We have had about a 75-year experiment with ESI, but its track record is one of continued decline over the last 30 years—fewer people covered, less coverage for more costs, and less value of that coverage. ESI was more an accident of history than a well-planned financing system for health care. Today, rapidly accelerating costs are the Achilles heel for ESI, both for employers and employees, as they are for the entire market-based ‘system’ itself.

ESI arose at a very different time than today. Beyond the labor shortage, American business was dominant with little concern about foreign competition, and labor unions were strong. Many workers could reasonably expect to hold their jobs for their working life.

But those days are long gone. Most workers these days have multiple jobs, even careers, over their working years. By 2002, only about one-half of employed men or women could claim to have held their job for ten years. (Tejada, C. A special news report about life on the job—and trends taking shape there. Wall Street Journal, September 25, 2002: B5) Loyalty between employers and employees has dropped way off in recent years, part-time workers are not eligible for benefits, and union membership hovers around 10 percent of the workforce.

These markers show a long decline of ESI, as well as the decreasing benefits to enrollees:

• In 1980, more than 70 percent of employees working more than 20 hours a week were covered; that number fell to 56 percent by 2005, with coverage already unraveling as employers shifted from defined-benefits to defined-contributions. (Mishel, L, Bernstein, J, Allegretto, S. The State of Working America 2004/2005. Ithaca. Cornell University Press, 2005)

• Over the 13-year period that Kaiser Family Foundation has been tracking premiums for ESI, employee contributions have increased by 168 percent as compared to increased wages of 50 percent and inflation of 38 percent. One-half of employees of companies with fewer than 200 workers now have a deductible of $1,000 or more for single coverage as compared to 16 percent five years ago. (Altman, D. Rising health costs are not just a federal budget problem. Kaiser Family Foundation, September 27, 2011)

• Premiums for family plan ESI coverage have gone up by 9 percent this year, triple the increase in 2010; family premiums now total $15,073 on average, of which $4,129 is paid by employees (consider that these costs may have little to do with what employees end up paying for their health care, especially those who are older or have one or more chronic diseases!). (Appleby, J. Costs of employer insurance plans surge in 2011. Kaiser Health News, September 27, 2011)

• In 2012, average annual employee premiums for health insurance are expected to go up by another 10.6 percent. (Japsen, B. Companies pass on more of health costs to workers. New York Times, October 3, 2011: B3)

• Many of the so-called ESI plans cannot really be called insurance, since they now pass along so much of the costs of care to enrollees even as the extent of coverage withers away. Retiree and disability coverage are being cut by many companies, and their employees are increasingly being herded into lower-cost networks of providers with quality of care in question. As Dr. Don McCanne, Senior Health Policy Fellow for Physicians for a National Health Program, sums up: “The new national standard in health insurance is unaffordable under-insurance”. (McCanne, D. Quote-of-the-Day, September 13, 2011)

Beyond the increasing unaffordability of ESI for employees, employers—big and small—have the same problem with no end in sight. General Motors says it spends about $5 billion on health care expenses each year, adding between $1,500 and $2,000 to the sticker price of every car out the door. That burden is many times higher than what neighboring competitors just across the border in Canada pay for health care, rendering GM much less competitive in global markets. (Johnson, T. Healthcare costs and U.S. competitiveness. Council on Foreign Relations, March 23, 2010) Small business (with fewer than 100 employees), accounting for about 40 percent of the private U.S. workforce, cannot keep up with the growing cost of ESI coverage. The small employer market has been one of the most profitable for private insurers, with premiums climbing by 74 percent between 2001 and 2008.

The so-called health care reform legislation, the Affordable Care Act of 2010, will not fix this problem. Having handed over a combined employer and individual mandate to the private insurance industry, with minimal regulatory clout, the bill (if and when it is implemented) lacks any semblance of cost containment measures. Federal waivers already give employers whatever they want, as illustrated by a recent HHS ruling that allows McDonald’s Corp. to keep its very low limits of annual coverage of just $2,000 a year. (Adamy, J, Johnson, A. Rules eased for some health plans. Wall Street Journal, November 23, 2010: B1) Whereas President Obama promised that the average American family would save $2,500 a year on health insurance premiums, the Congressional Budget Office later projected that their cost would only increase. (Hemingway, M. Obama promised $2,500 health care savings; CBO says plan is $2,300 price increase. Washington Examiner on line, March 10, 2010)

M. Obama promised $2,500 health care savings; CBO says plan is $2,300 price increase. Washington Examiner

Adding all of this up, we can only conclude that employer-sponsored health insurance, and the overly expensive, wasteful private insurance industry upon which it is based, is in its death throes. As the Vice chairman of Ford Motor Co. said in 2004: “Right now the country is on an unsustainable track and it won’t get any better until we begin—business, labor and government in partnership—to make a pact for reform. A lot of people think a single-payer system is better.” (Downey, K. A heftier dose to swallow. The Washington Post, March 6, 2004). Some 50 years ago, Walter Reuther, as the national president of United Auto Workers, saw the future this way:

“When American corporations reached the point where they couldn’t make their business more efficient without making it less profitable, when their dependency ratios soared to unimaginable heights, when they got tens of billions behind in
their health-care obligations, when the cost of carrying thousands of retirees forced them to stare bankruptcy in the face, they would come around to the idea that the markets work best when the burdens of benefits are broadly shared.” (Reuther, W. as cited by Gladwell, M. The risk pool: What’s behind Ireland’s economic miracle and GM’s financial crisis? The New Yorker, August 28, 2006, p 35)

We have to move beyond denial of this problem, and rein in markets that fail the public interest. We can no longer afford ESI or the private insurance industry. Unless we move past political gridlock on this big issue toward a new partnership between labor, business and government, they can bankrupt us all!

There is an answer, of course, in plain sight—not-for-profit, improved Medicare for All, funded by broadly shared progressive taxes that cost patients, families and business less than they are now paying while assuring universal coverage in a less bureaucratic and more accountable system.

John Geyman, M.D.
Professor emeritus of Family Medicine
University of Washington

Author of Do Not Resuscitate: Why the Health Insurance Industry is Dying and How We Must Replace It and Hijacked! The Road to Single-Payer in the Aftermath of Stolen Health Care Reform (Common Courage Press, 2008 and 2010)

To buy books from John Geyman visit: http://www.copernicus-healthcare.org

We now have to wonder what has happened to our sense of fair play, our self-proclaimed egalitarianism that has been part of our character for a long time. We need to ask whether we care anymore for our fellow citizens, and whether we can mount the collective political will to reverse course toward a kinder, gentler society?

Today’s mean-spirited political debate across the wide divide between the Tea Party and progressives stands in sharp contrast to previous times in the last century. Through the leadership of a strong and caring president, FDR brought us Social Security in the 1930s, the 1950s was a time of prosperity widely shared across our society, and the 1960s brought Medicare and Medicaid.

We are now seeing some interesting writing on this subject that helps us to understand how we got here and how we might get past these dark times.

In his classic recent article on the subject, Robert Kuttner, founder and co-editor of The American Prospect and co-founder of the Economic Policy Institute, draws a comparison with the failures of civic institutions of Germany in the late 1800s that prevented a national consensus with later global consequences. As he observes:

“One of our major parties has turned nihilist, giddily toying with default on the nation’s debt, reveling in the dark pleasures of a fiscal Walpurgisnacht. Government itself is the devil… Whether the target is the Environmental Protection Agency, the Dodd-Frank law or the Affordable Care Act, Republicans are out to destroy government’s ability to govern… The administration, trapped in the radical right’s surreal logic, plays by Tea Party rules rather than changing the game… The right’s reckless assault on our public institutions is not just an attack on government. It is a war on America.” (Kuttner, R. The war on America. The American Prospect 22 (8): 3, 2011)

In his new book Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It, Don Peck compares our times today with those in the First Gilded Age in this country in the late 1800s. The gulf between rich and poor was also very wide in those years. The Depression of 1893 led to a run on banks that crippled the financial system, extended families broke apart, communities became more transient, and the social fabric of society was shattered. (Peck, D. Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It. New York. Crown Publishers, 42-5, 2011)

Theodore Marmor, professor emeritus of public policy at Yale and Jerry Mashaw, professor of law, also at Yale, note how the language of our political leaders has changed from the 1930s to today—from “a morally resonant language of people, family and shared social concern to the cold technical idiom of budgetary accounting.” As they further observe:

“ In 1934, the government was us. We had shared circumstances, shared risks and shared obligations. Today the government is the other—not an institution for the achievement of our common goals, but an alien presence that stands between us and the realization of individual ambitions. Programs of social insurance have become “entitlements”, a word apparently meant to signify not a collectively provided and cherished basis for family-income security, but a sinister threat to our national well-being.” (Marmor, TR, Mashaw, JL. How do you say ‘economic security’? New York Times, September 23, 2011)

Henry Giroux, author of another new book, Education and the Crisis of Public Values: Challenging the Assault on Teachers, Students and Public Education, sheds further light on how all this has come about:

“As the left slid into organizing around mostly single-issue movements since the 1980s, the right moved in a different direction, mobilizing a range of educational forces and wider cultural apparatus as a way of addressing broader ideas that appealed to a wider public and issues that resonated with their everyday lives. Tax reform, the role of government, the crisis of education, family values and the economy, to name a few issues, were wrenched out of their progressive legacy and inserted into a context defined by the values of the free market, an unbridled notion of freedom and individualism and a growing hatred for the social contract.

…At issue here is the need for a new vocabulary, vision and politics that will unleash new, democratic movements, institutions and a formative culture capable of imagining life and society free of the dictates of endless military wars, boundless material waste, extreme inequality, disposable populations and unfounded human suffering.” (Giroux, HA. Corporate media and Larry Summers team up to gut public education: Beyond education for illiteracy, vulgarity and a culture of cruelty. Truthout, September 27, 2011) So we have some big questions here: who are we today, are we the country that we want to be, do we care about each other anymore, and do we have the collective will to assert ourselves against the bigoted interests of the few?

John Geyman, M.D.
Professor emeritus of Family Medicine, University of Washington School of Medicine, and author of Falling Through the Safety Net: Americans Without Health Insurance (Common Courage Press, 2005)

To buy a book from John Geyman, M.D., visit http://www.copernicus-healthcare.org

The public discourse is reaching new levels of ugliness, as illustrated by an audience at a GOP campaign event cheering the idea that that those without health insurance should just be left to die. (Krugman, P. Free to die. Op-Ed. New York Times, September 16, 2011: A23). GOP presidential hopefuls have no solutions to offer except the “freedom to choose” (your own fate!) and the private marketplace (which increasingly excludes those who cannot pay its rapidly increasing costs). In fact, they exacerbate the problem, under the guise of fiscal responsibility and austerity, by cutting government safety net programs while at the same time trying to exploit Medicare and Medicaid by further privatization.

These are some markers that show some of the impacts of this war:

• According to the U.S. Census Bureau, in 2010 49.9 million Americans were uninsured (which understates the problem since anyone with insurance for even a small part of the year was considered insured), the median household income was $49,445 (a drop of 2.3 percent from 2009), and 46.2 million people (including 22 percent of the nation’s children) were in poverty (the highest number in the 52 years for which estimates have been tracked). (U.S. Census Bureau. Income, Poverty, and Health Insurance Coverage in the United States, 2010)

• In his recent editorial in The Progressive, Matthew Rothschild notes that, over the last 40 years, the top 0.1 percent of the population (152,000 people making more than $5.6 million a year) skyrocketed by 385 percent while the income of the bottom 90 percent (about 137 million people) dropped by 1 percent.(Washington Post) In the last ten years, the median income of working-age households has dropped by more than 10 percent (Economic Policy Institute). (Rothschild, M. Enlist for class warfare. The Progressive, September 20, 2011)

• According to a Gallup poll, 18.2 percent of Americans state they did not have money to buy food at all times in 2010. (Gallup, Washington, D.C.)

• The median household wealth of white families has fallen by 16 percent since 2005; Hispanic families dropped by 66 percent. (Pew Research Center Social & Demographic Trends project. Washington, D.C.)

• Three-quarters of the increase in U.S. corporate profit margins over the last ten years have come from depressed wages. (J. P. Morgan, New York City) (Harper’s Index 323 (1937): 15, 68, October, 20ll).

• U.S. corporations pay only 10.5 percent of their profits in taxes today (vs. 40 percent in 1961, with some paying no taxes. (Institute for Policy Studies, Washington, D.C.)

• Based on a definition of the middle class of those between the 30th and 70th percentiles of the income distribution, one-third of Americans dropped out of the middle class over the last 30 years. (Acs, G. Downward Mobility from the Middle Class: Waking Up from the American Dream. Economic Mobility Project. Pew Charitable Trusts, September, 2011).

• The average annual premium for health insurance for a family of four reached $15,073 in 2011, 9 percent higher than 2010 (Abelson, R, Bernstein, N. Health insurers push premiums sharply higher. New York Times, September 28, 2011: A1) (an unaffordable level about 30 percent of the median family income, or twice the proportion of income that seniors paid for health care when Medicare was enacted in 1965!).

• In the most recent study of mortality amenable to health care in 16 high-income nations, the U.S. ‘led’ the field with the most preventable deaths, and with the least improvement over a ten-year period; the authors concluded this poor
showing is likely due to “the lack of universal coverage and the high costs of care.” (Nolte, E, McKee, M. Variations in amenable mortality—Trends in 16 high-income nations. The Commonwealth Fund, September 23, 2011)

• The consumer confidence level is now only 45 percent. (Vital signs. Wall Street Journal, September 28, 2011: A1) Despite all this pain and suffering, the political process continues to ignore this national catastrophe in the name of austerity as the debate continues over the budget deficit, targeting federal spending for education, health care and other important public programs (but avoiding bigger issues, such as major defense cutbacks, real financial reform, campaign finance reform, and tax increases for the wealthy). The extreme right-wing of the Republican Party, activated and hobbled by the Tea Party, continues to hold Congress and the Obama Administration hostage as it pursues its nihilistic agenda, focused on winning further power in 2012 despite its lack of a plan to address these kinds of problems.

The present situation in health care boils down to a human and moral crisis that seems beyond the reach or concern of our current political leaders, conflicted as they are by enormous amounts of corporate cash that perpetuates our present, increasingly cruel market-based system. In our next post, we will explore whether we still can draw on a long-standing self-image that we as Americans care about each other.

John Geyman, M.D.
Professor emeritus of Family Medicine, University of Washington School of Medicine and author of Hijacked! The Road to Single Payer in the Aftermath of Stolen Health Care Reform (Common Courage Press, 2010)

To purchase a book by John Geyman, visit copernicus-healthcare.org

But as I discussed in a lengthy article four years ago, this theory has been fully discredited over the years as a cost-containment tool in U.S. health care. (1) (Geyman, JP. Moral hazard and consumer-driven health care: A fundamentally flawed concept. Intl J Health Services 37 (2): 333-51, 2007) Instead of cutting health care spending, cost-sharing leads many patients to delay or forego necessary health care, resulting in later diagnosis of illness and higher costs down the road, together with decreased quality and outcomes of care.

Overall health care costs are not reduced. Cost-sharing just shifts more costs to patients and families at a time when these costs are already unbearable for many. Meanwhile, the real drivers of health care costs continue unimpeded— perverse incentives within the medical marketplace that encourage physicians, other providers, hospitals and other facilities to deliver more services, whether appropriate or necessary or not; lack of price controls; blatant profiteering by Big PhRMA, investor-owned hospitals and medical supply companies; introduction of new technologies with lax requirements to document their effectiveness; and excess bureaucracy of our 1,300 private insurers.

Although it is now clear that cost-sharing will not fix our cost problems, and will just make patients sicker and increase the numbers of preventable hospitalizations and deaths, the policy-making community continues to bark up this tree. In fact, all the present trends indicate that increased cost-sharing, promoted especially by the GOP and many willing Democrats, will be imposed across the board in both private and public programs.

These examples illustrate the extent of this continuing trend:
• High-deductible plans with increased co-payments for visits and drug prescriptions and greater restrictions on network providers.
• Efforts to increase cost-sharing in private Medicare plans, including Medigap and Medicare Advantage programs.
• The Obama Administration’s “surrender in advance” proposal to introduce new co-payments for home health services for new Medicare beneficiaries (4) (Office of Management and Budget. Living Within Our Means and Investing in the Future. The President’s Plan for Economic Growth and Deficit Reduction. September 2011).
• Draconian Medicaid cutting services and increasing cost-sharing (e.g. Arizonans below the federal poverty level must make co-payments to gain access to care, causing many to forego care, a practice recently rejected by a the 9th U.S. Circuit Court of Appeals. (5) (Reinhart, MK. Copays break law. The Arizona Republic, August 25, 2011) But conservatives and many Democrats conveniently ignore these inconvenient facts about cost-sharing as a failed mechanism to cut health care costs:
• Despite the widespread and increasing use of cost-sharing over many years, health care inflation remains completely out of control.
• Physicians push the buttons for health care services much more than patients.
• The enormous costs of the multi-payer financing system are wasteful and unsustainable, and could readily be controlled by shifting to a single-payer financing system. The hypocrisy of the right on this issue boggles the mind. Consider these contradictory policies and assertions on the right:
• Blind ideological support of “market competition” as the answer to our cost problems when that is the main part of the cost problem, since real competition does not exist in health care markets (e.g. more consolidation all the time, wide latitude to set prices, little transparency, etc).
• Intent to dismantle Medicare and convert it into a voucher-based welfare program while at the same time opposing cost controls of private Medicare programs and negotiated drug prices that are so effective in the VA.
• Forcing increasing cuts of an already underfunded Medicaid program while promoting for-profit privatized Medicaid programs that offer worse medical care (6) (McCue, MJ, Bailit, MH. Assessing the financial health of managed Medicaid managed care plans and the quality of patient care they provide. The Commonwealth Fund, June 15, 2011) and further gouge the most vulnerable among us.
• Opposition to reforms of Wall Street abuses, where moral hazard of high-risk and exploitive investment practices continue unchecked. (7) (Browning, ES. Fed faces old foe as hazard returns. Wall Street Journal, August 29,2011: C1)
• Failure to even consider a single-payer, not-for-profit Medicare for all program that would assure universal coverage for our whole population with increased choice, more efficiency, fewer disparities and improved quality of care, all at less cost than employers, patients and families are now paying.
• Calling for a more limited role of government until big banks and other privateinstitutions face bankruptcy, then begging for bailouts and minimal follow-up regulation.
• Calling the Obama Administration’s recent proposal for minimal tax rules for those making more than $1 million a year “class warfare” as if the GOP hasn’t been waging such a war for many years. (8) (Knowlton, B. Republican lawmakers equate Obama tax plan with ‘class warfare’. New York Times, September 19, 2011: A 19)

Adding up all these examples of GOP duplicity and hypocrisy (to which many Democrats unfortunately yield), we have to ask when logic, common sense, evidence and fairness will take center stage for health policy makers and legislators? The way things are going could well be called legislative malpractice.

These are some of the major ways by which Americans are hurt by the growing deficit of generalist physicians:

1. Can’t get a primary care physician.
It is getting harder and harder to find a generalist primary care physician still open to accepting new patients. In Massachusetts, for example, the passage of legislation in 2006 expanding insurance coverage for many people exposed a critical shortage of primary care physicians. (Fitzgerald, J. State medical group sees severe shortages in 10 specialties. Boston Herald, October 20, 2010) Patients on Medicare and Medicaid have particular problems finding a physician willing to take them on due to low reimbursement through those programs. Under the banner of fiscal austerity, many states are cutting Medicaid to the bone. In California, for example, where Medicaid (Medi-Cal) covers one in five Californians, Medi-Cal payment rates for physicians and other providers have been cut by 10 percent to just $11 a patient visit (Corcoran D. Doctors say Medi-Cal reimbursement is too low. San Francisco Chronicle, August 4, 2011) Even if one has a primary care physician today, the likelihood of a continued relationship in the future is becoming increasingly clouded due to physician retirements, mobility among physicians, and changes of providers in insurer networks that often force changes of physicians.

2. No access to breadth of primary care.
People without a primary care physician don’t get access to the breadth of primary care anywhere else in our “system”. Specialists are not trained or equipped to provide preventive services across the board, care for acute and chronic problems for patients of all ages, continuity of comprehensive care for all medical problems for years, with knowledge and understanding of their patients’ family and community setting. Emergency rooms and urgent care centers can focus only on the most acute problem at the time, with little follow-up, while so-called “retail clinics” for walk-in care are limited to non-emergency and low-acuity problems. As a result, many of the potential advantages of primary care are not available to a growing part of our population.

3. Higher costs and unaffordability of care.
Specialty care costs more than primary care—a lot more, for a number of reasons. For new medical problems, specialty physicians have to start “cold”, without context or knowledge of the patient, often ending up repeating tests and procedures that have been done previously, charging more than primary care physicians, and in the case of multiple medical problems, typically having to call upon other specialists for care. Since primary care physicians know their patients better, they order fewer tests than specialists, and help to protect their patients from inappropriate and unnecessary care. (Schoen, C, Osborn, R, Doty, M, Bishop, M, Peugh, J et al. Toward higher-performing health systems: adults’ health care experiences in seven countries. Health Affairs (Millwood) 26: w 717-34, 2007)

4. Foregone necessary medical care.
Foregone care is widespread and increasing. These markers document this growing trend:

• In the last year, one in three Americans skipped care, did not fill a prescription, or get other care because of cost. (Parashar, A. Compared to other countries, U.S. patients have more access to specialists, less to primary care. Kaiser Health News, November 18, 2010)
• One-third of uninsured adults have a chronic disease for which they
don’t get needed care. (Wilper, A, Woolhandler, S, Lasser, KE, McCormick, D, Bor, DH et al. A national study of chronic disease prevalence and access to care in uninsured U.S. adults. Ann Intern Med 1249 (3): 170-6, 2008)
• Two million cancer patients are now foregoing necessary care each year due to unaffordable costs. (Weaver, KE, Roland, JH, Bellizzi, KM, Ariz, NM. Foregoing medical care because of cost: Assessing disparities in healthcare access among cancer survivors living in the United States. Cancer online, June 14, 2010)
•. The number of annual patient visits to physicians has declined sharply since the onset of the Great Recession in 2008. (Johnson, A, Rockoff, JD, Mathews, AW. Americans cut back on visits to doctor. Wall Street Journal, July 29, 2010: A1)

5. Decreased coordination and integration of care.
Coordinated and integration is a huge problem, especially for patients with multiple medical problems, the norm for older patients. The electronic medical record does not substitute for close communication between specialists for such patients. According to the Joint Commission on Accreditation of Healthcare Organizations, 80 percent of serious medical errors are associated with lack of communication or teamwork among specialists in hospitals. (Health blog. Joint Commission-Hospital Collaboration targets hand-offs. Wall Street Journal, October 21, 2010)

6. Decreased quality of care with worse outcomes.
Compared to those without primary care, patients with primary care receive earlier diagnosis and treatment of illness and better outcomes of care (Ferrante, JE, Gonzales, E, Pal, N, Roetzheim, RG. Effects of physician supply on early detection of breast cancer. J Am Board Fam Pract 13: 408-14, 2000), including lower mortality rates (Baicker, K, Chandra, A Medicare spending, the physician workforce, and beneficiaries’ quality of care. Health Affairs (Millwood) 23: w 184-97, 2004)`

Unfortunately, the essential role of primary care in any health care system is not widely understood. In the next post we will consider some of the many misperceptions about it, and how they represent barriers to building a better health care system in this country.

Adapted in part from my recently released book Breaking Point: How the Primary Care Crisis Endangers the Lives of Americans. Copernicus Healthcare, 2011, soon to be available as an Ebook on Amazon.

John Geyman, M.D.
Professor emeritus of Family Medicine, University of Washington
Past President, Physicians for a National Health Program

Dr. Abston has written many reflections, including blogging as she reads every word 2,400+ pages of the “Patient Protection and Affordable Care Act.” (33 installments so far!) Dr. Abston has also articulated beautifully the principles that guide her support for single-payer reform, most recently some thoughts on “faith-based health cost sharing.”

If you follow the link to her blog you can subscribe and read Dr. Abston’s latest when she sends it out. I wholeheartedly recommend it!

Here is today’s blogpost by Dr. Abston.

It Could Have Been Me
Pippa Abston MD, PhD, FAAP
May 2, 2011

I’m writing this on a beautiful spring afternoon in Huntsville, just 5 days after a series of horrific tornadoes tore through my state. Tuscaloosa, the town I grew up in, suffered a huge gash. I’m told I wouldn’t recognize the landscape I knew so well. So many people– even children– are suddenly, unexpectedly and heartbreakingly dead. The blog post I drafted last week and meant to post a few days ago seems inadequate to our shared shock and grief.

Last Wednesday, I woke up to sirens and wondered if I would be able to drive down to Destin as planned, to attend our annual Alabama pediatric meeting. During the gap between fronts at 8 am, I decided to make a run for the coast– I succeeded in outrunning the storm by a couple of hours all the way south. Around Montgomery, a radio announcer casually said “there’s a tornado on the ground in downtown Huntsville” and returned to the music– frightened and imagining my husband in his downtown office, I pulled off the road to call him. He was fine, in the basement of the courthouse, and the announcer was wrong. It wasn’t until I got to Florida that I found out about Tuscaloosa.

The pediatric meeting was wonderful, with many excellent speakers. I learned several new things that I hope will help my patients. But the whole time, between every talk and well into the night, I frantically tried to learn what had happened to my loved ones. My father and stepmother were fine. I was able to find many of my Tuscaloosa friends on Facebook, even those who had lost their homes. I clicked repeatedly on the hyperlinks titled “Names of the Dead,” dreading what I might find. I watched the news, and I cried.

The storms passed. Online, between images of the twisters and the damage, I began to see photos of people coming forward to help– rescuing the injured, comforting the newly homeless, bringing food and water. Even in surrounding areas with no damage, strangers seemed kinder. The hotel desk clerk hugged me. Drivers slowed to let me merge, instead of rushing forward at the sight of my turn signal. In the grocery store lines, many let others go ahead of them. We quit watering our lawns and washing our cars to save precious water for the thirsty. I expected this– we always seem to locate our better selves after disaster. After awhile of course, we forget. We get back to “normal.” Still, every time, I am grateful to find our ability to care for one another remains intact, despite being so often underused.

Here’s what I didn’t hear, not even once: I didn’t hear anyone say a victim of the tornado was undeserving of help. I didn’t hear anyone asked if they had heeded the warning sirens, before being pulled from the wreckage. I didn’t see anyone turned away from the food lines because they had chosen to live in a trailer or because they could have stockpiled food and didn’t. I didn’t hear anyone ask why these devastated people had lived in Alabama anyway, knowing tornadoes were possible. And I didn’t notice volunteers checking citizenship papers before offering help.

I heard only “how can I help?” and “it doesn’t matter that I lost my house/stuff/car when others lost their lives.’” I heard “it could have been me.”

Can you imagine what would happen if we treated each other with the same compassion when it comes to healthcare? More than 300 people died this week in the storms– more than 45,000 die every year because they can’t afford to go to the doctor. Sure, some of them could have gotten insurance and didn’t, just the way some of us keep making dinner upstairs when the sirens go off. We could choose to let that go, knowing we are human and thus prone to error.

Forget for a few minutes about the details of how we would do it– single payer, private insurance, whatever. It isn’t an impossible dream. We share our resources to educate our country’s children and to build safe highways for anyone to use. And other developed countries have even applied this principle to their healthcare systems. But first we have to decide we matter to each other– not just after bad weather but all the time.

What if we just quit asking or telling sick people what they had done to cause their own trouble? Let other people into the line ahead of us sometimes? Counted our blessings? Didn’t complain about sharing some of our stuff, to save others’ lives? Conserved our resources out of concern for others? What if we only said “how can I help?” What if we really understood that “it could have been me?”

I posed this to him: “Many Democratic politicians, including our Blue Dog Rep. Baron Hill, tell us in private conversations that they believe we have to get to single payer eventually. What advice would you give on how to get there?” Without a blink, he replied it’s “going to be a long haul”, and if we don’t pass this bill it’s going to be even longer. He asserted that this bill begins building the required infrastructure for any future progress.

Since then, with the loss of the Democrats’ super-majority in the Senate everything is up in the air. Which brings us back to the recurring question – Should we Kill the Bill? There has been an incredible amount written in the Progressive community about this. At one end is Helen Redmond (CounterPunch 12/23) Beware the Progressive Democrat arguing that we can’t trust Sanders, Weiner, or Conyers and that we’ve got to build our movement without any of that unreliable crew (kind of a rough “logical”conclusion”, if you ask me).

At the other end is Nate Silver of FIveThirtyEight (12/16) Health Care: The Elevator Pitch (and a number of other posts) where this bright political analyst makes the case for incrementalism. Silver also notes “I’ve gotten as many nasty comments and e-mails from Democrats on this issue [over the last two weeks] as I have in the past six months from conservatives on all issues. That emotion is a factor in this debate seems self-evident to me.”

All that emotion is evident as the blame is ladled out for Scott Brown’s Senate victory. Is the message that the country is turning against the Progressives’ urge to legislate change, or that Obama has compromised the hope for change he promised by reverting to Washington business-as-usual and disappointing his base?

The healthcare bill will be at the center of this cyclone, and it’s too soon to say what gyrations the Dems will attempt to push it through. Our response as single payer advocates should remain unchanged – we have strong, informed positions on the poor policy provisions in the bill. I think we are best to remain silent on the political strategy (tragedy?) to be pursued. I see an important distinction between being a pointed, persistent, insistent, carping, kvetching, nagging critic of this bill for policy reasons on the one hand, and joining in the political discussion about the merits of killing the bill on the other.

Let’s not be drawn into the classic Progressive Circular Firing Squad. Our message is clear. If the Democrats still manage to pass some form of health reform, they can celebrate, but WE’RE STILL FOR HEALTH REFORM, AND THIS AIN’T IT!

If no bill passes, then we have a different set of problems/opportunities. If those who predict Republican ascendancy in the ’10 elections are right, then our work is really cut out for us. Meanwhile, all those who forsook single payer for the allure of the public option are ripe to be brought back into our fold. Movement building will continue. Opportunities to form coalitions will appear. As the business community becomes even more frustrated they will open to our message.

Here are the real lessons learned as we look back to the Iowa caucuses last January, from our vantage point looking out on the chaos this January:

1. As much as we had hoped that this was a historic opportunity to make drastic, needed changes in our healthcare system, there really wasn’t the support to go all the way to single payer. We can second guess Obama and Rahm forever, but I don’t believe there ever was a chance in hell that Evan Bayh, much less Lieberman or Ben Nelson would have ever voted for single payer.

2. We should look again at a strategy of incremental reforms, a strategy that has been fruitful for many movements. That is a longer story to explore later.

3. No matter how hard we try to predict the future, we will always be surprised. Remember that even if single payer had passed in the full glory of HR 676 without amendment, we would have to defend it, improve it, and deal with its unintended consequences. This work will never end.

How can we ever hope to win? As Bill Moyers asked David Corn on his PBS show January 8, “Have people been so politically abused that the will to fight for democracy, the political will has been dissipated? “

Will it first take campaign finance reform, to break the grip of the big money? Where will that movement come from? What other options do we have?

There is no better issue to organize around than universal health care. In the environmental movement we learned the word NIMBY – Not In My Back Yard. Sometimes people distain NIMBY’s, but many a NIMBY activist has started locally before coming around to a global perspective. Healthcare is everyone’s back yard, front yard, and right inside the house. Our issue’s not going away, even if some politicians do.

We will stay in this fight for the long haul. There is no real alternative except to quit. When I get discouraged, I turn to one of the original crusading journalists and a real hero, IF Stone (no relation):

“The only kinds of fights worth fighting are those you are going to lose, because somebody has to fight them and lose and lose and lose until someday, somebody who believes as you do wins. In order for somebody to win an important, major fight 100 years hence, a lot of other people have go to be willing – for the sheer fun and joy of it – to go right ahead and fight, knowing you’re going to lose. You mustn’t feel like a martyr. You’ve got to enjoy it.”

One of the great joys of being in PNHP has been the joy of meeting and working with so many wonderful people. I’m in this for the long haul and look forward to seeing you all many more times in the years to come.

Citizen juries demonstrate massive support for single-payer
By Kip Sullivan, JD

“They contradicted both beltway and public opinion polls. The whole damn world seems to think the Clinton plan is the way to go. Yet they like the single-payer system, which isn’t even getting considered in Washington.”

That was how the president of the Jefferson Center characterized the outcome of a five-day “citizen jury” experiment in which 24 “jurors” listened to and questioned 30 experts on health care reform. (Patrick Howe, “‘Citizens jury’ supports Wellstone’s health care proposal over Clinton plan,” Minneapolis Star Tribune, October 15, 1993, 10A.) Of those 30 experts, only one, Senator Paul Wellstone (D-MN), spoke in favor of single-payer. (Gail Shearer of Consumers Union, which had endorsed single-payer by 1993, was one of the 30 experts to speak to the jury, but it is not clear from the Jefferson Center record that she spoke in favor of single-payer.)

The jury heard expert testimony for and against all three of the major types of health care reform legislation that have been promoted in the US over the last four decades. Senator Wellstone presented the case for his single-payer bill, numerous speakers made the case for Bill Clinton’s managed competition bill (a bill based on competition between insurance companies that use managed-care cost-control techniques), and numerous speakers made the case for what later came to be called “consumer-driven” health insurance policies (competition between insurance companies that sell policies with deductibles on the order of $2,000 for individuals and $5,000 for families).

The jury voted by massive majorities to reject the market-based proposals – managed competition and high-deductible policies – and, by a landslide majority (17 out of 24, or 71 percent), to endorse Wellstone’s single-payer bill. At the time the Jefferson Center report noted only that a majority of jurors voted for single-payer. The actual vote count was reported years later by Barry Casper in his book, Lost in Washington: Finding the Way Back to Democracy in America.

The unbearable lightness of polls

Observers were surprised at the jury’s rejection of the Clinton plan because polls taken at the time the Jefferson Center jury was meeting (the second week of October 1993) were reporting that a majority of the public supported Clinton’s Health Security Act, his “managed competition within a budget” bill that was supposed to create a system of universal health insurance. For example, a Gallup/CNN/USA Today poll (see Exhibit 1 page 10) released on September 24, 1993 showed 59 percent endorsed Clinton’s bill. But just three weeks later, on October 14, 1993, the jury rejected Clinton’s bill by a vote of 19 to 5. Five jurors out of 24 comes to 21 percent, far below the 60-percent level one would have expected based on polls.

The enormous gap between the citizens jury’s vote on Clinton’s bill and contemporary poll results illustrates a well known problem with polls: Although they can produce consistent and accurate results when the question is about something the respondents are familiar with, such as whether they have health insurance, they can produce wildly divergent and inaccurate results when the question is about a complex issue that respondents have had little time to study or even to think about.

Contrast, for example, a 2007 AP-Yahoo poll, which found 65 percent of Americans support a Medicare-for-all system, with a 2009 CBS poll which found only 50 percent think “government” would do a “better job” of providing health insurance than the insurance industry. The AP-Yahoo poll posed this question (the order of the two solutions was reversed from one respondent to the next):

Which comes closest to your view?

The United States should continue the current health insurance system in which most people get their health insurance from private employers, but some people have no insurance;

The United States should adopt a universal health insurance program in which everyone is covered under a program like Medicare that is run by the government and financed by taxpayers.

Sixty-five percent of respondents chose the second solution – the Medicare-for-all solution – while only 34 percent chose the current system.

Now consider the June 12-16, 2009 CBS poll which asked: “Do you think the government would do a better or worse job than private insurance companies in providing medical coverage?” Fifty percent said “the government” would do a better job versus 34 percent who said “the government” would do a worse job.

Now, just to raise your skepticism about polls another notch, consider this wrinkle. When CBS asked the same question two months later – during August 27-31, 2009 – they found 13 to 14 percent of respondents had changed their minds in favor of the insurance industry. That is, by late August (by which time dozens of tumultuous “town hall” meetings about the Democrats’ health care “reform” legislation had taken place), the percent who thought “the government” would do a better job had fallen to 36 (from 50 percent) while the percent who thought “the government” would do a worse job had risen to 47 (from 34 percent).

How do we make sense of these seemingly contradictory results? Do we trust the late-August CBS poll and say only one-third of Americans support single-payer? Or do we go with the AP-Yahoo poll and say two-thirds support single-payer? Or do we split the difference and say the June CBS poll got it about right – that half of Americans support single-payer?

Fortunately, we are not reduced to rolling dice or drawing straws. We can examine research that uses methods more reliable than those used by the typical poll, notably two citizen jury experiments. And we can examine polls that have produced contradictory results to see if we can find a reason why. I will use the remainder of this paper to report on the two citizen juries. I’ll examine polling data more closely in Part III of this series.

The Jefferson Center’s methodology

The Jefferson Center, a non-profit organization created in 1974 by Ned Crosby, invented the “citizen jury” label and developed the rules for them that are now used around the world, especially in the United Kingdom. These methods include: random selection of jurors; selection of experts and moderation of the discussion in a manner that minimizes bias; recording of the proceedings; a report from the jury indicating votes taken on major issues presented to it and recommendations from the jury; questionnaires for jurors after the jury has completed its work to inquire about their perception of the fairness of the process; and oversight and review by a steering committee to minimize bias.

The 24 jurors who gathered in a Washington, DC hotel on Sunday, October 10, 1993 were randomly selected from a pool of 2000. They included a 23-year-old college student from Colorado, a 27-year-old carpenter from Wisconsin, a 32-year-old janitor from Minnesota, a 44-year-old village clerk from New York, a 46-year-old banker from Indiana, a 51-year-old antique dealer from California, a 59-year-old retired nurse from Louisiana, and a 75-year-old retired insurance agent from Florida. Ten had voted for Clinton in the 1992 election, nine for George H.W. Bush, and five for Ross Perot. Three had no health insurance.

The experts who addressed the jury included three sitting US Senators, two former members of the House of Representatives, and 25 other experts including Gail Wilensky (who was the director of Medicare under the first President Bush and is a member of numerous corporate boards), Ira Magaziner (who directed Hillary Clinton’s health care reform task force), and Ron Pollack (director of Families USA). The discussion was moderated by Kathleen Hall Jamieson, dean of the Annenberg School for Communication at the University of Pennsylvania. Former CBS and NBC TV anchor Roger Mudd was on hand to film a documentary which aired in April 1994.

After five days of listening to and cross-examining the 30 experts (the jury asked the experts more than 500 questions), the jurors refused even to vote on the “managed competition lite” proposal presented by Senator Dave Durenberger (R-MN) and a high-deductible (Medical Savings Account) proposal presented by Senator Don Nickles (R-OK). In other words, the jury rejected the Durenberger and Nickle’s legislation by a vote of 24 to zero. They rejected Clinton’s Health Security Act by a vote of 19 to 5. When they were asked how many supported Sen. Wellstone’s single-payer bill (S. 491), 17 of 24 (71 percent) raised their hands.

Washington Post columnist William Raspberry wrote at the time:

Perhaps most interesting about last week’s verdict is its defiance of inside-the-Beltway wisdom that says a single-payer … plan can’t be passed. These jurors think it can – and ought to be. (William Raspberry, “Citizens jury won over by merits of Wellstone’s single-payer plan,” Washington Post, October 21, 1993, 23A)

I have already noted one reason why observers were surprised by the jury’s votes, namely, polls taken around the time the jury met indicated a majority of the public liked Clinton’s bill. But there was another reason to be surprised: The Jefferson Center created a playing field that was steeply tilted against Wellstone’s single-payer bill.

To begin with, the Center limited the jury to two questions: “Do we need health care reform in America?” and, “Is the Clinton plan the way to get the health care reform we need?” Second, the agenda called for presentations by a team of Republicans and their expert witnesses arguing for Republican proposals, and a team of Democrats and their expert witnesses arguing for Clinton’s Health Security Act. (The Republican team was managed and represented by former Minnesota Congressman Vin Weber; the Democrats were led by Hill and Knowlton lobbyist and former Connecticut Congressman Toby Moffett.) There was no team advocating for single-payer. There was only Wellstone.

But the jury was so attracted to Wellstone’s description of his bill during his initial presentation that they voted 22-0 to invite him back for two more question periods (see page 10 of the Jefferson Center report). No other witness was asked back even once. “In fact,” noted columnist Raspberry, “when the Minnesotan [Wellstone] dropped in at the jury’s farewell dinner Thursday night, he got a standing ovation.”

To sum up: The Jefferson Center’s citizen jury methodology was far more rigorous than any two- or three-sentence poll can be, and yet even the methods used for that jury permitted substantial bias against the single-payer approach. A total of 30 experts spoke to the Jefferson Center jury over five days. Only one of them, Senator Wellstone, made the case for single-payer. Even though the question of whether to support or oppose single-payer was not on the agenda, the jury took the initiative to get more information about it. The jury did not have to do that for any other proposal. Despite these obstacles, the single-payer proposal won by a 71-percent majority.

Minnesota citizen jury endorses single-payer by 79 percent

On October 1, 1996 I was part of another citizen jury project sponsored by the Minneapolis Star Tribune and Twin Cities Public TV which used a methodology similar to the Jefferson Center’s jury and which had a nearly identical outcome. In this case, the jury consisted of 14 randomly selected Minnesotans, only three experts spoke, and the entire event lasted just four hours. I made the case for single-payer (at that time I represented Minnesota Citizens Organized Acting Together), Michael Scandrett (then the director of the Minnesota Council of HMOs) stated the case for managed competition, and a woman who had just left a job with the Minnesota Department of Health to create her own advocacy group for Medical Savings Accounts (MSAs, now referred to as Health Savings Accounts) presented the argument for MSAs.

At the end of four hours, the moderator for the evening (an officer of the Minnesota League of Women Voters) put several questions to the jury for a vote. Her first question asked each juror which proposal they supported. Eight voted for single-payer, three voted for managed competition, one woman split her vote between single-payer and managed competition (she said she wanted the two proposals to be married somehow), no one voted for MSAs, and two of the 14 abstained. If we allocate a half of the vote by the woman who wanted some combination of managed competition and single-payer to each proposal, single-payer’s total was 8.5, or 61 percent of the 14 jurors.

The moderator’s second question asked whether the jurors would support universal coverage under a single-payer system if citizens had to pay $1,000 more in taxes that were offset by $1,000 in reduced premiums and out-of-pocket costs. (This is a conservative estimate of what would happen. It is likely that aggregate premium and out-of-pocket costs would decline more than aggregate taxes would go up under a single-payer system, and very likely that premium and out-of-pocket costs would decline substantially more than taxes would go up for lower- and middle-income Americans.) Eleven said yes to this question, and three abstained. If we treat this latter vote as the definitive vote for single-payer, then it would be accurate to say 79 percent voted for single payer. Finally, the moderator asked if the jury thought Congress had failed to give single-payer a fair hearing. Again, 11 (79 percent) said yes and three said no. (Glenn Howatt, “Canadian-style care starting to look more attractive to panelists,” Minneapolis Star Tribune October 9, 1996, A15)

Stay tuned for Part 3: “Informative polls show two-thirds support for single-payer.”

Health Care, Essential to Democracy
by Katie Robbins and Andy Coates

Two weekends ago, after the bait and switch of a vote on single-payer for a vote on an anti-abortion amendment, we felt wizened to the possibility of unknown threats in the legislative churn on health reform. As insurance and pharmaceutical companies, Catholic bishops, and the right wing throw in dollars, lobbyists, and pressure for no votes on the final bill, it is clear we who are in the business of protecting and improving our rights to access to health care, including abortion, must remain vigilant and ready to challenge these threats.

First, a little history is in order. In mid-July Rep. Kucinich passed in the Education and Labor Committee an amendment to the House bill for health insurance reform that would make single-payer easier to enact at the state level. On July 31st Rep. Weiner and 6 other members of Energy and Commerce Committee brought to committee an amendment to that would substitute the text of HR 676, the national single-payer bill, for the House bill. Speaker Nancy Pelosi offered a floor vote on single payer — if Rep. Weiner would withdraw the amendment from committee.

Single-payer advocates embraced these efforts wholeheartedly. And we counted upon our champions in the House of Representatives to stand with us.

Vigorous activity ensued, a fourteen week campaign involving millions of people in phone calls, petitions, forums, local protests and vigils, emails and faxes, op-eds and letters-to-the-editor and personal visits. There were conscientious objectors. 158 single-payer supporters were arrested performing acts of civil disobedience, peaceful sit-ins to register their outrage in the offices of health insurance companies and Congress across the nation.

As the grassroots clamor rose, Reps. Weiner and Kucinich sought to surf the wave. The crescendo grew and grew, until one day before the House vote on health insurance reform.

And then — poof! — single payer was back off the table.

Rep. Kucinich’s state-based amendment was out of the bill, “dead as a doornail.” And Speaker Pelosi explained that the substitute amendment couldn’t possibly have a debate and vote, for if it did, amendments to restrict health care for women and undocumented immigrant workers would also get to the floor. Congressional leaders suddenly opined that a losing vote for a single-payer amendment would be “tantamount to driving the movement off a cliff.” Even the President weighed in to discourage a vote on single payer. Rep. Weiner withdrew the amendment.

Yet the next day the Speaker allowed the anti-abortion amendment to the floor, where it passed and was added to the bill. In the end, the only progressive Democrats to vote against the House bill, abortion ban and all, were Reps. Kucinich and Massa, both single-payer supporters.

The people expected universal health care, and the House of Representatives delivered an anti-abortion bill.

Worse, the Democratic Party traded away fundamental women’s rights for a Massachusetts-style mandate, a law to criminalize the uninsured and subsidize unaffordable private insurance premiums with tax money, something we know already will not reduce costs and will not cover everyone, will not lessen disparities and will not improve the health of the nation.

It is astounding to think the Democratic Party has made a bid for the United States to join a few shameful nations that severely restrict women’s access to abortion. Earlier this year we watched, with great dismay, when Mr. Obama chose not to strike the Hyde Amendment from his federal budget proposal. The President has now gone farther, re-affirming the prohibition of federal funding for abortion as a “principle.”

Reproductive rights cannot be bargained away for any reason. Autonomy over our bodies is essential to health care and to democracy.

No nation on earth can call itself a democracy without equal and full access to health care. No nation on earth can call itself a democracy without allowing full personal autonomy over all health decisions, including abortion. These values are severely threatened under the proposed legislation. It is time for protest.

As single payer advocates, we firmly believe that health care decisions must be made between the provider and the patient, with full protection of privacy. Women must be able to access abortion if determined necessary — by either the patient or the doctor.

We call upon the President and the Congress to start from scratch and ask you to join us. Senator Bernie Sanders will introduce a single payer bill in the United States Senate in the coming weeks. Demand that your Senator vote for this bill. In addition, join the National Organization for Women, strong single-payer advocates, in organizing days of action in DC and Pennsylvania to protest the Stupak-Pitts amendment.

The solution to the health care crisis must provide personal freedom from a dysfunctional and unsustainable system that ties health care to the employer and to the spouse. When Medicare was enacted, it reduced poverty in those over 65 by 60%. By this measure, a universal, single-payer system would also provide economic freedom, by raising over 22 million people out of poverty, while providing each of us with full and necessary access to health care. Nothing less will do.

Katie Robbins is National Organizer of Healthcare-NOW! Andy Coates, MD, is a member of Physicians for a National Health Program.

For more information on joining the fight to demand reproductive freedom and single-payer health care, visit:
now.org
pnhp.org
healthcare-now.org

In a previous paper I described the transformation of the “public option” from an enormous program that would insure 130 million people to a tiny program in the Democrats’ health “reform” legislation that will insure somewhere between zero and 10 million people. I predicted that the “options” in the Democrats’ bills would be unable to succeed in all or most markets in the country. I characterized the main barrier facing the Democrats’ shrunken “options” as a “chicken and egg” problem: A person or group trying to create a new insurance company can’t tell prospective customers what the premium will be until they have determined how much they will pay providers; but the person or group can’t know how much it will pay providers until it knows how many people it will insure.

In this comment I elaborate on this chicken-egg barrier by presenting an illustration of the barrier at work – the departure of the Prudential Insurance Company from the Minnesota managed care health insurance market in 1994. Although Prudential was (and still is) a huge Fortune 500 company, it was unable to survive Minnesota’s highly concentrated group health insurance market and was forced to withdraw. If a company as large and as experienced as Prudential could not crack the Minnesota market, why should we hold out any hope for the little “options” proposed by the Democrats?

A recap of the transformation of the “public option”

Jacob Hacker laid out his vision of what is now called “the public option” in papers published in 2001 and 2007.  Hacker spelled out five criteria he believed the “option” had to meet:

(1) It had to be pre-populated with tens of millions of people;

(2) Only “option” enrollees could get subsidies (people who chose to buy insurance from insurance companies could not get subsidies);

(3) The “option” and its subsidies had to be available to all non-elderly Americans (not just the uninsured and employees of small employers);

(4) The “option” had to be given authority to use Medicare’s provider reimbursement rates (which are typically 20 percent below the rates paid by insurance companies); and

(5) The insurance industry had to offer the same minimum level of benefits the “option” had to offer.

Although I question some of the assumptions Hacker made in these papers, including his assumption that the “option” will inevitably enjoy Medicare’s low overhead costs, I have little doubt that an “option” which met Hacker’s five criteria would stand an excellent chance of surviving its start-up phase in most markets in the U.S. (I am ignoring here the question of whether an “option” as strong as Hacker’s original has a better chance of being enacted than a single-payer system does. Events of the last few months should disabuse the entire world of that myth.)

But when the Democrats drafted legislation early in 2009 that included provisions creating an “option,” they abandoned the first four of Hacker’s criteria and kept only the last one (the one requiring insurance companies and the “option” to cover the same benefits). Proponents of the “option,” including Hacker, did not raise a fuss about this. Not surprisingly, the “option” provisions of the bills introduced in July – one by the Senate Health, Education, Labor and Pensions (HELP) Committee and the other by the chairs of the three House committees with jurisdiction over health care reform – were basically unchanged from those in the draft versions. The Congressional Budget Office estimates the HELP Committee’s “option” will insure approximately zero people and the “option” in the House bill (HR 3200) will insure roughly 10 million people.

The advent of managed care augmented the chicken-egg problem

Prior to the advent of what came to be called “managed care,” an entrepreneur or group seeking to start a new insurance company only needed to focus on amassing a large number of customers as opposed to providers (clinics and hospitals). But with the advent of managed care in the 1980s, groups seeking to start a brand new insurance company also had to amass a supply (or “network”) of clinics and hospitals as well. Some insurers amassed this critical supply of providers by buying them out (or merging with them), but most did so by signing contracts with them.

This new provider-network requirement for market entry arose because the spread of managed care tactics meant that survival and success would go to the insurance company with the greatest ability to exert influence over providers. Insurance companies throughout the country sought to increase their influence over providers by limiting patient choice of provider so that they could steer their enrollees to fewer providers. Developing this power to steer more patients to some providers and away from others gave an insurance company two substantial advantages over an insurance company that did not do that. First, it gave the insurer the ability to force the providers they dealt with to give them discounts off their usual charges. Second, it enhanced the power of the insurer to force providers to play by the insurer’s “managed care” rules (for example, rules requiring providers to get permission from the insurer before hospitalizing a patient).

But creating a network of providers that is large enough to satisfy a widely dispersed customer base but still exclusive enough to give the insurer leverage over the in-network providers is a time-consuming and expensive process. This requirement gives an enormous advantage to the home team – the insurers that have been doing business for a long time in a given market – and, conversely, creates an enormous barrier to entrepreneurs seeking to create new insurance companies.

When the U.S. Department of Justice investigated a proposed merger between Aetna and Prudential in 1999, it concluded that “effective new entry for an HMO or HMO/POS [point-of-service] plan [that is, an insurance company that limits patient choice of provider] in Houston or Dallas typically takes two to three years and costs approximately $50 million.” Because insurance markets have become more concentrated in the decade since the DOJ published this report, the time and money required to break into today’s markets is even greater than that required a decade ago.

Insurance companies which failed to grasp this new rule of the managed care era – that success will depend not only upon the size of your customer base but also your ability to limit patient choice of provider – lost market share and many went out of business. The decision by Prudential Insurance Company to leave the highly concentrated Minnesota health insurance market in 1994 illustrates this trend.

Prudential’s departure from Minnesota’s group market

As of 1994, Minnesota’s four largest health insurance companies insured 80 percent of all Minnesotans who had health insurance of any sort. Blue Cross Blue Shield of Minnesota enrolled 1.33 million people, Medica enrolled 900,000, HealthPartners enrolled 650,000, and PreferredOne enrolled 450,000. Two of these insurers – Medica and HealthParters — were so powerful in the Twin Cities area they could extract discounts from Twin Cities hospitals that were approximately equal to Medicare’s (at that time, a discount of about one-third). They extracted these discounts not because they were as big as Medicare was (nationally Medicare insured 40 times more people than Medica did in 1994 and about 55 times as many as HealthPartners), but because they were big in the Twin Cities insurance market and, unlike Medicare, they made a point of limiting patient choice of provider. This meant they could exercise enormous leverage over the providers they did choose to deal with.

Even though Prudential was and still is a huge company nationally (it is a Fortune 500 company and is among the nation’s largest health insurance companies) and had been selling health insurance for decades, it did not react fast enough to the gradual spread of managed care tactics in Minnesota during the 1970s and 1980s. (Minnesota, along with California, led the nation down the managed care path.) By 1994 Prudential decided it couldn’t compete in the Minnesota market.

Prudential made its decision known on July 8, 1994. As the following excerpt from a Minneapolis Star Tribune article published the next day indicates, Prudential had established a toehold – it was well on its way to creating both a customer base and a provider network – but the toehold wasn’t enough.

… Prudential Insurance Co. said Friday that it will discontinue its Twin Cities managed care health plan due to intense competitive pressures. Eighty metro-area jobs will be eliminated….While Prudential … is now in 42 cities, only the Twin Cities market posed a particular problem and will be shut down….

Prudential Plus of Minnesota operates mainly in the Twin Cities and deals with 800 primary care physicians and 1,500 specialists. Nationwide, the managed care plan has 5 million members. Regardless, Prudential did not grow large enough or fast enough in the Twin Cities market to maintain a substantial lead, analysts said. The firm was easily overshadowed by heavyweights such as HealthPartners and Medica…. And these bruisers and others like them are merging or forming alliances that kept welterweights like Prudential Plus on the ropes. Gary Schultz, executive director of Prudential Plus of Minnesota, said, “Recent mergers, acquisitions and strategic alliances involving health care plans and providers … have combined to make it increasingly difficult to compete in this market place….

“Prudential only has 30,000 (members) in the Prudential Plus plan,” [Prudential marketing director Pat] McLaughlin said. “They are not the big player they needed to be and as a result may not have been able to negotiate the best deals with providers” (Dee DePass, “Prudential to discontinue managed care health plan,” Star Tribune, July 9, 1994, 1D).

An article in BNET reported an identical explanation for Prudential’s demise in Minnesota: “A Prudential spokesperson said the clout of its bigger competitors had made it difficult to recruit a critical mass of new employers and enrollees.”

Lessons for “option” advocates

This story illustrates three facts “option” advocates must address.

First, it clearly illustrates the “chicken and egg” problem facing the “option” program, or to be more precise, facing the corporations that will be hired by the Secretary of the Department of Health and Human Services to create the “option” program. (Both the HELP bill and HR 3200 authorize the Secretary to contract with corporations that the HELP bill calls “contracting administrators” for the purpose of creating the “options” throughout the U.S.) The contracting administrators are going to have to build up provider networks and a customer base from scratch, simultaneously, and market by market, even though they will suffer the disadvantage of entering the insurance business long after the insurance companies they are competing with began introducing themselves to customers and cobbling together their own provider networks.

Second, this story should put the entire country on notice that the “option” may never be able to deliver on the promise, made over and over by “option” advocates, that the “option” will offer complete freedom to choose one’s doctor and hospital. If the contracting administrators who create the “options” around the country refuse to create “options” that limit enrollees’ choice of provider, those “option” programs will have less power to drive provider rates down. That means, of course, those “option” programs will have to set their premiums higher than existing insurers that do limit patient choice of provider. That will in turn make attracting a critical customer base very difficult if not impossible.

The third fact the Prudential story illustrates is that the size of an insurer at the national level is not an important factor in decisions by clinics and hospitals about whether to sign contracts with an insurer and whether to give that insurer discounts. What matters to clinics and hospitals is size at the local level. Minneapolis hospitals, for example, could have cared less whether Prudential insured 20,000 people in Tulsa or half-a million in Florida. (Size at the national level does have some bearing on whether an insurer can extract discounts from drug and equipment manufacturers. But drugs and equipment amount to roughly 15 percent of medical costs for the non-elderly. It is clinic and hospital costs that make or break an insurance company.)

The “chicken and egg” problem is, of course, not limited to entrepreneurs trying to break into the Minnesota market. The conditions that create the “chicken and egg” problem – high concentration levels within the insurance industry and near-universal use of managed care tactics including limited choice of provider – exist throughout the country. As Senator Charles Schumer (D-NY) said in a press release about a May 2009 report from Health Care for America Now, the entire U.S. health insurance industry suffers from “extreme … consolidation.” According to the HCAN report, eleven states have more concentrated insurance markets than Minnesota does.

“Option” advocates should stop comparing the “option” to Medicare

To test your understanding of the “chicken and egg” problem, let me end with a pop quiz:  Did Medicare face a “chicken and egg” problem when it started up?

The answer is:  No, it did not.  It did not because it didn’t have to create a “customer” base from scratch. Its base was created by the law (signed on July 30, 1965) that created Medicare.

Medicare is, by design, the sole insurer for people over age 64. That means that Medicare’s administrators had a precise idea of how many Americans they would be representing on July 1, 1966, the day Medicare commenced operations. Equally importantly, every clinic and hospital in America had a good idea of how many elderly patients they would be getting if they participated in Medicare and, conversely, how many they would lose (and how much money they would lose) if they refused to accept Medicare patients. And because the Medicare law gave the nation’s entire elderly population – the portion of the population with the greatest need for medical care – to Medicare, Medicare’s administrators had a good idea of how much leverage they had on day one over the nation’s providers. This allowed them (eventually) to make an offer to America’s providers that the providers could not refuse – accept Medicare’s below-average rates or lose a lot of money. The offer was not refused. Today, virtually all American clinics and hospitals accept Medicare enrollees even though there is no requirement in the Medicare statute that providers accept Medicare enrollees. In short, having pre-established enrollment, which in turn gave Medicare the ability to set its rates below those of the insurance industry, meant that Medicare did not face the “chicken and egg” problem.

More importantly, Medicare didn’t face a “chicken and egg” problem because it has always been the single insurer for the services covered under Medicare. Medicare has never had to compete with the insurance industry for “customers.”  A pernicious consequence of the tendency of “option” advocates to describe the “option” as “just like Medicare” is that “public option” supporters and members of Congress have been lulled into thinking the “option” is bound to succeed just as Medicare did. The tendency of “option” advocates to ignore the daunting “chicken and egg” problem is one manifestation of the lazy thinking that has been induced by the constant comparison of the “option” to Medicare.  ”Option” advocates should stop comparing the “option” to Medicare.

Kip Sullivan is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program.  He is the author of The Health Care Mess: How We Got Into It and How We’ll Get Out of It (AuthorHouse, 2006).