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Leading Dems Miss the Boat on Health Care

No amount of tax credits, health savings accounts or market solutions will fix this problem.
 
 
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As we face the 2008 presidential campaigns, the stakes have never been higher for health care reform. Health care is pricing itself beyond the reach of lower-income and middle-class Americans with no cost containment yet on the horizon. Seniors with Medicare are paying much more out-of-pocket for their medical care now than when Medicare was enacted in 1965.

We already have a perfect storm as the U.S. health care "system" falls apart, and many public polls put access to affordable health care at the top of our domestic agenda.

Although we spend far more than any other country in the world on health care, we have little to show for it except high prices, decreasing access, variable quality, underuse of essential care by vulnerable populations, and a significant amount of unnecessary and inappropriate care for those who can pay for it. Our enormous private health insurance industry of 1,300 insurers competes to cover healthier and lower-risk enrollees with more limited policies each year, while denying coverage of sicker individuals or raising premiums to unaffordable levels. That shifts the burden of the more costly care of sicker people to the public sector, defeating the whole principle of insurance: to spread risk broadly. Meanwhile, as the private insurance industry no longer finds growth in the employer-sponsored and individual markets, it has been shifting its sights to privatized public programs, including Medicare and Medicaid. Here it has found generous subsidies and little oversight from friendly conservatives in government.

Now would be the ideal time for leading Democrats to advance a progressive agenda for health care, such as Teddy Roosevelt did as a Progressive, with his call for national health insurance in 1912. The Republicans have been weakened by scandals, cronyism and incompetence, and have no new or credible ideas for health care reform. They still offer up only warmed-over ideas such as tax credits, health savings accounts, and how the competitive market can fix our problems, while limiting government's responsibility for care of the poor -- blatant social Darwinism. As William Greider recently observed in the Nation, "Democrats have a splendid opening to be substantive and political and righteous for working folks,all at once."

But so far, with only one exception, the Democratic presidential candidates have been disappointing, if not derelict, in reforming the system. In their misguided efforts to avoid too much controversy and to build a "centrist consensus," they are completely missing the target even before starting. Although Democrats in Congress united behind reauthorization of an expanded State Children's Health Insurance Program (SCHIP), that effort has diverted them from the real challenge -- how to reform the system to make accessible and comprehensive health care affordable for all Americans. That would require taking on powerful stakeholders, especially the insurance and drug industries, in the medical-industrial complex, now one-sixth of our economy. All but one of the Democratic presidential contenders shy away from that battle, usually with the limp excuse that real reform is not politically feasible.

What Are the Leading Democrats Proposing?

In their rush to build consensus for universal coverage, all three leading Democratic presidential candidates avoid taking on the real culprit -- a failing private health insurance industry. There is abundant evidence of the industry's failures, such as premiums increasing by three and four times the rates of cost-of- living and median family income. Projections show that, at this rate, premiums alone will consume all of household incomes by 2025. Administrative overhead will become five to nine times higher than Original Medicare."Denial management" is a vigorous growth area within the industry, while proliferation of near worthless limited benefit policies under the guise of insurance (e.g. deductibles up to $5,000 or annual caps as low as $1,000), and successful avoidance of regulation by state and federal regulators for many years is standard. Even as employer-sponsored insurance declines, the insurance bureaucracy keeps expanding as it seeks to exclude higher risk enrollees and keep its "medical loss ratio" attractive to investors (the industry's often-stated goal is to keep at least 20 percent of premium revenue for overhead and profits).

Despite these mounting problems, the proposals for"reform"of each of the leading Democratic candidates would build upon the private insurance industry. Both Senators Hillary Clinton and John Edwards call for an individual mandate whereby everyone is required to buy health insurance. Senator Barack Obama stops short of universal coverage, except for children.

There are many more similarities than differences among their proposals. All would offer choice among plans and government subsidies for those unable to afford coverage. All would require employers to shoulder some of the costs of coverage. All would need additional funding ($110 billion a year for Clinton's plan), and all support new efforts to rein in "cherry picking" by insurers. However,how these objectives would be achieved remains unclear in every case. What does seem certain is that any of these Democratic proposals, if enacted into law, would provide yet another new windfall for the private insurance industry through government subsidies for those unable to pay for coverage.And nowhere in this "debate" does the issue of actual benefits appear. Would mandated policies cover all necessary health care for all enrollees? How about cost-sharing requirements?

These proposals are too general and nebulous to know how they would be implemented. The devil is always in the details, and market stakeholders lobby their interests very effectively in and out of revolving doors from their bases on K Street.

As the current front running candidate, Senator Clinton's plan is carefully crafted to appeal to centrist voters. Under the label of American Health Choices Plan, her individual mandate "assures affordable health coverage for all" through use of refundable tax credits, means-tested limits on premium payments to a percentage of income, promoting shared responsibility by large employers and tax credits for small employers, and expansion of Medicaid and SCH IP. Her plan adds in other trendy components as well in an effort to lower costs or improve quality of care,such as more emphasis on preventive care,disease management for chronic disease, expanded use of information technology,and health insurance purchasing pools. A new component in the Clinton plan is the proposed creation of a public Medicare-like plan intended to compete against the offerings of private plans. On the surface, this may appeal to some as a way to keep the private plans honest and even as a possible future route toward achieving publicly financed Medicare for all.

What's Wrong With the Leading Democrat's Proposals?

Though well intended, there are many problems with all of these proposals. Unfortunately, the reasons are more intertwined and complex than we can reasonably expect to have clarified through political discourse. Leading the list by far is the failure of these proposals to address the central problem blocking reform -- the private multi-payer system itself -- all in the name of political compromise, without even putting single-payer on the table. In the just-released Rockridge Institute Report on "The Logic of the Health Care Debate," George Lakoff and his colleagues describe how this kind of neoliberal thinking falls into the 'Surrender-in-Advance Trap' by continuing to support failed market-based policies because of political opposition to the economically and morally superior progressive approach: single-payer public financing.

All three leading Democratic proposals leave the private insurance industry in place. This is a bad idea for many reasons. The industry has already demonstrated its bureaucratic inefficiencies, profiteering by cherry picking and favorable risk selection, fragmentation of risk pools, and commitment to the financial bottom line rather than reliable coverage of comprehensive benefits. It is well known that 10 percent of the population account for 27 percent of all health care spending. The industry goes to great lengths to avoid these enrollees' preference in order to market their products to the healthier majority of the population. The industry has no mechanisms or prospects to contain costs and any expansion of private financing is inflationary.

The industry has failed the public interest. It is unwilling (and unable) to compete with such public programs as Original Medicare on a level playing field. It has only survived to this point by avoiding higher-risk enrollees, increasing cost sharing, raising its premiums to increasingly unaffordable levels, and hollowing out coverage that people can afford. It does no good to mandate coverage within adequate benefits.

The much-touted Massachusetts individual mandate enacted in 2006 is a case in point. Even in a state with relatively high regulation of insurers, this mandate is already failing. The "Massachusetts Miracle"has no chance of providing universal coverage for all state residents, premiums are higher than expected, benefits remain controversial and fall far short of covering essential care, and the costs of promised government subsidies will end up much higher than anticipated. Meanwhile,of course,administrative and bureaucratic complexities have been moved up another notch. This experience also shows that mandates cannot really be enforced (the state has already lowered its initial expectations of employers, and private insurers will always respond to more mandated benefits by raising their premiums).

After some years of trials, there is still not a single example of successful mandates, whether upon employers or individuals. As long as we depend on private financing, mandates will be non-starters, though popular with politicians and welcomed by the insurance industry.

The other trendy "extras"promoted by these Democratic proposals likewise stand little chance of success. An increased emphasis on preventive care is needed and a good idea, but this can not be expected to contain health care costs. There are a few instances where costs are reduced, such as smoking cessation and wide use of seatbelts, but in most instances, health care costs go up with implementation of screening and prevention programs as new illnesses are identified, requiring follow-up and treatment.

Better management of chronic disease is certainly needed. Institutions with integrated systems such as Kaiser Permanente and Group Health Cooperative of Puget Sound have done pioneering work in this area, often with improved quality but not less costs. But "disease management" (DM) programs being promoted by commercial vendors to employers and health plans are a different story. Initially started by the drug industry in the 1990's with (a stake in expanding sales of their drugs), DM programs are largely disconnected from primary care and have yet to demonstrate any long-term cost savings. It is the same story for information technology. How can wider use of electronic medical records increase the efficiency of a multi-payer system with insurers which results in 17,000 different health plans in Chicago and more than 700 different insurance policies among 2,000 patients with depression in Seattle?

High-risk purchasing pools are another idea without any track record of success. Although 30 states have started high-risk pools, they still cover less than 200,000 people and are largely ineffective, plagued by extended waiting lists, high premiums, limited benefits, and shortfalls of state and federal funds.

A fundamental mistake of all incremental efforts now underway across the country towards universal coverage is the disconnect between insurance and health care . Here we find an increasing gap. Many people with insurance find cost-sharing an increasing burden with benefits decreasing and out-of-pocket costs taking ever larger bites from their household income. "Underinsurance" is defined by the Commonwealth Fund as medical expenses amounting to 10 percent of annual income or more (5 percent for adults below 200 percent of the Federal Poverty Level,which is set at $41,300 for a family of four in 2007). Yet many millions of "insured" Americans are having to spend much more than that on health care. Two million people were forced into bankruptcy by medical bills in 2001, the most recent year for which data are available; three-fourths of them were employed and insured at the outset of their medical problems.

The Medicare-like public option is an interesting idea, but does not make sense for several reasons. We have yet to show that the political process can yield a level playing field for competition between public and private programs. Another round of government subsidies would give the private insurance industry yet another opportunity to further divide the risk pool, concentrating the sick in Medicare, which could threaten its future viability. We would likely march toward even more of a two-tier system than we have now, and Medicare would face an increased risk of becoming a welfare program for sick people with significant medical problems. It would perpetuate a role for private health insurance and accept the illusion that it provides a valuable adjunct to health care financing when it is already clear that it doesn't. The battle over the industry's future needs to be fought, as it inevitably will. The Medicare-like option would simply delay that battle, perhaps losing an opportunity for real reform. Whatever further structures were put in place to implement the Medicare-like plan could themselves add to the obstacles of replacing an obsolete private financing system. If Medicare became excessively saddled with the most expensive care of a smaller population without adequate funding, its conservative critics could correctly claim that, "The government program can't do the job."

What Should the Government's Role be in this Crisis?

We have a market-based health care system driving up its own costs beyond the reach of ordinary Americans, with government policies making things even worse through minimal oversight and regulation of the market. As the situation gets worse, we remain deeply divided over the role of government. On the Right, conservatives have been quite clear about wanting to downsize government, render it less capable, and, in the case of Medicare, privatize it and turn Original Medicare into a smaller welfare program. The Right has raised such fears over creeping socialism and "government run" programs that the Left shies away from activist government. All of the leading Democratic health proposals studiously avoid any implication of government intrusion, despite the far greater bureaucratic intrusion of privately-financed health care compared to simplified public financing.

What can we learn from history about the role of government as our health care crisis grows? In an address to the Republican Citizens of Washington County, Mary-land in 1809, Thomas Jefferson's answer was: "The care of human life and happiness, and not their destruction is the first and only legitimate object of good government." Comparing our increasing gaps in income and opportunity today with those in the Great Depression, Joseph Stiglitz, Nobel Laureate in Economics and former chief economist of the World Bank, offered this perspective in 2004:

Markets do not lead to efficient outcomes, let alone outcomes that comport with social justice. As a result, there is often good reason for government intervention to improve the efficiency of the market. Just as the Great Depression should have made it evident that the market often does not work as well as its advocates claim,our recent Roaring Nineties should have made it self-evident that the pursuit of self-interest does not necessarily lead to overall economic efficiency.

But, instead of taking a progressive view of the responsibility of government to help solve our increasing problems of access, cost, quality, and equity of health care, we have the leading Democratic candidates perpetuating market approaches, with the already discredited notion that the insurance industry will respond to competition. They even take on some of the strategies of the Right, such as tax credits and purchasing pools, while offering up unpersuasive calls for cost containment, universal coverage, and improved quality of care. Despite conservative public policies favoring health care markets, as illustrated by continued over-payments and lack of oversight of private Medicare plans, these leaders remain unwilling to confront the insurance industry in the public interest.

Single-Payer National Health Insurance: The Only Effective and Sustainable Path to Universal Coverage

Only one of the six Democratic presidential candidates gets it right on health care reform. Congressman Dennis Kucinich (D-OH), as co-sponsor with Congressman John Conyers (D-MI) of House Bill 676, the U.S. National Health Insurance Act, has recognized for years that the private health insurance industry will always stand in the way of universal access to comprehensive health care.

This bill directly addresses the central problem of our health care system -- its private financing -- replacing it with a public financing system modeled after a reformed Medicare program.

A Medicare-for-All program would provide universal coverage of all necessary health care for all Americans coupled with a private delivery system. It would not be socialized medicine, but social insurance. Its extra benefits could be extended to the entire population by saving about $350 billion a year in administrative cost savings, monopsony (i.e., one dominant buyer) purchasing, and improved access with earlier diagnosis and treatment of illness. All Americans would have full choice of physicians, other licensed providers, and hospitals. Medical decision-making would stay with patients and their physicians with much less bureaucratic intrusion than we have today in our multi-payer financing system. With administrative and structural simplification, our system would be transitioned toward not-for-profit care in a more transparent and accountable way.

HR 676 is now endorsed by eighty-five sponsors in the House. It has received the support of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), and some in the business community are starting to view single-payer as a way to get out from under increasingly burdensome health care costs, to maintain a healthy workforce, and to better compete in the global economy. Poll after poll shows that about two-thirds of the public supports such a role for government in assuring health care for our population.

Health care reform should be a non-partisan issue. Health care is an essential need for all of us, regardless of age, gender, race, class, religious persuasion, or political

party. Everyone wins (except perhaps some corporate stakeholders in our market-based system) when we have a healthier population in a society that pulls together, instead of being split apart over economic and health disparities. Conservatives espouse principles of efficiency, responsibility, and eliminating waste. A single-payer system would be far more efficient than a multi-payer system, would have more leverage to reduce waste, and would provide a structure for more accountability than we have today. Everyone would contribute to its funding on a shared and equitable basis. Employers would pay a payroll tax in the range of 7 percent (less than they now pay), with further funding by a pro-gressiveincometaxaveraging2percentfor most taxpayers (less than they typically now pay for premiums, deductibles, and out-of-pocket costs). With all these advantages, it is remarkable (but no surprise) how silent the media have been, dependent as they are on corporate support, in publicizing the Kucinich candidacy and single-payer reform.

Based upon its track record in recent decades, the private health insurance industry has proven itself not to be a reliable and useful base upon which to finance health care. The trend toward its demise is becoming more obvious, but is still denied by most policymakers, including many on the Left. As the number of incremental "re-form" proposals proliferate in an effort to rationalize the industry under the false guise of "market competition," we need to ask who our health care system is for: patients and their families, or the insurance industry? Our public policy to date supports the latter.

Hazards of Political Compromise

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) gives us a classic example of the hazards of political compromise. The central problem requiring action was the rapid escalation of drug prices and their decreasing affordability to seniors. The drug and insurance industries launched a full-court lobbying campaign, resulting in compromises such that the main problem was dodged. Instead of controlling drug prices, the MMA was a sell-out to the drug and insurance industries, providing lavish new

over-payments to private Medicare plans, prohibiting the government from negotiating discounted drug prices as is done so well by the Veterans Administration, continuing a ban on importation of prescription drugs, and establishing health savings accounts. This new structure may be with us for years. Even after the Democrats gained control of both houses in the 2006 elections, they have yet to rein in the large subsidies handed over to the drug and insurance industries.

The leading Democrats' health care plans, if enacted, are a prescription for failure by giving the private insurance industry another bonanza: a carte blanche opportunity to sell more limited benefit policies to healthy people and prevent a structural health care fix. They would further raise costs, increase bureaucracy, enrich market stakeholders at the expense of patients, families, and taxpayers, and perpetuate markets treating health care as just another commodity to be bought and sold. Wall Street would prosper as Main Street hurts.

So What Next?

The public health policy choice facing us is whether or not to replace a failing private financing system with public single-payer financing. Making the right choice is the only way to gain affordable universal coverage of necessary care for everyone. It is that simple. This is not an issue to be compromised away by politicians. We need a new structure to heal many of the problems of U.S. health care. We have an opportunity now to galvanize a grassroots movement for real health care reform that may not come again for a long time. The Democrats are poised to regain the Presidency in 2008, together with both houses of Congress. We need activist government and leaders, as we have had earlier in our history, to confront our health care crisis. It is a matter of moral, economic, and social urgency. As a nation, we are long overdue responding to Martin Luther King Jr.'s call to action, some forty years ago: "Of all the forms of inequality, injustice in health care is the most shocking and most inhuman."

John P. Geyman, MD is professor emeritus of family medicine at the University of Washington. He is past president of Physicians for a National Health Program and author of The Corporate Transformation of Health Care: Can the Public Interest Still Be Served?

 
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