Cato on implicit taxes of the individual mandate

Posted by on Thursday, Jan 14, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Obama’s Prescription for Low-Wage Workers: High Implicit Taxes, Higher Premiums

by Michael F. Cannon
Cato Institute
January 13, 2010

Executive Summary

House and Senate Democrats have produced health care legislation whose mandates, subsidies, tax penalties, and health insurance regulations would penalize work and reward Americans who refuse to purchase health insurance. As a result, the legislation could trap many Americans in low-wage jobs and cause even higher health-insurance premiums, government spending, and taxes than are envisioned in the legislation.

Those mandates and subsidies would impose effective marginal tax rates on low-wage workers that would average between 53 and 74 percent — and even reach as high as 82 percent — over broad ranges of earned income. By comparison, the wealthiest Americans would face tax rates no higher than 47.9 percent.

Over smaller ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100 percent. Families of four would see effective marginal tax rates as high as 174 percent under the Senate bill and 159 percent under the House bill. Under the Senate bill, adults starting at $14,560 who earn an additional $560 would see their total income fall by $200 due to higher taxes and reduced subsidies. Under the House bill, families of four starting at $43,670 who earn an additional $1,100 would see their total income fall by $870.

In addition, middle-income workers could save as much as $8,000 per year by dropping coverage and purchasing health insurance only when sick. Indeed, the legislation effectively removes any penalty on such behavior by forcing insurers to sell health insurance to the uninsured at standard premiums when they fall ill. The legislation would thus encourage “adverse selection” — an unstable situation that would drive insurance premiums, government spending, and taxes even higher.

Since the numbers and policy details in the final reform legislation have not yet been released, the results presented here by Michael Cannon of the Cato Institute may be modified, but unchanged will be the conclusion that the complex, jerry-rigged method of paying for health care premiums will not eliminate inequities.

It is almost impossible to get right the amount that each person or family should pay with so many variables moving in different directions: insurance premiums, actuarial values, premium subsidies, cost-sharing subsidies, income levels, family sizes, age rating, bracketed income cliffs of eligibility, and other factors. Financing health care by using a fixed premium for a given private insurance plan no longer works because premiums for adequate plans are no longer affordable for the majority. Trying to make health care affordable by applying corrections for the many variables increases the administrative complexity while falling short on equity.

Financing would be greatly simplified and much more equitable if we established a single risk pool that covered everyone and funded it through progressive taxes. (That likely would not be the conclusion of the libertarians at Cato, but they offered no alternative suggestions in this report, and we wouldn’t agree with them anyway.)

Urgent appeal for aid to Haiti

Posted by on Thursday, Jan 14, 2010

In the wake of Tuesday’s devastating earthquake in Haiti, the need for medicines, basic medical supplies, food and shelter is extremely urgent. Financial contributions to the relief effort are also badly needed, as are trained medical staff.

There are numerous ways to help groups already on the ground in Haiti. One of the best, Partners In Health, founded by Dr. Paul Farmer and several others, has been operating in the country since 1987. PIH operates clinics in Port au Prince and other major Haitian cities. With hospitals and a highly trained medical staff in place, Partners In Health is already bringing medical assistance and supplies to areas that have been hardest hit. Donations to PIH to help earthquake relief efforts will be quickly routed to the disaster.

You can donate online to the Partners in Health effort via this link:

or send your contribution to:
Partners In Health,
P.O. Box 845578
Boston, MA 02284-5578

Trained medical staff are also urgently needed.

Nurses who want to volunteer in Haiti are being coordinated by the Registered Nurse Response Network (RNRN), a project of the 150,000-member National Nurses United (NNU), formed last month through the unification of the California Nurses Association and other nurses unions.  RNRN is hoping to have nurse volunteers on the ground in Haiti within the next few days and is coordinating with Haitian nurses on the effort.

Details are still being worked out, but those able to support the efforts of these nurses can get involved via:

* to sign up to volunteer or donate
* @NationalNurses on twitter or by following: #haitiRN
* Call the RNRN hotline: 1-800-578-8225

The RNRN may also be able to help direct physicians who would like to volunteer in the recovery effort. Groups like Doctors without Borders are among those who are already treating victims.

Health insurers fund Chamber attack ads

Posted by on Wednesday, Jan 13, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Health Insurers Funded Chamber Attack Ads

By Peter H. Stone
National Journal
January 12, 2010

Just as dealings with the Obama administration and congressional Democrats soured last summer, six of the nation’s biggest health insurers began quietly pumping big money into third-party television ads aimed at killing or significantly modifying the major health reform bills moving through Congress.

That money, between $10 million and $20 million, came from Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group and Wellpoint, according to two health care lobbyists familiar with the transactions. The companies are all members of the powerful trade group America’s Health Insurance Plans.

The funds were solicited by AHIP and funneled to the U.S. Chamber of Commerce to help underwrite tens of millions of dollars of television ads by two business coalitions set up and subsidized by the chamber.

In late October, (AHIP President Karen) Ignagni wrote in a letter to the Washington Post defending a health insurer-funded study critical of congressional cost estimates, “Let me be clear and direct, health plans continue to strongly support reform.” However, by that time money was already flowing through AHIP to the chamber to fund its negative ads.

The fundraising started last September and continued through December using AHIP as a conduit to avoid a repeat of the political flak that hit the insurance industry after it famously ran its multimillion-dollar “Harry and Louise” ads to help kill health care reforms during the Clinton administration.

AHIP’s December 2008 proposal for reform (pages 7-11):

This is not a simple Gotcha! The largest private insurers in the nation have been caught red-handed, secretly passing funds through their lobby organization, AHIP, to the United States Chamber of Commerce to help fund the Chamber’s advertising campaign opposing the reform proposal currently before Congress.

AHIP’s Karen Ignagni repeatedly has professed publicly to “strongly support reform,” yet has now been caught in this dishonest scheme campaigning in opposition to the current proposal. When you read AHIP’s proposal for reform (link above), you will see that it almost could be used as a description of the legislation. That is no surprise since it essentially was written by the private insurance industry. The legislation contains virtually every major policy that they requested.

So why should the insurers be involved in this effort to sabotage the bill? The answer is in two parts: what they don’t like about the current legislation, and what they do like about the status quo.

As the bill moves along in the late stages towards enactment, Karen Ignagni has stated many times that this bill does not require the government to do enough to control health care spending. The industry has been struggling with innovations in health plans to slow the increase in premiums, which are already placing a strain on individuals and businesses. Health care costs are so high that they can no longer provide insurance products with affordable premiums if those products are designed to provide adequate protection from financial hardship for those who actually need health care.

Working with Congress, the Congressional Budget Office, and now academically-compromised Jonathan Gruber, the industry has seen that their proposal must leave perhaps tens of millions without insurance, and leave the majority of working families with plans set at actuarial values that are so low that anyone who needs health care will still face major bills. The answer to this problem was to be found in the subsidies, but for them to be adequate would require a massive increase in government spending. Neither Congress nor the Obama administration were willing to consider the massive tax increases that would be required to make this work.

Increasingly unaffordable premiums for plans with diminishing benefits increases the instability of the private insurance market. The insurers should rightfully fear that the time is not far away when our policy makers would decide that we finally would have to replace the insurance industry with an efficient single payer system that actually would provide everyone the essential care that they need. They know that they cannot possibly deliver of the promise of affordable health care for everyone.

So what do they like about the status quo? The largest, healthiest, least expensive sector – the employer-sponsored market – is still working very well for them. In fact, that market would change very little with the current legislation, though the insurance industry would be inconvenienced with some additional regulatory oversight. The private Medicare Advantage plans are working well for them as well, but they would not be as lucrative under the reform proposal. The individual market works well for them because they can skim off the healthy, but they would have to include the high-cost chronically ill under the reformed system, making plans even less affordable.

Why would they want to comply with all of the other measures in this bill when they already have most of what they want, and they are very effectively avoiding what they don’t want? If they can kill this bill, they would be much better off.

What we have now is not working – too many are uninsured, and too many of the insured still face excessive medical bills. What this legislation proposes will not work – too many would remain uninsured, and too many of the insured would still face excessive medical bills. What we could have, an improved Medicare for everyone, would work – everyone would be insured, and no one would have to face excessive medical bills. Furthermore, as a nation, it would provide us with a financing system that we could afford, unlike our current system or the system in the flawed proposal.

AHIP, Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group and Wellpoint have lied to us, telling us that they support reform while secretly spending millions on a campaign to defeat it. Congress and President Obama now have every reason to show these crooks the door, and they should do so immediately.

Investment bankers win big in health care

Posted by on Tuesday, Jan 12, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Banks Prepare for Big Bonuses, and Public Wrath

By Louise Story and Eric Dash
The New York Times
January 9, 2010

The bank bonus season, that annual rite of big money and bigger egos, begins in earnest this week, and it looks as if it will be one of the largest and most controversial blowouts the industry has ever seen.

Industry executives acknowledge that the numbers being tossed around — six-, seven- and even eight-figure sums for some chief executives and top producers — will probably stun the many Americans still hurting from the financial collapse and ensuing Great Recession.

Though Wall Street bankers and traders earn six-figure base salaries, they generally receive most of their pay as a bonus based on the previous year’s performance. While average bonuses are expected to hover around half a million dollars, they will not be evenly distributed. Senior banking executives and top Wall Street producers expect to reap millions. Last year, the big winners were bond and currency traders, as well as investment bankers specializing in health care.

Even some industry veterans warn that such paydays could further tarnish the financial industry’s sullied reputation. John S. Reed, a founder of Citigroup, said Wall Street would not fully regain the public’s trust until banks scaled back bonuses for good — something that, to many, seems a distant prospect.

“There is nothing I’ve seen that gives me the slightest feeling that these people have learned anything from the crisis,” Mr. Reed said. “They just don’t get it. They are off in a different world.”

Amongst the biggest winners for the bonus paydays are the investment bankers specializing in health care.

Not only do these people not get it, the members of Congress and the Obama administration who insist that these people be left in charge don’t get it either. Or, worse yet, maybe they do.

Is Stanford tainted by accepting Pfizer money?

Posted by on Monday, Jan 11, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Using a Pfizer Grant, Courses Aim to Avoid Bias

By Duff Wilson
The New York Times
January 11, 2010

Stanford University on Monday will announce plans to develop new continuing education programs for doctors that will be devoid of the drug industry influence that has often permeated such courses.

The work is being done with a $3 million grant — from the drug maker Pfizer.

Dr. Philip Pizzo, dean of the Stanford medical school, says Pfizer will have no say on how the three-year grant will be spent. The university plans to set up unbiased programs of postgraduate education on the Stanford campus rather than the industry-selected topics of the past that have been presented to rooms full of doctors at hotels and resorts.

“It’s a fundamental change,” Dr. Pizzo said Sunday, criticizing the drug industry for poisoning educational programs with marketing messages and doctors for “complicity” in taking speaker fees and expenses-paid trips. He called the grant “a novel rebooting.”

Pfizer, in a statement, said it wanted to help redefine how continuing medical education was financed to ensure the independence and patient benefit of the programs, which most doctors are required to take to maintain their state medical licenses.

“The announcement is self-satirizing,” said Dr. Adriane Fugh-Berman, a Georgetown University medical professor who has researched and written about industry influence in continuing medical education. “Pfizer’s interest in better ways to manipulate physicians is well-known.”

Dr. Fugh-Berman said that Pfizer has major products in two of the four areas that the Stanford press release suggested might be pursued: smoking cessation and heart disease.

Dr. Arnold S. Relman, a former editor of The New England Journal of Medicine, a Harvard professor emeritus, an outspoken critic of industry conflicts and a friend of Dr. Pizzo, said he could not understand the rationale behind the arrangement.

“If it is true — a big, big if — but if it is true that this money is being given without any strings at all and without any obligation on the part of Stanford to please Pfizer, then it’s arguable that it’s O.K.,” Dr. Relman said.

“But it’s just not a good idea for a profession that says it wants to be independent and trusted, a reliable source of information to the profession and the public about drugs, to take money from the drug company under any conditions.”

This tempering of the contingencies attached to Pfizer’s grant to Stanford’s continuing medical education program (CME) seems like a very small anecdote in the overall picture of health care reform, but it has greater significance than would appear at first blush.

Stanford’s Dean Philip Pizzo has a well deserved reputation for taking principled stands on the ethics of medical education and health care in general. This agreement to accept the Pfizer grant only on the condition that its use in their CME program be exclusively controlled by Stanford, without further input by Pfizer, is another step towards Dr. Pizzo’s goal of a system largely freed from the albatross of ethical compromise.

Are there any reasons that Stanford should not have accepted these funds? The first and most obvious reason is that this expense for Pfizer will be passed on to patients in the form of higher drug prices, already a serious problem that policy makers face.

Also, since Pfizer can deduct this as a business expense, the tax subsidies that we are providing are being turned over to Pfizer, which has control over how to distribute those funds. Do we really believe that a private, investor-owned pharmaceutical corporation has a greater ethical sense and wisdom in determining the use of our taxpayer funds than would our own public stewards? Likely Stanford will make very good use of the funds, but of the options for use of the taxpayer-funded component, is that the best use? It doesn’t seem right to turn that decision over to Pfizer, especially when it appears that the CME programs may still support Pfizer products, but only if Stanford decides so (certainly an ethical problem if and when it comes time to renew the Pfizer grant).

CME programs provide a social good: better health care for everyone. Public funding would prevent such ethical compromises and would help to ensure that CME programs have a mission to improve patient care rather than a mission to advance the pecuniary interests of pharmaceutical and medical-tech firms.

The ethical premise behind the concept of a single payer national health program – an improved Medicare for all – resets the primary mission for our entire health care system from one of private entrepreneurialism to one of service for the benefit of patients.

Dean Pizzo is to be admired for trying to achieve the best under the confines of our current dysfunctional system. You work with what you have, until you have something better.

The greater significance of this anecdote is that the rules under which we operate are wrong, and we need to change them, not just work within their confines as Congress is trying to do. We need a single payer monopsony that belongs to all of us – the people of this nation.

By Jeoffry  B. Gordon, MD, MPH

Any doctor with a brain and a heart who practices medicine these days has daily experiences with the many disastrous shortcomings of our medical system. As the graph below shows we spend nearly $8000 per person per year on health services involving 18% of our GDP and we have worse out comes. We all know that medical care in the United States is poorly distributed, has less than optimal outcomes, and is hugely expensive.

In the last year we have witnessed a vociferous and prolonged public debate about health care reform – the most vigorous and comprehensive in 50 years. This has had the beneficial effect of bringing knowledge of the failings of our health care system into the daily discussions and awareness of large numbers of Americans. While passage of the resulting legislation seems imminent, the process and the outcome in the public square, while often passionate, have been greatly askew – one could even say deceitful, distorted and ineffective. We all know it is shocking to see the proposed reform revolve around tax subsidized premiums to health insurance companies – which are the source of huge administrative  complexity and inefficiencies, thus wasted monies. It is shocking to listen to national experts tell us that more emphasis on information technology and preventive medicine will go a long way to cure our systemic problems. It is shocking not to hear about the excess burden of disease and mortality born by minority citizens. It is shocking not to hear about the expanding deficit of primary doctors, of the shortage of trained nurses, of the huge debt burden of many medical students, or the excessive proliferation of MRI machines and other profit producing technologies. At the same time it is even more shocking, one might say even repulsive, to hear the shrill and distorted rhetoric of the opponents of health reform – focusing on topics like “love of my insurance company,” “insurance required abortions,” “death panels,” “socialism” and government takeover, denial of care due to recommendations of expert panels using evidenced based medicine studies, and the declaration that the United States can be proud of its exemplary health outcomes. For those of us committed to health reform, it is imperative to review and understand the events and the process of the past year in order to formulate a better strategy for accomplishing the reforms  which will improve the health of Americans at a reasonable cost.

Any analysis of contemporary national public policy on health reform must be based on the insight that the health insurance companies had successfully structured the process in their interest before it even began. Single payer health reform, the elimination of the private health insurance sector, was firmly and totally “off the table” from the very start. President Obama was so opposed to the idea that none of the 140 luminaries invited to the First White House Conference on Health Reform were single payer proponents – until 2 were invited at the last minute after protests were being organized outside. It is important to get past the statistics of the huge amounts of money spent by the health insurance industry on lobbying and campaign contributions, of the many former Congressional, White House, and government officials who became health reform lobbyists. Insight comes when you realize that the chief health aide to Senator Max Baucus, Chairman of the Senate Finance Committee is Elizabeth J. Fowler, JD, PhD, who after serving many years as Health and Entitlements Counsel to the Committee left to become a Vice President of Wellpoint Health Insurance and then returned to the Senate Committee to literally write Senator Baucus’ bill. It would also be prudent to recognize that Senator (fmr D, Conn) Joe Lieberman’s wife was a former health insurance company lobbyist and Senator (D, Indiana) Evan Bayh’s wife was on the Board of Directors of Wellpoint insurance, and so on. All the activists’ efforts to educate, confront or otherwise influence Washington principals, all the think tanks, academics, and accumulated data had a vanishing little impact on the final legislative proposals. It is important to remember that the so-called “public option” was first introduced as a pro-competitive, cost-cutting government program as a practical compromise short of single payer and preserving the private insurance market. This could have had an improved competition in the system and based on market principles had the potential to be a real cost saver. When a study showed that up to 135 million Americans might be eligible and able to choose it, it was quickly disparaged and the insurance lobby saw to it that it was whittled away to an impotent remnant that might cover 5 to 8 million people, and then eliminated. Now we have “Health Insurance Exchanges” which especially if done on the state level will be impotent as well. A brief enthusiastic compromise  effort to expand Medicare to age 55 was snuffed out quietly and quickly by the same insurance lobbyists as soon as it was realized that it could be the first step to universal Medicare.

Toward the fall, the health insurance industry was still anxious about the direction of the legislation and showed its anxiety by conducting and releasing several reports predicting the failure and excessive costs of the then proposed reforms. These reports were so obviously self serving that there was a brief, vociferous backlash. This brought to light the previously neglected, extraordinary fact that the insurance industry, along with baseball, is exempt from federal regulation and anti-trust law. This was due to the McCarran-Ferguson Act  (15 U.S.C. 1001) which was passed by Congress in 1945 to nullify a Supreme Court ruling that insurance could be regulated by the federal government via the Commerce Clause of the Constitution and the Sherman Anti-Trust Act as interstate commerce. This law naturally covered developing health insurance products leaving them to state regulation and supervision. This law also forced health care financing to be subjected to the perversities of ERISA law and to intra-state monopolies by health insurance companies. For a brief moment of anger and insight repeal of McCarran-Ferguson was included in the draft health reform legislation. Then it was quickly and quietly removed.

The idea that the problems with medical care outcomes, or even with health care financing, could be solved by the currently proposed legislation falsely follows the Massachusetts model which is currently demonstrating its lack of cost control, lack of restraint on insurance company behavior, and strain on primary care. The politicians have grabbed a model that optimizes the outcomes for the health insurance companies. L. Randall Wray, an economist at the University of Missouri-KC put it best last October 11, 2009:

“Here’s Wall Street’s newest and bestest gamble: there is a huge untapped market of some 50 million people who are not paying insurance premiums—and the number grows every year because employers drop coverage and people can’t afford premiums. Solution? Health insurance “reform” that requires everyone to turn over their pay to Wall Street. Can’t afford the premiums? That is OK—Uncle Sam will kick in a few hundred billion to help out the insurers. Of course, do not expect more health care or better health outcomes because that has nothing to do with “reform”. …They’ll collect the extra premiums and deny the claims. This is just another bailout of the financial system, because the tens of trillions of dollars already committed are not nearly enough.

“You might wonder about the connection between insurance and Wall Street finance. They are two peas in a pod. Indeed, we threw out the Glass-Steagall Act that separated commercial banking from investment banking and insurance with the Gramm-Leach-Bliley Act of 1999 … that let Wall Street form Bank Holding Companies that integrate the full range of “financial services” such as loans and deposits, that sell toxic waste mortgage securities to your pension funds, that create commodity futures indexes for university endowments to drive up the price of your petrol, and that take bets on the deaths [and health] of firms, countries, and your loved ones. “

In fact, it should have been apparent to anyone who was watching that any movement toward real health reform would peter out and fail after there was a wholly inadequate institutional, political, cultural, and media response to the economic debacle in the fall of 2008. The only major public figure who confessed to a failure of ideology was Alan Greenspan. No other main stream political leader or public institution diagnosed the financial collapse as a total failure and repudiation of the government de-regulated, laissez faire, market driven, profit making, financial institutional dominance political philosophy (facilitated by both the Republican and the Democratic Parties)which had sucked our country into a dark hole. Without a clear and strategic, articulate insight into the nature and breadth of the economic crisis and courageous leadership, real financial and health reform and remediation have been impossible. President Obama selected his financial and economic team from the very Wall Street players who were intimately part of the debacle. Then, as the Republicans have properly observed, unconscionable amounts of tax payer money have been thrown into the banking and finance system with astonishingly little targeting, oversight or fiduciary supervision. And even to this day there has been no legislative reform of the regulation of the financial system, nor substantive governmental intervention in its functioning.  In this context, the barriers to real health reform are only a side show. White House town halls, brief visits to the Cleveland or Mayo Clinics, noting the cost of medical education, discussions about electronic medical records, or primary care deficiencies, or obesity or touting the medical home or preventive medicine were all media enticing diversions and mere window dressing. As finance capital continues to control all 3 branches of our national government, it was to be expected that public policy about health care reform would end up seeking to maximize profits by the insurance industry. As Michael Moore has said, “There has been a coup d’etat in this country and Goldman Sacks won.”

Due to the dominant importance of the financial interests of the health insurance industry (and our politicians’ subservience to them) all of the hard facts, rational analysis, objective national and international data, and all of the reform planning and policy projects – whether in the clinical realm or in the areas of administration and finance – done by the many government agencies, private foundations, academic institutions, grass roots organizations, and think tanks have been basically impotent and irrelevant. The political movers of public policy and, especially, the opponents of reform have studiously avoided dealing with any of the tragic hard facts about the contemporary provision of medical care and its financing. It was painful to hear Senate Minority Leader (R-Kentucky) Mitch McConnell declare, “We have the best health care system in the world.” Or Senator (R-Iowa) Chuck Grassley complain in August that “(You) should not have a government run plan to decide when to pull the plug on grandma.” Or to hear House Minority Leader, Congressman (R-Ohio) John Boehner tell the press, “I’m still trying to find the first American to talk to who’s in favor of the public option….This is about as unpopular as a garlic milkshake.” The Republicans are clearly handicapped by their one note ideological opposition to government agency to solve any problem short of war or protection of the unborn, even in the face of a total objective failure of their philosophy. And the Democrats have become equally impotent by their refusal to acknowledge the fundamental foundational significance and origins of the economic crisis and by their attempts to accommodate and build bipartisanship with the obstreperous Republicans. The Republicans are patently absurd to propose income tax refunds or health savings accounts as the public policy for optimal funding of health insurance for the working poor or the unemployed. It is tragic to see the political leadership of our country so purposefully turning a blind eye to the hardship and suffering of millions of their constituents. It is certainly demoralizing for involved citizens to see our elected officials, whether in support or in opposition, promote rhetorical name calling, deceitful analyses and avoid honest debate on the issues.

It has been even more provocative and threatening to have experienced – as we did this summer – the angry hatred of the so-called Tea Party protesters, the Palin People and their friends. It is crucially important to understand the origin and implications of this phenomenon in order to plan for success in the future. In fact, it is only by understanding their forceful energy and beliefs that we can make any sense of this phenomenon at all. Clearly the issues and fears of these citizens are not based on the facts nor any reality concerning clinical medical care, actual government policies,  or its proposed administration and financing. Furthermore it must be recognized that these protests have been mobilized and magnified with hundreds of millions of dollars from the same well documented vast array of very wealthy donors and foundations (Including the health insurance industry) which have undertaken to destroy good government over the past twenty years. In addition, their vehement disruptiveness and distain for civil discourse has been explicitly and eagerly endorsed by and participated in by the Republican Party itself. One can accept the legitimacy of the vehemence of their  energies, even if it is impossible to agree with the actual content of what they are saying. The content of their fears, and the source of their opposition, is both emotional and ideological. The emotional issues are serious and very important because they fuel their anger and its threat of violence. Their fervor has two sources: (1) the perceived disruption of personal security and the natural order of things created by the election of a Black President and (2) the huge economic dislocations and economic insecurity our country and each family are experiencing at this time. Only by understanding how threatening and tumultuous these circumstances are to those involved can we make sense of the forceful deceived rhetoric and the mass psychology of this summer’s protests. While the racism of these folks has its origin in their primal immaturity and class culture and cannot be excused, frankly it is important to respect their economic fears – and this is crucial for successful health care reform. As will be demonstrated below, the President, both political parties, major cultural leaders and commentators, and most main stream media as well as most bloggers and critics, both currently and in the past, have been desperately trying to get the country to ignore or minimize the economic and social painful transformation and decline of the United States over the past few decades and the tragic harm-multiplier of last year’s economic collapse and its continuing impact. This neglect of our true economic circumstances is analogous the past President’s attempts to minimize the costs of war by forbidding photographs of returning dead soldiers.

GROUPS 1, 2, AND 3 (the top 10% of all income producers) ADD TO A TOTAL OF 50% 0F TOTAL NATIONAL FAMILY INCOME



We must now delve into the suppressed economic circumstances of the contemporary United States. As you can see from the figures above, from 1943 through 1983 our country had a stable sharing and distribution of incomes – and prosperity – which carried us forward from a recovery after a horrible war through the awakening and the challenges of the civil rights movement and beyond.  It was this period which created and supported our cultural self image of a generous, pluralistic, idealistic, humanistic, equitable civil American society. First, note that this graph ends before the additional impact of the current depression. Second, note that the period since 1998 has created a concentration of wealth among the top 1% of families unseen since the years immediately preceding the Great Depression.  And third note that this transformation in our society started in 1983 with the Presidential election victory of Ronald Reagan and the ascendency of the deregulating, laissez faire, anti-government economic philosophy of the Republic Party. Yes, the Tea Party and Palin People folks have every right to be angry. The economic evolution of our country has stolen their birthright and the current economic mess has put the nail in the coffin of their hopes. And it is more than their problem:  while we have been looking the other way, the economic catastrophe of the last 18 months has been destroying the middle class. Today about 20% of Americans are unemployed, underemployed, or stopped looking for work. In the past decade the United States economy has had zero net job creation. Almost 10% cannot make the minimum payment of their credit cards; 12.5% are on food stamps (over 37 million people). A total of 10,000,000 Americans may lose their homes (6.2% of mortgages are in default). The current economic depression has wiped out $5 trillion in pensions and savings assets and another $13 trillion in housing assts. In 2008 median household income, adjusted for inflation, fell 3.6% to $50,303, the steepest drop in 40 years. The poverty rate in 2008 rose to 13.2%, the highest since 1997. And about 700,000 more Americans did not have health insurance in 2008 than in 2007. It goes without saying that the data for 2009 when it is in will be much worse.

If this shocking description does not motivate you to want to join the outrage of the Tea Party and Palin People, let me introduce you to a statistic called the Gini coefficient. This is a statistical index which can be used to quantify the level of income or wealth inequality in a country. It is compiled by such organizations as the United Nations and the CIA.  Sweden captures the “world’s best” title (with an index of 23 (CIA) or 25 (UN). It keeps company with countries like Denmark (24), Austria (26) and Belgium (28). The average EU index is 31; Canada has an index of 32; and Great Britain has an index of 34. Before the current economic turmoil the United Sates had an index of 47 (its highest ever) and it keeps company with countries like Cameroon (44.5), Jamaica (45.5), Mexico (46.1), and the People’s Republic of China (46.9). Yes, while you weren’t looking our country has been turned into a banana republic. The ascendency of Wall Street, the crash of 2008 and the failure of health reform are prime symptoms of a much bigger problem. One way to look at the angst created by the gap between President Obama’s charisma and rhetoric and his performance in office is to see that it reflects our gut feeling that our Country has been taken in the wrong direction into a period of massive decline.  We are responding to his abject failure to acknowledge these tragic facts and lead us in a better direction. Even worse – and his paradigm of health care reform proves it – he has chosen to kowtow to the interests of the financial sector.

Because these economic circumstances are so different from the prosperity of the sixties, contemporary political activism must use different strategies and tactics to achieve our aims. It is myopic and fraught with failure to merely pursue health reform in the era of what Kevin Phillips calls the rule of the plutocracy. This country needs a more fundamental transformation. Many Americans do not yet feel the anguish and failure in their gut like the Tea Party and Palin People folks but there is every reason we should. If we look at the Palin People and Tea Party as alien, we can see the seeds of fascism in their alienation and anger, similar to that experienced in Germany, Italy and Argentina before their takeover by the far right. On the other hand, if we identify with their distress – and get past our still relatively comfortable circumstances – we will have allies in taking our country back. We cannot be limited to our rational, professional analyses. Facts and data will not rule the day. There is no rational, beneficent debate going on. It has become clear and evident that all the foundation work, all the macro and micro system modeling, all the vital statistics of health outcomes and service maldistribution, all the shocking case studies, all the bankruptcies, and the morbidity, not to mention, mortality statistics have had little impact on the outcome of last year’s health reform process.

These observations lead to two complimentary paths which will help further the achievement of real health reform. For make no mistake about it, it is highly likely that the currently proposed federal legislation, if it is passed, will not greatly improve medical outcomes, will be an unacceptable financial burden both on individual families and on individual state and federal governments, and will not eliminate the horribly expensive administrative inefficiencies of our current private health insurance based system. Thus it is likely to become highly unpopular and its impact will further erode faith in government agency and the Democratic Party. Our approach to the current circumstances needs to be more strategic, more tightly organized, facilitated by better communication and coordination, and directed toward mobilizing a broader army of reform activists. First, working within the political system, we should focus on the strategy of creating state based initiatives to legislate state single payer systems. The practical fact is that at this time of economic contraction each and every state will be desperate for truly budget saving measures – and because of Medicaid and public employee health costs, real health reform will have major beneficial outcomes. The specific goal should be an amendment to the federal ERISA law to permit states to develop their own single payer systems. This focus will both continue to highlight the fundamental target in the health system debacle – the insurance companies – and energize political action at a level that is more strategically amenable to grass roots impact.

The second path of action lies in dramatically changing the tactics of progressive reform advocates. To put it plainly we must transcend our reliance on facts and data and get out there with an emotional message and captivating activities. As health care providers doctors and other practitioners are taught to maintain a professional demeanor and to maintain an emotional distance from their patients’ suffering and, furthermore, at the core our technical skills are based on analytical knowledge. It is obvious that carrying these habits into the political arena has not been effective. We have to catch up to our opponents – first in the passionate expression of the anguish and suffering that is abroad in the land and secondly in the enthusiastic demand for political attention. It is evident that physicians and nurses alone cannot create the momentum for change. We must actively recruit our own patients who have suffered the shortcomings of the system in large numbers as well as the staffs of institutions serving the underserved, such as municipal hospitals and free and community clinics, and those religious who will stand up for social justice. This outreach must occur in an on-going organized way so that we can create a critical mass. We cannot effectively bring our insights to the public square without a broader coalition at our side. Along with those mentioned above, the Tea Party and Palin People are, in fact, our allies and constituents, for it is they – whether rural plain folk, farmers, manual service workers, employed poor, family shopkeepers, restaurant servers and so on – who are most severely impacted by the expensive, poorly functioning health care system and by our failing national economy. And you can bet they are about to be joined by hordes of former middle class folk. Their conventional wisdom, that government is the problem, just happens to be wrong. We are now in an era of catastrophic decline and disarray generated by 30 years of the dominance of that political philosophy. It has dramatically failed. The alternative conservative or libertarian model of Individual and independent initiative surely will not be enough to solve these problems. We must reach out to fundamentalist churches, talk radio and other conservative media, for example, to respect their anxieties and debate their political paradigm. We need to broadly mobilize as many of these disaffected citizens as we can. We must directly challenge the conservative religious activists morally devoted to protecting the life of an unborn child to see that their morals must encompass and give priority to the duty to relieve the suffering of the living. Collective communal action through an effective democratic government is the major prerequisite for successfully solving our economic problems as well as the expensive dysfunction in health services. The only way forward on health reform is to correctly diagnose the massive economic disaster that has befallen our country and create an integrated, energized broad coalition to implement political change. Those professional groups, those labor unions, those in progressive political organizations must not only unite, but also reach out to enroll and involve the disaffected among us. Then we will be successful.

Obama demands tax on Cadillac plans

Posted by on Friday, Jan 8, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Obama Urges Excise Tax on High-Cost Insurance

By David M. Herszenhorn
The New York Times
January 6, 2010

President Obama told House Democratic leaders at a meeting on Wednesday that they should include a tax on high-priced insurance policies favored by the Senate in the final version of far-reaching health care legislation, aides said.

The White House has long expressed a preference for the excise tax on high-cost plans, which health economists say could be an important tool in controlling long-term health care spending for the government and for individuals and families.


Taxing Cadillac Health Plans May Produce Chevy Results

By Jon Gabel, Jeremy Pickreign, Roland McDevitt and Thomas Briggs
Health Affairs
December 3, 2009 (online)

It’s often assumed that high-cost health insurance plans — sometimes called “Cadillac” plans — provide rich benefits to plan subscribers. Health reform provisions that treat these plans like luxuries may be misguided. Only 3.7 percent of variation in the cost of family coverage can be explained by benefit design (actuarial value). Benefit design plus plan type (HMO, PPO, POS, or high-deductible plans) explains 6.1 percent of this variation. Industry type and medical costs in the region also play a role. Most variation in premiums, however, remains largely unexplained.

Our inquiry suggests, however, that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors — industry and cost of medical inputs — are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities.


Nation’s Largest RN Organization Blasts Bid to Tax Benefits…

National Nurses United
Press Release
January 6, 2010

The nation’s largest union and professional organization of registered nurses today called on House members to hold the line in opposing a tax on workers’ healthcare benefits.

“It is unconscionable that workers and families with employer-sponsored health plans, who receive virtually no benefits from the proposed legislation, would have their health coverage taxed and seriously eroded,” said Deborah Burger, RN, co-president of the 150,000 member National Nurses United, formed last month through a unification of the California Nurses Association/NNOC, United American Nurses, and the Massachusetts Nurses Association.

“Advocates of the tax have made clear their intent: to force working people into cheaper, high deductible plans that provide less coverage and shift more costs to employees. The inevitable effect will be more people skipping needed medical care, enduring much higher out-of-pocket costs and risking financial ruin due to medical bills,” said NNU Co-president Karen Higgins, RN.

“Enactment of the tax, whose central premise is to control healthcare costs by reducing utilization of needed medical care while failing to control the pricing practices of the healthcare industry, would symbolize a central failing of the proposed legislation, ceding far too much to the insurers and the rest of the healthcare industry,” Burger added.

What is the deal on the excise tax on high-premium “Cadillac” health plans, and why is President Obama pushing this tax so vigorously in the final stages of enacting health care reform?

Well, he is pushing it because his advisers tell him that it would help to achieve his first and foremost goal of slowing the increase in health care spending. The rhetoric being used implies that taxing high-premium plans would reduce the waste of paying for extravagant, non-essential benefits that are of little practical value. We’ll first dismiss this misperception and then follow with an explanation of why this form of cost management results in detrimental health outcomes.

The so-called Cadillac plans are merely plans with high premiums. The Health Affairs article by Jon Gabel and his colleagues demonstrates that only 3.7 percent in the variation in premiums can be explained by the actuarial value inherent in the benefit design. In most instances, the higher premiums are not due to “Cadillac” benefits, but they are due to other factors, such as the type of industry providing the employment and the medical costs in the region. In most instances, the higher premiums cannot even be explained. We can speculate that our reliance on our dysfunctional system of financing care through relatively unregulated private insurer pricing may be the most important culprit in providing Chevy plans at Cadillac prices.

So if the excise tax is going to push premiums down anyway, how could this be detrimental? Employers will not want to pay the excise tax, so they will demand from the insurers premiums that are at or below the tax threshold. Insurers will not simply reduce the premiums and continue to offer the same benefit packages. They will lower their benefits, lowering the actuarial value of the plans. There is absolutely no doubt that high and ever-increasing deductibles will be the norm.

A plethora of studies has demonstrated that individuals with high-deductible plans reduce their use of beneficial health care services. Although the RAND HIE data has been inappropriately misused to suggest that a reduction in beneficial services causes no harm, in fact many other studies have shown that health outcomes are worse when people don’t receive the health care that they should have.

The philosophy of controlling health care spending by shifting the financial burden to individuals and families is the most serious defect in the legislation before Congress. The excise tax on high-premium plans is only an example of this shift. The most glaring example is that the national standard proposed for basic plans has an actuarial value set at the unacceptably low level of 70 percent or even less. Making insured individuals pay money they don’t have to access care that is unaffordable is the worst way to control health care spending, that is, except for designing a program that deliberately leaves tens of millions of individuals with no insurance at all, just to satisfy budget hawks who understand only spending and not revenues.

Instead of enacting cruel policies that negatively impact patients on the demand side of the equation, we need to enact policies on the supply side that would benefit patients – all patients. That is precisely what a single payer national health program would be designed to do.

Isn’t it time that we told the lobbyists for the special interests and our elected leaders who revere them where they can stuff their Cadillacs?

Uwe Reinhardt on community rating and risk equalization in other nations

Posted by on Friday, Jan 8, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

How the World Balances Health Care Risk

By Uwe E. Reinhardt
The New York Times
January 8, 2010

In last week’s post I used a stylized illustration to throw into sharp relief the economic and ethical dimensions of community-rated premiums for health insurance.

I am gratified by the many comments that post drew, and even more so by their quality. (In fact, I have shared these comments with my students in a course on health policy.) The comments show that there is no consensus on the merits of community rating in this country.

Remarkably, in virtually all other industrialized nations, this issue is hardly ever raised. Community rating there has long been widely accepted and is unlikely to be abandoned in the foreseeable future.

The health systems of Switzerland, the Netherlands and Germany are frequently cited as potential models for a reformed American health system. All three countries offer their citizens a wide choice of health insurers — none of which is a government-run health plan. Yet in all three countries full community rating is de rigueur.

Swiss citizens, for example, are required to purchase insurance coverage for a comprehensive health-benefit package from a large menu of private health insurance companies that compete for customers on the basis of the premium they charge for that coverage.

Profits cannot be earned on insurance for the basic package. Premiums do vary among competing insurers, but for a given insurer they can vary only by the deductible and coinsurance rates of the different policies. Neither the individual’s health status nor age affects the premium charged the individual by a given insurer. Health insurers ending up with an older or sicker enrolled risk pool then receive compensation from a risk-equalization fund.

Similarly, Dutch citizens are mandated to purchase insurance coverage for a comprehensive benefit package from a menu of private for-profit or not-for-profit insurers.

Roughly half of the cost of this coverage is financed by a payroll tax — that is, it is based roughly on ability to pay. The other half comes from competitively set premiums collected directly from those enrolled.

The payroll taxes are paid into a national risk-equalization fund that then pays a risk-adjusted amount to the insurance carrier chosen by a particular individual. Among health services researchers, this risk-adjustment mechanism has long been viewed as one of the most sophisticated in the world.

The part of the premium collected by Dutch insurers directly from individuals is fully community-rated. Although these premiums vary among insurers, a given insurer must charge all comers, healthy or not, young or old, the same premium, which is community-rated over that insurer’s pool of those insured.

Germany’s statutory health insurance system, covering about 90 percent of the population, also has a national risk-equalization fund, which is fed by a flat payroll tax on gross income of about 14 percent paid by all employees insured by that system.

The risk-equalization fund makes a risk-adjusted payment to the health insurer (which is a nonprofit “sickness fund”) of the individual’s choice. That payment from the risk-equalization fund, of course, does reflect the individual’s health status and age. But the individual’s payroll-tax payment into the risk-equalization fund is completely independent of the individual’s age and health status. It is based strictly on ability to pay.

I could continue to describe the health insurance systems of other European countries, or Canada, Taiwan, Japan, Korea, Australia or New Zealand. We would find that in none of these health systems does the individual’s or family’s contribution to health insurance reflect that individual’s age or health status.

Community rating is so acceptable in these countries because citizens there view it not only as part of a larger social contract, but also as a vehicle for life-cycle economic planning.

The vast majority of citizens in these countries view health care as a so-called “social good” that is to be shared on the basis of need by all on roughly equal terms and is to be financed largely on the basis of ability to pay.

By contrast, Americans have never agreed on a shared social ethic that should govern their health system, as the current debate over health reform has made visibly and audibly clear.

Furthermore, younger and healthier people in these countries realize that, but for the grace of God, they might become chronically ill only a few years hence and that, in any event, one day they, too, will be older and sicker. By paying more than their actuarially expected cost for health insurance, young and healthy people in these countries join a club, so to speak, that offers them a valuable call option. That call option allows them to procure at age 55 health insurance at a premium much below their actuarially expected cost.

By contrast, Americans have been taught that health insurance is largely a private consumption item purchased year to year and customized to the individual’s circumstances. Indeed, the private health insurance industry in this country has never been able to offer individual Americans the kind of life-cycle health insurance citizens in virtually all other industrialized nations take for granted. With the exception of Medicare, all health insurance in the United States is basically temporary.

Curiously, however, although Americans often flatter themselves with the image of being self-reliant, rugged individualists, they actually tend to rely more than citizens in many other countries on government-run health insurance and pensions in their old age, or when they fall on hard times. It is what makes the creature called “American” so perplexing in the eyes of foreigners.

Furthermore, many Americans who oppose community-rated insurance in the current health-reform plan are themselves beneficiaries of community rating. I shall have something more to say about this oddity in my next post to this blog.

Posted response of Don McCanne, San Juan Capistrano, CA (response # 2):

Some of us were very disappointed when politicians rejected, up front, the administrative simplification of the single payer model of an improved Medicare for everyone. Nevertheless, in the decision to expand the role of private insurance, Congress still had the opportunity to create a rational system of social insurance which would have included important concepts such as community rating and risk equalization.

The concept of the insurance exchange provided that potential. Yet Congress erected firewalls which will prevent most individuals from purchasing plans within the exchange. They also delayed the initiation of the exchange for a few years, and it will require several more years after that to once again prove that our rejection of the concept of a truly effective social insurance program will perpetuate the inequities, inefficiencies and profound waste in our system.

Worse, in trying to patch together this dysfunctional system, Congress has decided that 20 million or so will be left out, a number destined to increase with continuing increases in health care costs. That’s roughly two-thirds the population of Canada, a country that we criticize merely because of its issues with queues for some elective services.

Proponents of this reform proposal say that we should pass it now, and we can fix it later. Unfortunately, this process almost assures that it will be at least another decade before our nation takes another serious look at the policies required for an equitable and just health care financing system.

It’s too bad that we don’t have visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now. But then the citizens of the United States are used to living with our over-priced, dysfunctional system that accepts, as a given, financial hardship, physical suffering, and even death.

Further comment: Although my published response acknowledges that social insurance programs that depend on private health plans, such as the European programs that Professor Reinhardt describes, can achieve important policy goals such as community rating and risk equalization, I cannot overemphasize the fact that our goal for reform should remain the golden standard of a single payer national health program – an improved Medicare program that includes everyone.

The single payer model has unique features, not found in an exchange of private plans, that improve efficiency, effectiveness, and equity while insuring that absolutely everyone is included.

Private health plans, especially those in the United States that have evolved throughout the past three-quarters of a century, provide a negative value in administration of our health care funds because of their high costs, inefficiency, inequity, and their inability to improve the resource allocation that is needed for a high-performance health care system. They are not a suitable vehicle for a social insurance program.

Although some who read the letter from PNHP to our Senators fixated on the negative message of rejecting the flawed proposal before Congress, many seemed to miss our positive message which is reframed in my comment above: We need “visionaries in power who can say that this isn’t going to work, and we have to move on with fixing it now.” (The PNHP letter stated, “… immediately move to consider… “)

now: at the present time or moment (Merriam-Webster)

immediately: without interval of time (Merriam-Webster)

“Now” and “immediately” are terms that we used to communicate the fact that we need to avoid the decade or so of inevitable torture that so many will experience as we watch this experiment with reform fail us miserably. We need a bona fide program of social insurance now… immediately!

New book examines Israeli health care system

Posted by on Thursday, Jan 7, 2010

“Circles of Exclusion: The Politics of Health Care in Israel”
By Dani Filc, M.D., with a foreword by Quentin Young, M.D.
Cornell University Press, 2009
Hardcover, 208 pp., $35

Dr. Quentin Young, national coordinator of Physicians for a National Health Program, has written a foreword to a new book by Dr. Dani Filc of Israel.

Young writes (excerpt):

“As I sat down to read Dani Filc’s ‘Circles of Exclusion,’ I expected to learn a great deal about the Israeli health care system. What I did not expect was to find that this tiny country enmeshed in a seemingly intractable conflict in the Middle East would have so many lessons for the world’s most powerful nation – the United States.

“Several pages into this courageous book, it became clear that the issues Dr. Filc describes hold great relevance for those grappling with America’s ongoing health care crisis. The crisis in Israel and that in the United States are the result of the impact of neoliberal market policies that are currently being imposed on health care throughout the globe.

“In both countries we see a decline in concern and funding for public health and the exclusion of the poor racial and ethnic minorities from increasingly privatized health care systems in which the survival of profit-making enterprises seems to be the paramount concern. …

“For a public health advocate like myself, the message of this book is crystal clear. Obsessive preoccupation with free-market formulas are intensifying social and health care problems in industrialized countries, not resolving them. Of course, Filc shows us how this has happened is Israel, which because of its history puts a very specific spin on the problems of the poor, the old, racial and ethnic minorities, and the new migrant working class that crisscrosses the globe. Nonetheless, in Israel and elsewhere, preoccupations with profit are crowding out concerns for the classical social determinants of health and, as Dr. Filc points out over and over again, are not saving money but actually wasting it.”

The editors at Cornell University Press write:

“In its early years, Israel’s dominant ideology led to public provision of health care for all Jewish citizens-regardless of their age, income, or ability to pay. However, the system has shifted in recent decades, becoming increasingly privatized and market-based. In a familiar paradox, the wealthy, the young, and the healthy have relatively easy access to health care, and the poor, the old, and the very sick confront increasing obstacles to medical treatment.

“In ‘Circles of Exclusion,’ Dani Filc, both a physician and a human rights activist, forcefully argues that in present-day Israel, equal access to health care is constantly and systematically thwarted by a regime that does not extend an equal level of commitment to the well-being of all residents of Israel, whether Jewish, Israeli Palestinians, migrant workers, or Palestinians in the Occupied Territories.

“Filc explores how Israel’s adoption of a neoliberal model has pushed the system in a direction that gives priority to the strongest and richest individuals and groups over the needs of society as a whole, and to profit and competition over care. Filc pays special attention to the repercussions of policies that define citizenship in a way that has serious consequences for the health of groups of Palestinians who are Israeli citizens — particularly the Bedouins in the unrecognized villages — and to the ways in which this structure of citizenship affects the health of migrant workers.

“The health care situation is even more dire in the Occupied Territories, where the Occupation, especially in the last two decades, has negatively affected access to medical care and the health of Palestinians. Filc concludes his book with a discussion of how human rights, public health, and economic imperatives can be combined to produce a truly equal health care system that provides high-quality services to all Israelis.”

President Obama asks for greater affordability

Posted by on Wednesday, Jan 6, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Premiums are key issue for health care negotiators

By Ricardo Alonso-Zaldivar
The Washington Post
January 6, 2010

Congressional Democrats and President Barack Obama began work in earnest Tuesday on difficult issues still standing in the way of their national health care overhaul after months of tortuous debate. Topping the list: How to help Americans pay for insurance premiums.

Obama “… stated his intention to work with leaders to strengthen affordability … beyond what is in the Senate bill,” said a House leadership aide, who spoke on condition of anonymity because the meeting was private.

(House Speaker Nancy) Pelosi said she wants the final product “to ensure affordability for the middle class, accountability for the insurance companies, (and) accessibility by lowering costs at every stage.”

From the very beginning of his political campaign President Obama stressed that his highest priority in health care reform was to make health care affordable. He even rejected universal coverage through an individual mandate, insisting that you can’t require individuals to purchase a private insurance plan that they can’t afford.

In his meeting with the Democratic leadership yesterday, during the final stages of the reform process, he stressed again that affordability must be further strengthened.

The question of affordability has often been framed as a balance between what is affordable for employers, for individuals, and for the government. But it is really individuals, collectively, that bear the costs of health care. Individuals pay for insurance premiums and out-of-pocket expenses. Individuals also pay for employer-sponsored health plans through foregone wage increases. Those who dispute that will have to admit that the cost of premiums that are not supported by lower wages would then be passed on to individuals as consumers of the products or services provided by the businesses. And of course the government is financed by individuals though taxes, either paid directly or paid by higher consumer prices for taxes collected from businesses.

Why is it important to acknowledge that the individual is the source of all health care financing? It’s simply because our entire national health expenditures (NHE) represent the financial burden for which individuals bear the collective responsibility, and it is that burden that must be made affordable.

Unfortunately, most attention was directed to making health care affordable for the government. Rather than doing that by controlling our NHE, Congress merely played shell games with the budget, shifting the flow of funds in different directions, creating only the false appearance of affordable reform that was fully paid for. Balancing a government budget on the backs of others has almost nothing in common with the concept of affordability.

What is most unfortunate is that President Obama, right from the very beginning, rejected the model of financing reform that would make health care affordable for everyone. The model he selected is the most expensive model and falls far short on effectiveness, equity, and universality. Where his model saves money is in policies that are designed to place more financial barriers between the patients and the care that they need – policies that are primarily business tools of the private insurance industry, especially the low actuarial values of the plans.

It has been proven repeatedly, through simulations and through real-life experiences, that a single payer national health program or a national health service are the only models that would actually slow health care cost increases while truly covering everyone through equitable financing of a universal risk pool. They are truly effective in controlling spending through mechanisms such as reduction in administrative waste, global budgeting for hospitals, negotiation of pricing, and budgeting of capital improvements. These are the least expensive and most effective models of ensuring that everyone receives the health care that they need.

Although Americans remain uncomfortable with the concept of a government owned and operated national health service, they are very receptive of the concept of an improved Medicare that would cover everyone. That would be affordable for businesses, for the government, and, most importantly, for the individuals who really are paying all of the bills anyway.

President Obama needs to sit down with the Democratic leadership and say, “Hey, it’s absolutely imperative that we make health care affordable, so let’s look at this single payer thing again.”

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Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

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