A Truly pragmatic approach to health care reform

Health care reform is, once again, in the air in Washington. President Obama says its his administration's top fiscal priority. It's about time. Evidence of the myriad flaws of the U.S. health care system is overwhelming. Among the industrialized nations of the world, the American health care system is the most expensive, both in absolute terms and relative to the size of our economy, least equitable--1/6 of Americans have no insurance, while in every other industrialized nation, health care is a right--and just about the worst performing. Despite spending more on health care than any other nation, The United States ranks 38th in the world in life expectancy, and 33rd in infant mortality. Many developing nations, such as Costa Rica and Chile, have higher life expectancies. Cuba, whose per capita income is less than a fourth of the U.S., has a far lower infant mortality rate. The rising cost of health care in the United States is also becoming unbearable for American families. Medical bills are the cause of nearly half of personal bankruptcies in the United States. The U.S. health care system is also a disastrous competitive disadvantage for American industry, a problem best exemplified by the Big 3 auto companies. As Amy Goodman loves to point out, the automakers spend more on health care than on steel. According to Dean Baker, if the U.S. health care system was as expensive as the Canadian system, GM would have earned $22 billion more in profits over the past ten years. If they had those extra earnings, they might have been able to ride out the current crisis without government assistance, or at least with far less aid.

It may come as some of a shock, as I rarely say anything positive about him, but I think President Obama's thinking on health care is, at a minimum, on the right track. First and foremost, I'm happy that President Obama has acknowledged that the American health care system is in crisis. In his own words:

the cost of our healthcare has weighed down our economy and our conscience long enough. So let there be no doubt: healthcare reform cannot wait, it must not wait, and it will not wait another year.

He is also matching his words with action. In his budget proposal, Obama has allocated $634 billion for health care reform. Obama plans to use those $634B for two main purposes. Firstly, he wants to set up a system of subsidies to help Americans without health insurance to afford it. Secondly, he wants to set up a public health insurance plan, like Medicare, that any American can buy into. He proposes to pay for this by raising taxes on the super-wealthy and eliminating subsidies for the pharmaceutical and insurance industries in Medicare, which were included in the 2003 Medicare Modernization act. Or, as Paul Krugman more accurately calls it, The Medicare Middleman Multiplication Act of 2003. Eliminating the gratuitous and utterly inefficient corporate welfare in Medicare is a good step in itself. I'm glad that he also plans to put the savings generated to good use.

Both of these ideas aren't bad, if implemented correctly. Our goal, however, ought to be moving towards a single payer health insurance system, like that of Canada. Unfortunately, Obama is not proposing a single payer system. Single payer is the most equitable means of financing health care as it guarantees the same standard of care to everyone, regardless of their ability to pay. In single payer systems, people also aren't dependent on their employers for health insurance, like we are in the U.S., allowing for continuity of coverage in the event of joblessness. It is also far and away the most efficient means of financing health care. As mentioned above, countries which use single payer systems and guarantee coverage to everyone, like Canada, France, and the United Kingdom, actually spend less per person than we do in the United States, despite the gaping holes in our system.

How is that possible? Mainly because private companies are far less efficient insurers than government agencies. That's right, as difficult as it may be for Americans to believe, privatization is not synonymous with efficiency. Private companies are less efficient because they make money not by providing the best quality insurance at the lowest price, but by denying coverage to the sick and selectively covering only the healthiest and wealthiest among us. This process, as any American whose ever wrangled with their insurance company knows, requires a lot of paperwork, wastes time, and drives up administrative costs. In a single payer plan, everyone is covered, regardless of income or health, so there's far less wasteful paper work. Private companies also earn profits and pay executives exorbitant salaries, two sources of waste which are nonexistent in government bureaucracies. These costs all add up. According to Physicians for a National Health Program, private insurers spend 13 cents of every dollar they take in in on administration and profits. For managed care organizations, this figure is even higher, averaging 30%. In contrast, administrative costs and overhead represent just 2% of the costs of running Medicare and 1% of the cost of the Canadian national health insurance system. Having to deal with multiple insurance plans, each with different, complex, and often confusing billing procedures, also drives up administrative costs for doctor's offices and hospitals in the U.S.. In Canada, doctor's offices spend 34% of their gross income on overhead and hospitals spend about 12%. In the United States, the numbers are 44% and 25.5%, respectively. All told, the potential savings of switching to a single payer plan in terms of reduced bureaucracy are enormous. According to the U.S. Congress's General Accounting Office (GAO), switching to single payer would instantly cut U.S. health care costs by 10% a year, saving us $100 billion annually.

Any plan that leaves private insurers in place will force consumers and providers to bear the cost of unnecessary administrative waste. As such, private insurance will never be as effective at containing costs, while preserving quality and equity, as public insurance. As concerned citizens, we ought to be organizing and pushing for single payer. That being said, Obama's plan is not at all terrible. In particular, creating a public plan that everyone can buy into, even as a voluntary option, is a great idea. Due to the inherent efficiencies of public insurance noted above, the public option ought to deliver decent coverage at a lower price than private insurance. Thus, through the magic of the marketplace, individuals and businesses should switch from private to public insurance, saving them money on a micro level and decreasing costs on a macro level. Obama has also proposed the idea of requiring private insurers (and the new public plan) to use community rating, which would make it illegal for them to deny coverage to people based on pre-existing health conditions and require them to charge everyone the average, rather than marginal price of coverage. In other words, if it costs, on average, $6000 per person per year to cover everyone at your workplace, then the insurer must charge everyone $6000 a year and cannot charge less for young, healthy workers or more for older, sicker workers. Community rating is an absolutely essential piece of Obama's plan for it to work properly. It ought to make private insurance function more equitably. By criminalizing selective coverage, it should also cut down on administrative costs as insurers will spend less money trying to figure out how not to cover people. Community rating will also insure that the public and private plans compete on a level playing field. If a public plan which uses community rating is actually established and private insurers are not required to play by the same rules, private companies will continue to cover just the healthiest, youngest, and wealthiest and likely drop their coverage of sicker people, while the least healthy and oldest, who cost more to insure, will migrate to the public insurance, weighing down the public budget. This phenomena, known as adverse selection(see example: insurance), is a big problem in Chile, which has both public and private insurance but does not require that they use the same standards for coverage (if you're a total geek like me and would actually like to read the Chile study, send me an email and I'll send you a copy).

Basically, if Obama's plan were put into law exactly as he envisions it, it would be decent, but not ideal. Regardless, the pragmatic path for citizen activists to take is still advocating for single payer. Not only should we advocate for it because it's the best system, it's also the smartest negotiations tactic if we're willing to be honest about how Washington actually works and indeed how all public policy is made any where. As Paul Street eloquently pointed out back in November of last year,

Big and meaningful reforms - and we need serious reforms (e.g. single-payer national health insurance, massive public works programs, and the restoration of union organizing rights in this country), however insufficient they may be in and of themselves - are only attained when elites are convinced that the cost of changing is less than the cost of not changing

. The New Deal is a perfect example of this. As I've stated before, FDR did not create social security, set up public works/job creation programs, or reform American labor legislation solely out of the goodness of his own heart. Rather, he took these steps because there were lots of radicals, such as trade unionists, unemployed activists, and anti-eviction protesters, running arround in the 1930s with very dangerous ideas that shook the status quo to its core. I can't find the exact quote, but I'm almost positive that FDR regarded his efforts as "saving capitalism from itself". If he had not acted, America may have very well been taken over by those crazy radicals. (If only, I'd say, but we can get back to that later). Instead, he preserved the state capitalist economic system, albeit in a much more humane fashion.

Whatever health care reform comes out of Washington, I believe, will inevitably be a compromise between the people's interests and corporate interests. If we build a large, aggressive, grassroots campaign for single payer, as many progressive organizations like Physicians for a National Health Program, the California Nurses Association, and Healthcare-Now!, are already working towards, we approach the negotiations over health care reform in Washington with a strong hand and raise the cost of not acting or acting solely in the corporate interest. In contrast, if we preemptively make concessions to corporate interests, like those made by Health Care for America Now!, which has aligned themselves totally with the Obama plan and opposes single payer, we set ourselves up for failure. The health insurance industry will do everything they can to prevent the most vital and progressive elements of the Obama plan from passing, namely community rating and the public insurance plan. If we start off by calling just for those reforms, a far weaker plan can be presented as a compromise between the left (the people) and the right (the corporations). See the recent stimulus debate for more evidence of this dynamic.

So please, write or call your congresspeople and tell them you want single payer health insurance today! There's already a bill in congress that would put single payer in place, sponsored by Representative John Conyers of Michigan, HR 676. Then check out Healthcare-Now!'s website and find out when the next demonstration is in favor of single in your area and go to it! I know it's easy to say this, heck, I'm in Costa Rica, but I really think supporting single payer is among the most patriotic things you can do. HR 676, for America's future!