medical needs of people who are currently doing without will cost more money in the short run. But we will be spending proportionately less on administration to compensate.
In the long run, the best way to control costs is to negotiate fees and budgets with doctors, hospitals, and drug companies and to set and enforce an overall budget.


How will we keep doctors from doing too many procedures?

This is a problem in systems that reimburse physicians on a fee-for-service basis. In today’s health system, another problem is physicians doing too little for patients. So the real question is, “how do we discourage both overcare and undercare”? One approach is to compare physicians’ use of tests and procedures to their peers with similar patients. A physician who is “off the curve” will stand out. Another way is to set spending targets for each specialty. This encourages doctors to be prudent stewards and to make sure their colleagues are as well, because any doctor doing unnecessary procedures will be taking money away from other physicians in the same specialty. Another way is to continue to develop expert guidelines by groups like the American College of Physicians, etc. to shape professional standards – which will certainly change over time as treatments change. This really gets to the heart of “how do you improve the quality of health care” which is a longer topic . Suffice it to say that universal coverage is a pre-requisite for quality improvement.

What will happen to physician incomes?

On the basis of the Canadian experience, average physician incomes should change little. However, the income disparity between specialties is likely to shrink.

The drop in income that a physician might experience under a single-payer system could be mitigated by a drastic reduction in office overhead and malpractice costs. Billing would involve imprinting the patient’s national health program card on a charge slip, checking a box to indicate the complexity of the procedure or service, and sending the slip (or a computer record) to the physician-payment board. This simplification of billing would save thousands of dollars per practitioner in annual office expenses.

How will we keep drug prices under control?

When all patients are under one system, they wield a lot of clout. The VA can purchase drugs for 40% discounts because they are a bulk purchaser. This is called monopsy buying power and it is the main reason why other countries’ drug prices are lower than ours. The same could happen with medical supplies and durable medical equipment.

Why shouldn’t we let people buy better health care if they can afford it?

Whenever we allow the wealthy to buy better care or jump the queue, health care for the rest of us suffers. One need only look at the example of the nation’s health insurance program for the poor, versus the Walter Reed Hospital in Bethesda, MD, that serves members of Congress. Access to care for the poor is deteriorating because Medicaid is a grossly underfunded health care program. Because it doesn’t serve the wealthy, the payment rates are low and many physicians refuse to see Medicaid patients. D.C. General Hospital in D.C., which serves the poor, is always on the brink of bankruptcy. Calls to improve Medicaid fall on deaf ears because the beneficiaries are not considered to be politically important. On the other hand, members of Congress have completely free access to care at Walter Reed where the quality of care couldn’t be better.

What will be covered?

All medically necessary care, including doctor visits, hospital care, prescriptions, mental health services, nursing home care, rehab, home care, eye care and dental care.

What about alternative care, will it be covered?

Alternative care that is proven in clinical trials to be effective will be covered. For example, spinal manipulation for some back conditions. Other treatments will be decided by the health care planning board or other public body. New kinds of treatments will be added to the benefits package over time as they are shown to be effective, including “alternative” treatments. Similarly, ineffective, harmful, or wasteful care can be removed from the benefits package, such as funding for a costly medication that is no better than aspirin for arthritis.

Isn’t a payroll tax unfair to small businesses?

The payroll tax is more costly to businesses who are not currently insuring their workers. However, it is much less THAN what they would pay for good private insurance for themselves and their workers. For most of the small businesses already providing coverage, the payroll tax will be much less expensive than what they are paying now.
Ideally, the payroll tax will be replaced in the future by a tax that doesn’t charge an administrative assistant making $17,000 a year the same percentage of salary as a CEO earning $175,000 a year.


Can a business keep private insurance if they choose?

Yes and no. Everyone has to be included in the new system for it to be able to control costs, reduce bureaucracy, and cover everyone. However, business and anyone who wants to can purchase additional private insurance that covers things not covered by the national plan (e.g. cosmetic surgery, orthodontia, etc.).

Insurance companies will no longer be needed to decide who gets medical care and what kind of medical care, and would not be allowed to offer the same benefits as the universal health care system. Any allowance for this would weaken and eventually destabilize the health care system. It would undermine the principle of pooling the risk. Health care systems act as universal insurers. At any one time the healthy help pay for those who are ill. If private insurers are allowed to cherry pick the healthy, leaving the public health care system with the very sick, the system cannot help but fail. This is part of what is happening in U.S. health care now.

Another reason is that, if allowed, patients would enroll in the private system while they were healthy (and their premiums were low), and enroll in the public system when their care (and private premiums) became expensive. This, in fact, is what we saw happen to Medicare and HMOs. There, patients needing expensive care, e.g., a hip replacement, were encouraged to drop out of their HMO so traditional Medicare would pick up the tab. However, while they are healthy they enroll in the HMO for the modest additional dental and drug benefits.

What will happen to all of the people who work for insurance companies?

The new system will still need people to administer claims. Administration will shrink, however, eliminating the need for a large bureaucracy. The focus will shift to those who deliver health care. More health care providers, especially in the field of long-term care and home health care, will be needed, and many insurance clerks can be retrained to enter these fields. Many people now working in the insurance industry are, in fact, already health professionals (e.g.nurses) who will be able to find work in the health care field again.

How will we contain costs with the population aging and the advent of expensive technology?

Japan and Europe are already facing this problem head-on and doing fine. They have a much higher percentage of elderly than we do, and still spend less on health care by far.

The best way to approach this is to regard it as a societal problem, one that needs a solution with everyone in mind. Germany and Japan recently adopted single-payer long-term care systems to cover the long-term care needs of the elderly at home and in specialized housing. Germany is pioneering a program that pays family members to care for the elderly at home. That’s family values!

What about ERISA? Doesn’t it stand in the way of implementing a universal health care plan?

No. ERISA (the Employees Retirement Income Security Act) prevents a state from requiring that a self-insured employer provide certain benefits to their employees. However, a single payer plan would not mandate the composition of employer benefit plans – it would replace them with a new system that would essentially be “Medicare for All”. The state would require employers to pay a payroll tax into the health care trust fund. This is legal and is done now with taxes levied to pay for Medicare.

How will the Health Planning Board operate?

In Vermont, it would work something like this: The health planning board (the Health Care Administration) would be a public body with representatives from every legislative district. The representatives would be appointed by each member of the state house of representatives. The state would be divided into 7 regions. The appointed members from each region would elect one person among them to serve on the health planning board. The board would consult regularly with a medical expert advisory committee. The latter would advise the regional board members on what treatments, medications and services should be covered, decisions supported by medical science.

Since we could finance a fairly good system , like the Norwegian, Danish or Swedish system with the public money we are already spending (60% of health costs), why do we need to raise the additional 40% (from employers and individuals)?

There are three reasons why the U.S. health care system costs more than other systems throughout the world. One, we spend 2-3 times as much as they do on administration. Two, we have much more excess capacity of expensive technology than they do (more CT scanners, MRI scanners, mammogram machines than we need). Three, we pay higher prices for services than they do. There is no doubt that we do not need to spend more than we currently spend to cover comprehensive care for everyone. But it would make the transition to a universal system very difficult at first if we spent less. That is because we have a tremendous medical infrastructure, some of which would likely retain its slightly larger than necessary capacity during the transition phase. Secondly, we would likely retain salaries for health professionals at their current levels. Thirdly, we would cover much more than most other countries do by including dental care, eye care, and prescriptions. And for these reasons we would need the extra 40% that we are already spending – but NOT more. We could cover all the uninsured for the same amount we are currently spending!

How much of the health care dollar is publicly financed?

Previous calculations of the percentage of the health care dollar that is publicly financed were estimated to be around 50%. That was from federal and state taxes to fund Medicare, Medicaid and the VA. 30% was out-of-pocket and 20% from employers.

Estimates differ depending on how they factor in certain costs. For example, recent studies put the tax subsidy offered to employers into the public spending column. A tax subsidy to help employers buy health insurance for employees means the public helps pay the bill. Another factor is that many employees pay the full cost of the premiums for their health insurance at work – not the employer. Newer analyses of these factors put the public financing estimate at 64%, out-of-pocket at 17% (for uncovered services, premiums not paid for by an employer) and employers’ contributions at 19%. (Health Affairs 1999;18(2):176.

Why not MSAs?

Medical savings accounts (MSAs) and similar options such as health reimbursement arrangements are individual accounts from which medical expenses are paid. Once the account is depleted and a deductible is met, then medical expenses are covered by a catastrophic managed care plan, usually a restricted PPO plan. Individuals with significant health care needs may rapidly deplete their accounts and then be exposed to large out-of-pocket expenses. They would tend to select plans with more comprehensive coverage. Since only healthy individuals would be attracted to the MSAs, higher-cost individuals would be concentrated in the more comprehensive plans, driving up premiums and threatening affordability. By placing everyone in the same pool, the cost of high-risk individuals is diluted by the larger sector of relatively healthy individuals, keeping health insurance costs affordable for everyone. Also, since healthy individuals cannot possibly predict whether or when they would develop significant health care needs, they would eliminate that potential financial risk by being included in the comprehensive pool with everyone else.

Why not use tax subsidies to help the uninsured buy health insurance?

The major flaw of tax subsidies is that they would be used to help purchase plans in our current fragmented system. The administrative inefficiencies and inequities that characterize our system would be left in place, and we would continue to waste valuable resources that should be going to patient care instead. In spite of tax subsidies, moderate and lower income individuals would be able to afford only those plans with very modest benefits, and with higher cost sharing that might make health care unaffordable. Instead of perpetuating our current inequities, tax policies should be used to create equity in contributions to a system in which everyone is assured access to comprehensive beneficial services.

If the tax subsidies are granted to individuals, employers would be motivated to drop their coverage, and most individuals covered would have merely rotated from employer coverage to individual coverage. The net reduction in the numbers of uninsured would be close to negligible. If the tax subsidies are granted to employers, a major shift in funding passes from employers to taxpayers without significant improvements in the inefficiencies and inequities of our current system. We can use the tax system to create equity in the way we fund health care, but we should also expect equity and efficiency in allocation of our health care resources. That is possible only if we eliminate the private health plans and establish our own publicly administered system.

Won’t competition be impeded by a universal health care system?

Advocates of the free market approach to health care claim that competition will streamline the costs of health care and make it more efficient. What is overlooked is that competitive activities in health care under a “free market” system have been wasteful and expensive and can be blamed for raising costs. Not only have they NOT contained costs, they have raised costs. In fact it has been shown that in some states where competition among insurers and HMOs is fiercest, such as California, costs are higher than the national average.


There are two main areas where competition exists in health care. Among the providers, and among the payers. When, for example, hospitals compete they often duplicate expensive equipment in order to corner more of the market. This drives up overall medical costs to pay for the equipment. They also waste money on advertising and marketing. The preferred scenario has hospitals coordinating services and cooperating to meet the needs of the public.

Competition among medical care providers can be beneficial in terms of improving the quality of medical care. Take for example, three primary care doctors in a certain area “competing” for patients for which they will receive equal reimbursement from every patient. The doctor who is most competent in different areas will attract the most patients in that area. One doctor may make house calls to see the elderly. Another may be very good at mental health care. This is competition based on quality not on price. Competition among insurers (the payers) is not effective in containing costs either. Rather, it results in competitive practices resorted to by private payers such as avoiding the sick, cherry picking, denial of payment of expensive procedures, marketing, etc.

Why not make people who are Higher Risk pay Higher Premiums?

Experience rated insurance requires higher risk people to pay higher premiums. This approach says that people who have had cancer or other problems in the past, or who have chronic conditions like diabetes and hypertension, must pay more because they are at higher risk of getting cancer again or having a stroke or other health problem. Experience rating allows insurance companies to “cherry pick” the healthiest people and either refuse to insure the sickest or, what amounts to the same thing, charge prohibitively high rates.This approach makes no sense. The whole point of insurance is to spread the risk so that everyone is covered. If you raise premiums – and thereby exclude from coverage – those people unfortunate enough to have been sick in the past, you defeat the point of both insurance and the health care system. Genetic conditions, childhood diseases, accidents, injuries and income distribution (or how much equality there is in a society) play a much bigger role in people’s health than so-called “lifestyle” factors. It costs much less to care for a smoker than a driver who has a paralyzing accident. (Of course, we need public health and education programs to try to prevent both!).

Community rated health insurance is the socially fair approach. It spreads the risks evenly among all the insured. It removes the punitive element. It does not discriminate against the very sick, nor against those of us who are at higher risk because of our age (say, over 50) or our gender (females have higher health expenses in their 20’s and 30’s than men do).

It appears that for what should be a broad social service an insurance-based approach does not work. For it to work at all society is asked to surrender all control of the system and what is left is both discriminatory and unaccountable to anyone. At some point in our lives all of us without exception have needed or will need some level of health care. Health insurance is unlike any other form of insurance. We all are involved in it. It is profoundly intertwined with social principles of decency and fairness. A system that punishes the sick is neither. Any reform of the health care system must begin from a principled approach.
"Of all the forms of inequality, injustice in health care is the most shocking and inhumane." - Martin Luther King, Jr.
Physicians for a National Health Program


Why the US Needs a Single-Payer Health System

Why Single Payer?

Single-payer national health insurance, also known as “Medicare for all,” is a system in which a single public or quasi-public agency organizes health care financing, but the delivery of care remains largely in private hands. Under a single-payer system, all residents of the U.S. would be covered for all medically necessary services, including doctor, hospital, preventive, long-term care, mental health, reproductive health care, dental, vision, prescription drug and medical supply costs.

The program would be funded by the savings obtained from replacing today’s inefficient, profit-oriented, multiple insurance payers with a single streamlined, nonprofit, public payer, and by modest new taxes based on ability to pay. Premiums would disappear; 95 percent of all households would save money. Patients would no longer face financial barriers to care such as co-pays and deductibles, and would regain free choice of doctor and hospital. Doctors would regain autonomy over patient care.

The Expanded and Improved Medicare for All Act, H.R. 676, based on PNHP’s JAMA-published Physicians’ Proposal, would establish an American single-payer health insurance system.

What about Obamacare?

The Affordable Care Act (“Obamacare”) aims to expand coverage to about 30 million Americans by requiring people to buy private insurance policies (partially subsidizing those policies by government payments to private insurers) and by expanding Medicaid. However:

• About 30 million people will still be uninsured in 2023, and tens of millions will remain underinsured.
• Insurers will continue to strip down policies, maintain restrictive networks, limit and deny care, and increase patients’ co-pays, deductibles and other out-of-pocket costs.
• The law preserves our fragmented financing system, making it impossible to control costs.
• The law continues the unfair financing of health care, whereby costs are disproportionately borne by middle- and lower-income Americans and those families facing acute or chronic illness.

This handy chart compares single payer and the ACA.

Ready to take action?

Let Congress know they should support single payer. Click here to send an editable letter in support to your representative.

For other steps you can take in support of single payer, check out our Get Active page.

More questions?

Over the past two decades, peer-reviewed research by PNHP leaders framed the debate on health care and focused it on the need for fundamental reform. Our proposals detail what a single-payer system in the U.S. could look like.

Further information is available on our Single Payer Resources and FAQ pages.

Physicians for a National Health Program
29 E Madison Suite 602, Chicago, IL 60602 ¤ 
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© PNHP 2015


What is Single-Payer?

Single-payer means that one fund, administered by a non-profit government agency accountable to the public would make payment for all medical services. Period. The 1500 private health insurance companies that currently do this work—each raking in profits for its stockholders and each with its own expensive bureaucracy and complicated policies—would no longer be involved as middle men.   Medicare is an example of a single-payer plan.



For an entertaining and informative overview of single-payer, take a look at "WHAT IS SINGLE-PAYER?" an animation created for the general public by Stanford University Medical Student Graham Walker.

Like music with your messages?  "PIRATES OF THE HEALTH CARE-IBBEAN," an animation with music by the Austin Lounge Lizards, will tickle your funnybone.


Single-Payer FAQ


Check out the Physicians for a National Health Program web site ( It lays out, point by point, how a national single-payer system would work and explains in clear language why single-payer is the best solution to the health care crisis in America.


Why the US Needs a Single-Payer Health System
by David U. Himmelstein, MD & Steffie Woolhandler, MD

Our pluralistic health care system is giving way to a system run by corporate oligopolies. A single payer reform provides the only realistic alternative.


A few giant firms own or control a growing share of medical practice. The winners in the new medical marketplace are determined by financial clout, not medical quality. The result: three or four hospital chains and managed care plans will soon corner the market, leaving physicians and patients with few options. Doctors who don’t fit in with corporate needs will be shut out, regardless of patient needs.
A single firm - Columbia/HCA - now owns one quarter of all Florida hospitals, and has announced plans to move into Massachusetts. In the past year alone the firm has purchased more than a dozen hospitals in Denver and Chicago, closing unprofitable ones and shutting out unprofitable physicians and patients.

In Minnesota, the most mature managed care market, only three or four plans and three or four hospital chains are left. In many rural areas a single plan dominates the market, presenting patients and physicians with a take it or leave-it choice.

Managed care plans in California, Texas and Washington, DC have “delisted” thousands of physicians - both primary care doctors and specialists - based solely on economic criteria. One Texas physician was featured in Aetna’s newsletter as “Primary Care Physician of the Month”, and thrown out of the plan shortly thereafter when he accumulated high cost patients in his practice.

In Massachusetts, BayState HMO “delisted” hundreds of psychiatrists, instructing their patients to call an 800 number to be assigned a new mental health provider. The for-profit firm running Medicaid’s managed mental health care plan has just informed psychiatrists that many of them will be barred from the plan as a cost cutting measure.

HMOs are racing to take over Medicare, despite evidence that HMOs have actually increased Medicare costs. The managed care plans sign up mainly the healthy elderly, often illegally inquiring about their health history. The physician contracts offered by plans such as Secure Horizons/Tufts virtually exclude small practices as well as academic physicians who practice less than full time. Financial incentives that penalize the primary care physician for every specialty referral, diagnostic test, and hospital visit pit patients against doctors, and specialists against primary care physicians.

HMOs/insurers that can raise massive amounts of capital by selling stock have a decisive advantage. Their deep pockets allow them to mount massive ad campaigns, market nationally to large employers, and set premiums below costs until competitors are driven out. Once they’ve cornered the market they can drive hard bargains with hospitals and doctors. As a result not-for-profit plans across the country are going for-profit (even Blue Cross), and small plans are being taken over. Even the largest physician-owned plans cannot compete with U.S. Healthcare, Prudential and similar firms with multi-billion dollar war chests.

Large drug firms are preparing to directly take over much of specialty care. Merck, Lilly and others are developing “Disease Management” subsidiaries to sub contract with HMOs to care for patients with expensive chronic diseases such as depression, diabetes, asthma and cancer.

A single payer system would save on bureaucracy and investor profits, making more funds available for care.

Private insurers take, on average, 13% of premium dollars for overhead and profit. Overhead/profits are even higher, about 30%, in big managed care plans like U.S. Healthcare. In contrast, overhead consumes less than 2% of funds in the fee-for-service Medicare program, and less than 1% in Canada’s program.

Blue Cross in Massachusetts employs more people to administer coverage for about 2.5 million New Englanders than are employed in all of Canada to administer single payer coverage for 27 million Canadians. In Massachusetts, hospitals spend 25.5% of their revenues on billing and administration. The average Canadian hospital spends less than half as much, because the single payer system obviates the need to determine patient eligibility for services, obtain prior approval, attribute costs and charges to individual patients, and battle with insurers over care and payment.

Physicians in the U.S. face massive bureaucratic costs. The average office-based American doctor employs 1.5 clerical and managerial staff, spends 44% of gross income on overhead, and devotes 134 hours of his/her own time annually to billing2. Canadian physicians employ 0.7 clerical/administrative staff, spend 34% of their gross income for overhead, and trivial amounts of time on billing2 (there’s a single half page form for all patients, or a simple electronic system).

According to U.S. Congress’ General Accounting Office, administrative savings from a single payer reform would total about 10% of overall health spending. These administrative savings, about $100 billion annually, are enough to cover all of the uninsured, and virtually eliminate co-payments, deductibles and exclusions for those who now have inadequate plans - without any increase in total health spending.

The current market-driven system is increasingly compromising quality and access to care.

The number of uninsured has risen rapidly, to 39.7 million nationally [update: This figure is now over 42 million!]. The proportion of people with coverage paid by an employer is dropping, and those with employer-paid coverage face rising out-of-pocket costs. Only massive Medicaid expansions - 10.5 million nationally since 1989 - have averted a much larger increase in the uninsured. Proposals for welfare reform and Medicaid managed care programs would shrink Medicaid enrollment (increasing the number of uninsured) and threaten the quality of care for those left on Medicaid.

U.S. Healthcare and other investor-owned managed care plans are inserting “gag” clauses in physicians’ contracts. Our own U.S. Healthcare contracts forbid physicians to “take any action or make any communication which undermines or could undermine the confidence of enrollees, potential enrollees, their employers, their unions, or the public in U.S. Healthcare or the quality of U.S. Healthcare coverage” and forbids any disclosure of the terms of the contract. Meanwhile, Leonard Abramson, U.S. Healthcare’s CEO, took home $20 million in a single year, and holds company stock valued at $782 million.

Insurers are gutting mental health benefits, denying needed care, cutting payment rates, and insisting on the cheapest - and often not the best - form of therapy.

HMOs have sought to profit from Medicare and Medicaid contracts by providing substandard care, and even perpetrating massive fraud. The largest Medicare HMO, IMC in Florida, induced thousands of the elderly to sign over their Medicare eligibility and then absconded with $200 million in federal funds. Nationwide, Medicare HMOs provide strikingly substandard homecare and rehabilitation to the disabled elderly. Tennessee Medicaid HMOs have failed to pay doctors and hospitals for care.

After 360,000 women and children were enrolled (and $650 million was spent annually), Florida suspended enrollment in its Medicaid HMO program because of flagrant abuses. Administrative costs consumed more than 50% of Medicaid spending in at least 4 Florida HMOs. In one plan that enrolled 48,000 Medicaid recipients, 19% of total Medicaid dollars went for the three owners’ salaries. Thousands of patients were denied vital care; sales reps often illegally pressured healthy people into joining HMOs, while discouraging those who were ill; patient complaints, and inspectors’ findings of substandard care were repeatedly ignored. Overall, a cursory state audit found serious problems at 21 of the 29 HMOs participating in the program. A more extensive evaluation is just beginning. These Florida scandals are a virtual replay of California’s earlier Medicaid HMO experience.

HMO payment incentives increasingly pressure primary care physicians to avoid specialty consultations and diagnostic tests. In this coercive climate, errors of judgment will inevitably occur, denying patients needed specialty care, while specialists are idle. In some areas of the nation (eg. New York City and California) market imperatives have led to growing unemployment of physicians, while huge numbers of patients don’t get adequate care.

Surveys show that patients greatly prefer care in the small-scale, non-institutional practices that are being wiped out in the current system.

A single payer system is better for patients and better for doctors. Canada spends $1000 less per capita on health care than the U.S., but delivers more care and greater choice for patients. Combining the single payer efficiency of Canada’s system with the much higher funding of ours would yield better care than Canada’s or ours at present.

Canadian patients have an unrestricted choice of doctors and hospitals, and Canadian doctors have a wider choice of practice options than U.S. physicians.

Canadians get more doctor visits and procedures, more hospital days, and even more bone marrow, liver and lung transplants than Americans.

While there are waits for a handful of expensive procedures, there is little or no wait for most kinds of care in Canada. An oft-cited survey that alleged huge waiting lists counted every patient with a future appointment as “in a queue.” (The fringe group that conducted the survey also advocates the abolition of the licensing of physicians to open up free competition among “healers”). More legitimate research shows that the average waiting time for knee replacement in Ontario is 8 weeks, as compared to 3 weeks in the U.S. But patient satisfaction levels with the procedure and care are identical. The time from first suspicion to definitive therapy for breast cancer is actually shorter in British Columbia than in Washington State. There are virtually no waits for emergent coronary artery surgery in Canada, though elective cases face delays, particularly with the surgeons held in highest regard. Interestingly, though Canadian MI patients receive substantially fewer invasive diagnostic and therapeutic procedures, death and reinfarction rates are comparable in the two nations. Finally, under a single payer system we would face much less restraint on care than Canada because we spend (and would certainly continue to spend) much more, and have many more specialists and high tech facilities. Hence even the modest limitations on care seen in Canada are unlikely here.

Surgical outcomes for the elderly (all of whom are insured in the U.S.) are, on average, slightly better in Canada.

Surveys show that Canadian doctors are far happier with their system than we are with ours. According to a 1992 poll, 85% prefer their system to ours; 83% rate the care in Canada as very good or excellent, and most physicians would urge their children to enter the profession. Fewer than 300 out of Canada’s 50,000 physicians emigrate to the U.S. each year, and a survey of doctors who have practiced in both nations shows a clear preference for the Canadian system. Medicine has remained an extremely desirable profession; medical school admission is even more competitive in Canada than here.

Surveys show very high patient satisfaction in Canada. 96% prefer their system to ours, and 89% rate care good or excellent (up from 71% 4 years ago).

Canadian physicians’ income are comparable, in most specialties, to those in the U.S., and have kept pace with inflation for the past 25 years.

It is perhaps comforting to know that Canada’s highly regarded and efficiently managed health system is run by a government no more competent nor popular than our own. Their postal service and public railroad system generally receive lower marks than ours; their government’s record on fiscal management is not better than ours; and polls show that Canadians distrust their government even more than we do.

Many of us have negative feelings toward government, and examples of government inefficiency and incompetence abound. Yet the record of private insurers is far worse. Their overhead is, on average, 600% above that of public programs, and no private insurer’s overhead is as low as Medicare’s. Dozens of financial scandals have wracked insurers and HMOs in the past year alone (our personal favorite is the $500,000 travel budget consumed by the head of one Blue Cross plan, including a $7000 junket to Africa to lecture on insurance fraud). Moreover, Medicare treats doctors and patients more respectfully than most private insurers, funds virtually all residency training, and pays Massachusetts hospitals higher rates than do most HMOs. Finally, when a public program misbehaves we have channels to seek redress; we know where Congress meets, and can vote them out. For-profit firms must answer only to their stockholders.

  1. U.S. Healthcare 1994 Annual Report.
  2. NEJM 1991; 324:1253.
  3. NEJM 1993;329:400-3.
  4. U.S. General Accounting Office. Canadian Health Care: Lessons for the U.S. 1991
  5. Data from U.S. Census Bureau, Current Population Survey March Supplement.
  6. U.S. Healthcare primary care physician contract
  7. Modern Healthcare 5/1/95:60
  8. Health Care Financing Review 1994;16:187
  9. Fort Lauderdale Sun Sentinel. Florida’s Medicaid HMOs: Profits from Paiin. 12/11-12/15, 1994 and State Health Watch April, 1995.
  10. JAMA 1993;270:835
  11. NEJM 1990;323:884
  12. NEJM 1993;328:772
  13. NEJM 1994;331:1063, Ann Int Med 1992;116:507, & OECD Health Database
  14. Waiting Your Turn. Fraser Institute, 1994
  15. NEJM 1994;331:1068
  16. Medical Care 1993;34:264
  17. Health Affairs 1991;10(3):110
  18. NEJM 1993;328:779
  19. Health Affairs, Summer 1992:61
  20. Toronto Globe and Mail, 10/23/92
  21. American J Public Health 1993;83:1544
  22. Medical school application statistics from JAMA medical education issue, multiple years.
  23. Toronto Star 9/13/93
  24. NEJM 1990;322:562

The Moral-Hazard Myth

The bad idea behind our failed health-care system.

by Malcolm Gladwell
The New Yorker - Issue of 2005_08_29

Tooth decay begins, typically, when debris becomes trapped between the teeth and along the ridges and in the grooves of the molars. The food rots. It becomes colonized with bacteria. The bacteria feeds off sugars in the mouth and forms an acid that begins to eat away at the enamel of the teeth. Slowly, the bacteria works its way through to the dentin, the inner structure, and from there the cavity begins to blossom three-dimensionally, spreading inward and sideways. When the decay reaches the pulp tissue, the blood vessels, and the nerves that serve the tooth, the pain starts—an insistent throbbing. The tooth turns brown. It begins to lose its hard structure, to the point where a dentist can reach into a cavity with a hand instrument and scoop out the decay. At the base of the tooth, the bacteria mineralizes into tartar, which begins to irritate the gums. They become puffy and bright red and start to recede, leaving more and more of the tooth’s root exposed. When the infection works its way down to the bone, the structure holding the tooth in begins to collapse altogether.
Several years ago, two Harvard researchers, Susan Starr Sered and Rushika Fernandopulle, set out to interview people without health-care coverage for a book they were writing, “Uninsured in America.” They talked to as many kinds of people as they could find, collecting stories of untreated depression and struggling single mothers and chronically injured laborers—and the most common complaint they heard was about teeth. Gina, a hairdresser in Idaho, whose husband worked as a freight manager at a chain store, had “a peculiar mannerism of keeping her mouth closed even when speaking.” It turned out that she hadn’t been able to afford dental care for three years, and one of her front teeth was rotting. Daniel, a construction worker, pulled out his bad teeth with pliers. Then, there was Loretta, who worked nights at a university research center in Mississippi, and was missing most of her teeth. “They’ll break off after a while, and then you just grab a hold of them, and they work their way out,” she explained to Sered and Fernandopulle. “It hurts so bad, because the tooth aches. Then it’s a relief just to get it out of there. The hole closes up itself anyway. So it’s so much better.”


People without health insurance have bad teeth because, if you’re paying for everything out of your own pocket, going to the dentist for a checkup seems like a luxury. It isn’t, of course. The loss of teeth makes eating fresh fruits and vegetables difficult, and a diet heavy in soft, processed foods exacerbates more serious health problems, like diabetes. The pain of tooth decay leads many people to use alcohol as a salve. And those struggling to get ahead in the job market quickly find that the unsightliness of bad teeth, and the self-consciousness that results, can become a major barrier. If your teeth are bad, you’re not going to get a job as a receptionist, say, or a cashier. You’re going to be put in the back somewhere, far from the public eye. What Loretta, Gina, and Daniel understand, the two authors tell us, is that bad teeth have come to be seen as a marker of “poor parenting, low educational achievement and slow or faulty intellectual development.” They are an outward marker of caste. “Almost every time we asked interviewees what their first priority would be if the president established universal health coverage tomorrow,” Sered and Fernandopulle write, “the immediate answer was ‘my teeth.’ ”


The U. S. health-care system, according to “Uninsured in America,” has created a group of people who increasingly look different from others and suffer in ways that others do not. The leading cause of personal bankruptcy in the United States is unpaid medical bills. Half of the uninsured owe money to hospitals, and a third are being pursued by collection agencies. Children without health insurance are less likely to receive medical attention for serious injuries, for recurrent ear infections, or for asthma. Lung-cancer patients without insurance are less likely to receive surgery, chemotherapy, or radiation treatment. Heart-attack victims without health insurance are less likely to receive angioplasty. People with pneumonia who don’t have health insurance are less likely to receive X rays or consultations. The death rate in any given year for someone without health insurance is twenty-five per cent higher than for someone with insur-ance. Because the uninsured are sicker than the rest of us, they can’t get better jobs, and because they can’t get better jobs they can’t afford health insurance, and because they can’t afford health insurance they get even sicker. John, the manager of a bar in Idaho, tells Sered and Fernandopulle that as a result of various workplace injuries over the years he takes eight ibuprofen, waits two hours, then takes eight more—and tries to cadge as much prescription pain medication as he can from friends. “There are times when I should’ve gone to the doctor, but I couldn’t afford to go because I don’t have insurance,” he says. “Like when my back messed up, I should’ve gone. If I had insurance, I would’ve went, because I know I could get treatment, but when you can’t afford it you don’t go. Because the harder the hole you get into in terms of bills, then you’ll never get out. So you just say, ‘I can deal with the pain.’ ”

One of the great mysteries of political life in the United States is why Americans are so devoted to their health-care system. Six times in the past century—during the First World War, during the Depression, during the Truman and Johnson Administrations, in the Senate in the nineteen-seventies, and during the Clinton years—efforts have been made to introduce some kind of universal health insurance, and each time the efforts have been rejected. Instead, the United States has opted for a makeshift system of increasing complexity and dysfunction. Americans spend $5,267 per capita on health care every year, almost two and half times the industrialized world’s median of $2,193; the extra spending comes to hundreds of billions of dollars a year. What does that extra spending buy us? Americans have fewer doctors per capita than most Western countries. We go to the doctor less than people in other Western countries. We get admitted to the hospital less frequently than people in other Western countries. We are less satisfied with our health care than our counterparts in other countries. American life expectancy is lower than the Western average. Childhood-immunization rates in the United States are lower than average. Infant-mortality rates are in the nineteenth percentile of industrialized nations. Doctors here perform more high-end medical procedures, such as coronary angioplasties, than in other countries, but most of the wealthier Western countries have more CT scanners than the United States does, and Switzerland, Japan, Austria, and Finland all have more MRI machines per capita. Nor is our system more efficient. The United States spends more than a thousand dollars per capita per year—or close to four hundred billion dollars—on health-care-related paperwork and administration, whereas Canada, for example, spends only about three hundred dollars per capita. And, of course, every other country in the industrialized world insures all its citizens; despite those extra hundreds of billions of dollars we spend each year, we leave forty-five million people without any insurance. A country that displays an almost ruthless commitment to efficiency and performance in every aspect of its economy—a country that switched to Japanese cars the moment they were more reliable, and to Chinese T-shirts the moment they were five cents cheaper—has loyally stuck with a health-care system that leaves its citizenry pulling out their teeth with pliers.


America’s health-care mess is, in part, simply an accident of history. The fact that there have been six attempts at universal health coverage in the last century suggests that there has long been support for the idea. But politics has always got in the way. In both Europe and the United States, for example, the push for health insurance was led, in large part, by organized labor. But in Europe the unions worked through the political system, fighting for coverage for all citizens. From the start, health insurance in Europe was public and universal, and that created powerful political support for any attempt to expand benefits. In the United States, by contrast, the unions worked through the collective-bargaining system and, as a result, could win health benefits only for their own members. Health insurance here has always been private and selective, and every attempt to expand benefits has resulted in a paralyzing political battle over who would be added to insurance rolls and who ought to pay for those additions.


Policy is driven by more than politics, however. It is equally driven by ideas, and in the past few decades a particular idea has taken hold among prominent American economists which has also been a powerful impediment to the expansion of health insurance. The idea is known as “moral hazard.” Health economists in other Western nations do not share this obsession. Nor do most Americans. But moral hazard has profoundly shaped the way think tanks formulate policy and the way experts argue and the way health insurers structure their plans and the way legislation and regulations have been written. The health-care mess isn’t merely the unintentional result of political dysfunction, in other words. It is also the deliberate consequence of the way in which American policymakers have come to think about insurance.


“Moral hazard” is the term economists use to describe the fact that insurance can change the behavior of the person being insured. If your office gives you and your co-workers all the free Pepsi you want—if your employer, in effect, offers universal Pepsi insurance—you’ll drink more Pepsi than you would have otherwise. If you have a no-deductible fire-insurance policy, you may be a little less diligent in clearing the brush away from your house. The savings-and-loan crisis of the nineteen-eighties was created, in large part, by the fact that the federal government insured savings deposits of up to a hundred thousand dollars, and so the newly deregulated S. & L.s made far riskier investments than they would have otherwise. Insurance can have the paradoxical effect of producing risky and wasteful behavior. Economists spend a great deal of time thinking about such moral hazard for good reason. Insurance is an attempt to make human life safer and more secure. But, if those efforts can backfire and produce riskier behavior, providing insurance becomes a much more complicated and problematic endeavor.


In 1968, the economist Mark Pauly argued that moral hazard played an enormous role in medicine, and, as John Nyman writes in his book “The Theory of the Demand for Health Insurance,” Pauly’s paper has become the “single most influential article in the health economics literature.” Nyman, an economist at the University of Minnesota, says that the fear of moral hazard lies behind the thicket of co-payments and deductibles and utilization reviews which characterizes the American health-insurance system. Fear of moral hazard, Nyman writes, also explains “the general lack of enthusiasm by U.S. health economists for the expansion of health insurance coverage (for example, national health insurance or expanded Medicare benefits) in the U.S.”


What Nyman is saying is that when your insurance company requires that you make a twenty-dollar co-payment for a visit to the doctor, or when your plan includes an annual five-hundred-dollar or thousand-dollar deductible, it’s not simply an attempt to get you to pick up a larger share of your health costs. It is an attempt to make your use of the health-care system more efficient. Making you responsible for a share of the costs, the argument runs, will reduce moral hazard: you’ll no longer grab one of those free Pepsis when you aren’t really thirsty. That’s also why Nyman says that the notion of moral hazard is behind the “lack of enthusiasm” for expansion of health insurance. If you think of insurance as producing wasteful consumption of medical services, then the fact that there are forty-five million Americans without health insurance is no longer an immediate cause for alarm. After all, it’s not as if the uninsured never go to the doctor. They spend, on average, $934 a year on medical care. A moral-hazard theorist would say that they go to the doctor when they really have to. Those of us with private insurance, by contrast, consume $2,347 worth of health care a year. If a lot of that extra $1,413 is waste, then maybe the uninsured person is the truly efficient consumer of health care.


The moral-hazard argument makes sense, however, only if we consume health care in the same way that we consume other consumer goods, and to economists like Nyman this assumption is plainly absurd. We go to the doctor grudgingly, only because we’re sick. “Moral hazard is overblown,” the Princeton economist Uwe Reinhardt says. “You always hear that the demand for health care is unlimited. This is just not true. People who are very well insured, who are very rich, do you see them check into the hospital because it’s free? Do people really like to go to the doctor? Do they check into the hospital instead of playing golf?”


For that matter, when you have to pay for your own health care, does your consumption really become more efficient? In the late nineteen-seventies, the rand Corporation did an extensive study on the question, randomly assigning families to health plans with co-payment levels at zero per cent, twenty-five per cent, fifty per cent, or ninety-five per cent, up to six thousand dollars. As you might expect, the more that people were asked to chip in for their health care the less care they used. The problem was that they cut back equally on both frivolous care and useful care. Poor people in the high-deductible group with hypertension, for instance, didn’t do nearly as good a job of controlling their blood pressure as those in other groups, resulting in a ten-per-cent increase in the likelihood of death. As a recent Commonwealth Fund study concluded, cost sharing is “a blunt instrument.” Of course it is: how should the average consumer be expected to know beforehand what care is frivolous and what care is useful? I just went to the dermatologist to get moles checked for skin cancer. If I had had to pay a hundred per cent, or even fifty per cent, of the cost of the visit, I might not have gone. Would that have been a wise decision? I have no idea. But if one of those moles really is cancerous, that simple, inexpensive visit could save the health-care system tens of thousands of dollars (not to mention saving me a great deal of heartbreak). The focus on moral hazard suggests that the changes we make in our behavior when we have insurance are nearly always wasteful. Yet, when it comes to health care, many of the things we do only because we have insurance—like getting our moles checked, or getting our teeth cleaned regularly, or getting a mammogram or engaging in other routine preventive care—are anything but wasteful and inefficient. In fact, they are behaviors that could end up saving the health-care system a good deal of money.


Sered and Fernandopulle tell the story of Steve, a factory worker from northern Idaho, with a “grotesquelooking left hand—what looks like a bone sticks out the side.” When he was younger, he broke his hand. “The doctor wanted to operate on it,” he recalls. “And because I didn’t have insurance, well, I was like ‘I ain’t gonna have it operated on.’ The doctor said, ‘Well, I can wrap it for you with an Ace bandage.’ I said, ‘Ahh, let’s do that, then.’ ” Steve uses less health care than he would if he had insurance, but that’s not because he has defeated the scourge of moral hazard. It’s because instead of getting a broken bone fixed he put a bandage on it.

At the center of the Bush Administration’s plan to address the health-insurance mess are Health Savings Accounts, and Health Savings Accounts are exactly what you would come up with if you were concerned, above all else, with minimizing moral hazard. The logic behind them was laid out in the 2004 Economic Report of the President. Americans, the report argues, have too much health insurance: typical plans cover things that they shouldn’t, creating the problem of overconsumption. Several paragraphs are then devoted to explaining the theory of moral hazard. The report turns to the subject of the uninsured, concluding that they fall into several groups. Some are foreigners who may be covered by their countries of origin. Some are people who could be covered by Medicaid but aren’t or aren’t admitting that they are. Finally, a large number “remain uninsured as a matter of choice.” The report continues, “Researchers believe that as many as one-quarter of those without health insurance had coverage available through an employer but declined the coverage. . . . Still others may remain uninsured because they are young and healthy and do not see the need for insurance.” In other words, those with health insurance are overinsured and their behavior is distorted by moral hazard. Those without health insurance use their own money to make decisions about insurance based on an assessment of their needs. The insured are wasteful. The uninsured are prudent. So what’s the solution? Make the insured a little bit more like the uninsured.


Under the Health Savings Accounts system, consumers are asked to pay for routine health care with their own money—several thousand dollars of which can be put into a tax-free account. To handle their catastrophic expenses, they then purchase a basic health-insurance package with, say, a thousand-dollar annual deductible. As President Bush explained recently, “Health Savings Accounts all aim at empowering people to make decisions for themselves, owning their own health-care plan, and at the same time bringing some demand control into the cost of health care.”


The country described in the President’s report is a very different place from the country described in “Uninsured in America.” Sered and Fernandopulle look at the billions we spend on medical care and wonder why Americans have so little insurance. The President’s report considers the same situation and worries that we have too much. Sered and Fernandopulle see the lack of insurance as a problem of poverty; a third of the uninsured, after all, have incomes below the federal poverty line. In the section on the uninsured in the President’s report, the word “poverty” is never used. In the Administration’s view, people are offered insurance but “decline the coverage” as “a matter of choice.” The uninsured in Sered and Fernandopulle’s book decline coverage, but only because they can’t afford it. Gina, for instance, works for a beauty salon that offers her a bare-bones health-insurance plan with a thousand-dollar deductible for two hundred dollars a month. What’s her total income? Nine hundred dollars a month. She could “choose” to accept health insurance, but only if she chose to stop buying food or paying the rent.


The biggest difference between the two accounts, though, has to do with how each views the function of insurance. Gina, Steve, and Loretta are ill, and need insurance to cover the costs of getting better. In their eyes, insurance is meant to help equalize financial risk between the healthy and the sick. In the insurance business, this model of coverage is known as “social insurance,” and historically it was the way health coverage was conceived. If you were sixty and had heart disease and diabetes, you didn’t pay substantially more for coverage than a perfectly healthy twenty-five-year-old. Under social insurance, the twenty-five-year-old agrees to pay thousands of dollars in premiums even though he didn’t go to the doctor at all in the previous year, because he wants to make sure that someone else will subsidize his health care if he ever comes down with heart disease or diabetes. Canada and Germany and Japan and all the other industrialized nations with universal health care follow the social-insurance model. Medicare, too, is based on the social-insurance model, and, when Americans with Medicare report themselves to be happier with virtually every aspect of their insurance coverage than people with private insurance (as they do, repeatedly and overwhelmingly), they are referring to the social aspect of their insurance. They aren’t getting better care. But they are getting something just as valuable: the security of being insulated against the financial shock of serious illness.


There is another way to organize insurance, however, and that is to make it actuarial. Car insurance, for instance, is actuarial. How much you pay is in large part a function of your individual situation and history: someone who drives a sports car and has received twenty speeding tickets in the past two years pays a much higher annual premium than a soccer mom with a minivan. In recent years, the private insurance industry in the United States has been moving toward the actuarial model, with profound consequences. The triumph of the actuarial model over the social-insurance model is the reason that companies unlucky enough to employ older, high-cost employees—like United Airlines—have run into such financial difficulty. It’s the reason that automakers are increasingly moving their operations to Canada. It’s the reason that small businesses that have one or two employees with serious illnesses suddenly face unmanageably high health-insurance premiums, and it’s the reason that, in many states, people suffering from a potentially high-cost medical condition can’t get anyone to insure them at all.


Health Savings Accounts represent the final, irrevocable step in the actuarial direction. If you are preoccupied with moral hazard, then you want people to pay for care with their own money, and, when you do that, the sick inevitably end up paying more than the healthy. And when you make people choose an insurance plan that fits their individual needs, those with significant medical problems will choose expensive health plans that cover lots of things, while those with few health problems will choose cheaper, bare-bones plans. The more expensive the comprehensive plans become, and the less expensive the bare-bones plans become, the more the very sick will cluster together at one end of the insurance spectrum, and the more the well will cluster together at the low-cost end. The days when the healthy twenty-five-year-old subsidizes the sixty-year-old with heart disease or diabetes are coming to an end. “The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance,” the Stanford economist Victor Fuchs says. Health Savings Accounts are not a variant of universal health care. In their governing assumptions, they are the antithesis of universal health care.


The issue about what to do with the health-care system is sometimes presented as a technical argument about the merits of one kind of coverage over another or as an ideological argument about socialized versus private medicine. It is, instead, about a few very simple questions. Do you think that this kind of redistribution of risk is a good idea? Do you think that people whose genes predispose them to depression or cancer, or whose poverty complicates asthma or diabetes, or who get hit by a drunk driver, or who have to keep their mouths closed because their teeth are rotting ought to bear a greater share of the costs of their health care than those of us who are lucky enough to escape such misfortunes? In the rest of the industrialized world, it is assumed that the more equally and widely the burdens of illness are shared, the better off the population as a whole is likely to be. The reason the United States has forty-five million people without coverage is that its health-care policy is in the hands of people who disagree, and who regard health insurance not as the solution but as the problem.


Mandated private insurance just helps insurers

By Milton Fisk
The Journal Gazette


Suddenly, the most unlikely bunch has turned altruistic. Conservative businesses and politicians want health coverage for the uninsured. Schemes are multiplying about how to do it. Why the change of heart? Beware of those bearing gifts — this altruism is but poorly disguised self-interest.

Look at some apostles of this new altruism. Wal-Mart is an easy case; it hopes to use it to avoid paying any more for health benefits. Why Gov. Arnold Schwarzenegger? He hopes to garner more dollars for powerful private insurers he needs.


What are these schemes?


Common to all of them is the use of public subsidies so the uninsured can buy private insurance. However, spreading private insurance worsens the problems it creates.


The idea came from President Bush’s 2003 Medicare Plan D drug program, by which private insurers get public subsidies. It’s unadulterated corporate welfare. The drug companies get $40 billion a year more because Medicare can’t bargain over what it charges. The insurers’ ads and profits cost the government $5 billion a year.


With Medicare Plan D as inspiration, don’t expect much from our new altruists. Covering more people is an admirable goal. Getting it through private insurance will push inflation in health care through the roof. To modulate this inflation, we’d need public insurance — Medicare (A and B) is an example — extended to all.


In 2005, CEOs at five big insurers received together a total of $14 million plus stock options and grants for over 2 million shares. The aggregate profits in 2006 of these insurers were $12 billion. Still, their premiums have nearly doubled in the past decade. A public insurer seeks no profits, and its chieftains don’t become plutocrats.


Don’t stop here — there’s more to being an expensive parasite. Premiums for private insurance go to marketing as well as health care: the TV ads, junk mail, public relations accounts to burnish a bad image and hucksters signing on employers and hospitals. There’s little of this waste with public insurance.


Then there’s the cost of underwriting — trying to find whose poor health warrants a bigger premium, whose pre-existing conditions will deny them coverage and who to dump from the rolls. This cherry-picking is absent with public insurance; there’s no extra charge or denial for bad luck or poor genes.


Schwarzenegger wants insurers in his state to devote at least 85 percent of premiums to health care. WellPoint says it devotes only 81 percent; as a California giant, its screams will get Arnold back on track. This bickering is juvenile when Medicare has overhead of 3 percent.


Hang on for more — add to private insurers’ overhead a ripple effect on providers. Doctors and hospitals must send bills to multiple insurers. With a single public payer, this inefficiency disappears. Hospitals won’t have to bill insurers; they will operate under annual budgets negotiated with that single payer.


Shouldn’t the competition between multiple insurers save money?

Free enterprise versus big government? That’s not the fight. It’s rather: Pay more or pay less?


When a new altruist says he or she wants more people covered, ask, “Do you want to expand business for private insurers or do you want to reduce inflation in health care costs by having a single public insurer?”


Milton Fisk, a Bloomington resident, is a member of Hoosiers for a Commonsense Health Plan. He wrote this for Indiana newspapers.

Time for Health Care for All on Medicare's 40th Anniversary

Published on Monday, August 1, 2005
Distributed by Knight Ridder/Tribune Information Services

by Holly Sklar
When Medicare and Medicaid were signed into law on July 30, 1965, former President Harry Truman received the first Medicare card. He would be shocked that 40 years later, more than 45 million Americans have no health coverage, half of all personal bankruptcies are health-related, and lack of universal insurance is increasingly hurting our economy as well as our health.

Truman proposed national health insurance for all Americans in 1945. He said, "By preventing illness, by assuring access to needed community and personal health services...and by protecting our people against the loss caused by sickness, we shall strengthen our national health, our national defense and our productivity."

If Americans without health insurance were a nation, the population would be bigger than Canada -- plus Michigan, Montana, New Hampshire and Vermont. Canada, like other industrialized nations besides ours, provides universal health coverage.

Contrary to myth, the United States does not have the world's best health care. It has the costliest.

In the words of Dr. Christopher Murray of the World Health Organization (WHO), "Basically, you die earlier and spend more time disabled if you're an American rather than a member of most other advanced countries."

The United States is just No. 29 in the WHO healthy life expectancy ranking. We lag Canada by nearly three years and Japan by nearly six.

The United States does worse than 36 countries in child mortality under age five -- well behind South Korea and Singapore.

The United States is No. 1 in spending. The Organization for Economic Cooperation and Development (OECD) reports the United States spent 15 percent of its Gross Domestic Product on health in 2003 compared to an average 8.6 percent in 30 OECD countries.

The United States has fewer physicians, nurses and hospital beds per person, and fewer MRI and CT scanners than the OECD average. Health Affairs reports that Americans had more difficulty making appointments with physicians quickly than people in Canada, the U.K., Australia and New Zealand, and were more likely to delay or forgo treatment because of cost.

Lack of health insurance is killing many more Americans than terrorism. As the Institute of Medicine documents, uninsured Americans get about half the medical care of those with insurance. They receive too little care, too late, get sicker and die sooner. For example, uninsured women with breast cancer have a 30 percent to 50 percent higher risk of dying than insured women. Uninsured car crash victims receive less care in the hospital and have a 37 percent higher mortality rate than privately insured patients.

One out of three Americans below age 65 -- 85 million people -- lacked private or public health insurance for all or part of 2003-2004. Millions more are underinsured.

Average family health insurance premiums will reach a projected $14,545 in 2006, more than double the 2001 average.

Much health spending is squandered on the mountainous red tape, profits and executive pay of private insurance and drug companies. As Dr. Marcia Angell explains in "The Truth About the Drug Companies," the highly profitable pharmaceutical industry relies heavily on taxpayer-funded research.

The National Coalition on Health Care, an alliance of about 100 corporations, pension funds, medical associations, insurers, unions, consumer and religious organizations, says, "Comprehensive health care reform is long overdue. Every year that reform is delayed, tens of millions of Americans live in peril, without health insurance; millions are harmed, and hundreds of thousands die needlessly, because of sub-standard care."

"The crisis in health care is the central economic problem facing America -- adversely affecting living standards, job creation and retention, wage growth, the adequacy and viability of pension benefits" and the global competitiveness of American business, says Coalition president Henry Simmons.

The Coalition calls for "health care coverage for all." It offers four different scenarios for universal coverage: employer and individual mandates and subsidies; expanding Medicare and other public health insurance; creating a new public program modeled on the Federal Employee Health Benefits Plan; and establishing a universal single payer, publicly financed program.

The first three scenarios would net $320 billion to $370 billion in savings over the first ten years; the fourth scenario would save $1.1 trillion.


Like untreated cancer, the health care crisis is spreading throughout our families and economy. It's time for health care for all.

Holly Sklar is co-author of "Raise the Floor: Wages and Policies That Work for All Of Us" (

Healthcare in Ohio

Special Section: Good Health


By David Laber
Athens NEWS Writer

A statewide group is circulating petitions to get a state-sponsored healthcare initiative onto the Ohio ballot for the 2006 November general election, and southeastern Ohio counties are playing an integral role in filling petition requirements.


The Single-Payer Action Network Ohio (SPAN Ohio) has been collecting signatures to overhaul the state's healthcare system, and Southeastern Ohio SPAN has been leading the charge locally.

On Sunday, Warren Haydon and Arlene Sheak, both of Athens, said under the proposed plan, all Ohioans would receive healthcare coverage by cutting back on administrative paperwork that hospitals and insurance companies use and by increasing taxes on the wealthiest Ohioans.

Highlighting some of the points in the proposal, Haydon said all Ohioans will receive hospital care, mental health, vision, hearing, prescription drugs dental, emergency services and more.

Currently, about 1.3 million Ohioans do not have any healthcare insurance for one year, Sheak said, and that number doubles when talking about families that only have healthcare insurance part of the time. About 18,000 Americans will die this year as a result of not having health coverage, she said.

And this is happening locally as well. Haydon said he has increasingly seen fliers about benefits being held for people who need to raise money for health coverage.

And according to a February study, which included research done by an Ohio University professor, about half of the bankrupted families in the country are in their situation as a result of a health problem. "All of us are one accident away from being bankrupted," Sheak said.

Injuries and poor health are not just an economic burden on the uninsured, she said, but it also poses a threat to those with insurance because sometimes the injury is such that the person can no longer work or the spouse has to quit work to care for the other, she said.

"More and more, people are considering providing healthcare for everyone as a moral issue," Haydon said.

The proposal also provides better access for those living in rural areas to procedures and equipment, he said.

A statewide board consisting of 14 members from the seven Ohio health districts (Athens County's district includes a total of 21 counties with Muskingum County being the most populated) would distribute the equipment to make everyone available to that type of equipment within a 20-minute drive "as opposed to giving people in Cleveland three different choices," he said.

Each hospital would receive a monthly check from the state board to cover operating costs, according to the plan.

The plan also would cut back on administrative spending (about $11.6 billion) necessary to bill the hundreds of insurance companies, Sheak said.

According to the plan, statewide healthcare would be paid for by raising taxes on the wealthiest Ohioans (6.2 percent for those who earn more than $90,000 per year and 11.2 percent for those who earn more than $200,000 per year).

Businesses also will be asked to contribute to the plan as well, Haydon said.

Employers will pay up to a 3.85 percent payroll tax and up to 3 percent gross receipts tax; however, Haydon said the plan may have to reduce or abandon the receipt tax because it is not likely to be popular with businesses that currently do not offer healthcare to their employees.

Haydon also noted, however, that employers that do offer healthcare benefits do so often at a cost of 12 percent to 15 percent of their payroll.

Haydon said he expects health maintenance organizations (HMOs), insurance companies, pharmaceuticals and possibly the American Medical Association to come out against the plan or anyone who stands to lose financially as a result of a change in the status quo.

To help would-be displaced workers, the proposal includes a section to create a transition advisory group that would provide financial and education assistance for two years.

To get the proposal on the ballot, Haydon said the organization needs to collect about 97,000 signatures (3 percent of the number of 2002 voters), but to account for possibly invalidated signatures, the goal is to collect 140,000. Of those signatures, at least half of the state's counties (44) must have at least 1.5 percent of its 2002 number of voters sign the petition.

The signatures are to be submitted to the Ohio Secretary of State's Office 10 days prior to when the state legislature goes into session in January. Haydon said he does not know if the organization will be able to meet this deadline for 2006 or not.

If they do, then the Ohio Legislature will have 120 days to either do nothing, approve the plan as is, or amend it, he said.

But if it appears the legislators are not receptive to the plan, then the organization needs to collect 97,000 more signatures in 90 days to get the issue on the ballot, he said.

More information about the statewide healthcare plan is available at the organization's Web site,, and specific questions can be directed to the organization via e-mail at


Rx for America: a national health plan

Fewer workers each year receive health insurance from their employers
By Ron Gettelfinger / Special to The Detroit News

In recent weeks, members and retirees of our union have confronted a new set of challenges in the field of health care.

The roots of this problem, however, are hardly new. As Walter Reuther said during an address to the American Public Health Association in 1968:


"We must first free ourselves of the illusion that we really have a health care system in America. What we have is a disorganized, disjointed, antiquated, obsolete non-system of health care. Consumers are being required to subsidize a non-system that fails to deal with their basic health care needs and the cost of that system is continuing to skyrocket."


Unfortunately, the problems have only become more serious in the intervening years. We now have nearly 46 million Americans -- including more than 8 million children -- with no health insurance at all.


Current system is wasteful


The U.S. has the best doctors, nurses and health care professionals anywhere in the world. But they are hindered by an ineffective, wasteful bureaucratic system. Our nation spends approximately $1.7 trillion, or 15.4 percent of our gross domestic product, on health care. Four hundred billion of this sum is absorbed by the cost of paperwork and administration.


Additionally, prescription drugs cost more in the United States than in any other country. One reason for these high costs is that pharmaceutical companies spend more than any other industry on lobbying, with more than 1,200 lobbyists in Washington. These lobbyists are doing well for their employers, crafting laws and regulations to protect an industry which earns tens of billions in profits each year. But what are they accomplishing for the rest of us?


For all our health care spending, the United States ranks near the bottom among industrialized countries on life expectancy, infant mortality and virtually every other measure. In fact, the infant mortality rate in our nation's capital is more than double the infant mortality rate in Beijing.


America deserves better.


Fewer workers covered


Our health care is based on employment, but each year, fewer employers are providing company sponsored insurance. The figure is now down to 60 percent, a decline from 69 percent in 2000. Members of our union have learned through hard experience that relying on individual employers to provide health care is inefficient and a drag on our ability to compete in the global economy.


At General Motors, for example, we recently negotiated an agreement intended to preserve the company's ability to provide affordable health care for workers and retirees for many years to come. During this process, we had to confront GM's staggering $61 billion liability for the cost of present and future UAW retiree health care.


Foreign firms have advantage


Global auto companies like Toyota, Honda and Volkswagen have little or no liability for retiree health care because in industrialized nations outside the United States, health insurance is a government responsibility.


With universal health insurance, no employer gains an advantage by offering lower benefits or passing higher costs onto workers. Does it make any sense for the United States to continue on a policy course -- employer-based health care -- which delivers inferior care to our citizens and gives foreign manufacturers a cost advantage worth tens of billions of dollars over U.S. companies that employ U.S. workers?


To be sure, no government policy will help a company that can't make products consumers want to buy. But a modern, competitive national health insurance system would go a long way toward helping U.S. manufacturers make products at affordable prices. We need a uniquely American system, not one that tries to copy a solution from a different country. A workable American plan would be universal, covering every single man, woman and child in the United States. It would be comprehensive, offering a range of medical benefits for workers and families. And it would have only a single payer, creating the leverage needed to negotiate the cost of medical care and keep prices from rising every year.


We've heard time and again that national health insurance might be a good idea, but it's not politically possible in the United States at the present time. One thing is for sure: it's not possible to ignore our current health care crisis any longer. American workers -- and American employers -- can't afford it.


Labor voices Ron Gettelfinger is president of the United Auto Workers union.


Samples of SPAN's printed materials and how to obtain copies for distribution

Organizations and individuals may purchase SPAN’s educational flyers and brochures in quantity; we will provide you with the printer's contact information upon request.

Any purchase arrangements you make will be between you and the printer. SPAN receives no part of your payment—you pay only the actual cost of printing and shipping. [Note: Sample copies can be obtained directly from SPAN Ohio at no cost.]

The following items are available for purchase:

Realizing the Human Right to Health Care
Full-color tri-fold brochure. (See sample in English in pdf format)

Small Business Benefits
Full-color (See sample in English in .pdf format)

Single Payer Primer
Full-color (See sample in English in .pdf format)

LABOR and Publicly Funded, Universal Access To Health Care
Full-color (See sample in English in .pdf format)

Universal Health Care and the Faith Community
Full-color (See sample in English in .pdf format)

The Conservative Case for Single Payer Health Care



Donations to SPAN Ohio help cover operating and lobbying expenses and are NOT tax deductible. To donate, click the DONATE button below. On the page that appears, type in the amount of your donation. If you want your donation to be recurring, check the box where it says "Make this a monthly donation." If this is a one-time donation, leave that box blank.Then click either "Donate with PayPal" (if you have an account) or."Donate with a Debit or Credit Card." Complete the transaction on the page that follows.

Donations to HCFAO go to our education fund and ARE tax deductible. To donate, click the Donate button below. On the page that appears, type in the amount of your donation. If you want your donation to be recurring, check the box where it says "Make this a monthly donation." If this is a one-time donation, leave that box blank.Then click either "Donate with PayPal" (if you have an account) or."Donate with a Debit or Credit Card." Complete the transaction on the page that follows.


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