Headaches For All
Everybody knows it will take a lot more than diet and exercise to fix America’s health
AMERICANS are constantly told that their health care is the best in the world. In terms of research, technology and advances in surgery, the boast is undoubtedly true. In other ways, it is hard to justify. At any one time, more than 43m Americans under the age of 65 have no health insurance (the elderly are covered by Medicare, a federal insurance programme). The infant mortality rate for black Americans runs at 14 per 1,000 live births, double the rate for white Americans and over four times the rate in Japan. Indeed, in a 2000 study of the effectiveness of health-care systems around the world, the World Health Organisation ranked America only 37th (France came top).
If all that speaks ill of the nation as a whole—over half of America’s uninsured in 2002-03 were without cover for at least nine months—the situation in some states is far worse. Families USA, a health-consumer organisation, notes that in Texas—the state that George Bush likes to call home—some 43.4% of the “non-elderly” population were without health insurance for all or part of 2002 and 2003. In California the rate was 37.1%; in Florida 34.6%. The Kaiser Family Foundation (KFF) notes that infant-death rates across the South, from Arkansas to the Carolinas, are far higher than in the western states.
This is a poor reward for spending more on health than any other country. Health care accounts for almost 15% of America’s gross domestic product, compared with less than 8% for Japan and Britain. Moreover, where other countries pay for their health care mostly out of taxation (the OECD average in 2001 was 72%), over half of America’s spending is accounted for by private insurance—normally provided by an employer—and out-of-pocket payments. Indeed,America is the only industrialised democracy without publicly funded universal health cover.
To counteract the costs of medical advances and malpractice suits,insurance premiums have been rising by more than 10% a year. In 1998 the average health-care cost per employee for a private-sector company was $1 an hour; by last year, it had risen to $1.50. This has a perverse effect: employers either tend to cut or eliminate their workers’ coverage—thereby adding to the uninsured—or try not to hire new workers. With the cost of insuring a single worker now running at around $3,000 a year, the proportion of workers covered by a company health plan has fallen to 61% in 2004, according to KFF, compared with around 65% in 2001.
The Search For A Cure
Clearly, reform is needed. One reason is pressure from voters. Health care is consistently near the top of their concerns, especially if they are old; old people are both sicker, and vote more, than the average American. They note that many of their drugs are much cheaper in Canada than in the United States, and ask why the federal authorities are refusing to legalise imports from across the northern border. (In defiance of the Food and Drug Administration, Illinois has recently approved the importation of drugs from Canada; Vermont is suing the
FDA.) Seizing the moment, John Kerry says he backs such imports.
A second reason for reform is the inexorable pressure of demography. As baby-boomers retire, they will add to the burden of health care in general and Medicare in particular. Indeed, America’s total expenditure on health care is expected to rise from just under $2 trillion a year now to almost $3 trillion by the end of the decade.
So the question is not so much whether to reform, but how. The Clinton plan a decade ago for universal coverage was defeated by doctors and insurance companies, as well as by Republicans. In its place came health-maintenance organisations (HMOs), health-care-management companies that contract with doctors and hospitals to manage treatment and costs. The proportion of employees with employer-provided care enrolled in managed health-care plans rose from 27% in 1988 to 92% in 2000.
But HMOs succeeded only for a time in slowing the rise in health-care costs. Some politicians, such as the former Democratic presidential candidate, Dennis Kucinich, believe the only workable solution is to replace the private-sector insurance companies with a government-run “single-payer” system, as in Canada. This, however, would guarantee the same lobbying that defeated Mr Clinton—which is why neither Mr Kerry nor Mr Bush is talking about dramatic change.
Mr Bush’s remedy is particularly modest. He proposes extending the new Health Savings Accounts to allow individuals to deduct from their taxes the cost of premiums for major medical coverage. According to the Treasury Department, this would extend insurance to an extra 1m Americans. Similarly, there are tax credits to help workers laid off “due to international trade” to find insurance; other credits would make insurance affordable for around 4.5m workers with no employer-provided or public insurance. Meanwhile, a five-year plan is already under way to fund 1,200 new or expanded community health centres to serve an additional 6.1m people, and association Health Plans are proposed to allow small businesses to band together to provide cover to another 600,000.
The centrepiece of the president’s reform, however, is to make prescription drugs available to the 40m elderly and disabled Americans covered by Medicare. From 2006 (a discount card will in the meantime offer savings off retail prices), a Medicare recipient will pay the first $250 in a year, Medicare most of the next $2,000 and the recipient the next $2,850 (after which Medicare will again pick up the tab). The plan is both complicated and expensive: over $570 billion, according to the latest estimates, over ten years. Embarrassingly for the president, the price tab is rising not just for the government but also for Medicare recipients: their premiums are set to rise by 17% in 2005.
These are not the only problems with Mr Bush’s proposals. The tax credits, aimed at helping the poor and worth some $90.5 billion over ten years, would actually benefit the rich, who need no help, and would be little help to the low-paid, who pay little or no tax and are most at risk of losing insurance. As for Medicare reform, the congressional Budget Office reckons that, as an unintended side-effect, a third of retired people whose drugs are now covered by their former employers will lose that coverage (why should the bosses pay if the government will pick up the tab?) and be forced to accept inferior cover from Medicare. The most damning criticism of the proposals, however, is that their impact will be too limited: according to the Kaiser Family Foundation, the ranks of the uninsured will fall by just 1.8m.
THE 95% SOLUTION
By contrast, Mr Kerry aims to reduce the number of uninsured by 26.7m and so bring health insurance to 95% of America’s population. That ambition carries a hefty price-tag of $653 billion over nine years, which a President Kerry would finance mainly by repealing Mr Bush’s tax cuts for Americans earning over $200,000. In the Kerry vision, all Americans would have the right to the same health plans as their congressmen and some 9m federal employees and their dependents. Tax credits would help find cover for 55-64-year-olds, who are too old to be good insurance risks for an employer but too young to qualify for Medicare. To help poor families, Mr Kerry would make the government assume all the costs of the 20m children who now benefit from state Medicaid plans. In return, the states would have to expand insurance to those poor families who do not qualify for Medicaid.
Mr Kerry’s biggest claim is that he can cut insurance costs by up to two-thirds for small businesses: the federal government would act as a reinsurer, reimbursing employee health plans for 75% of costs above $50,000. This alone would lower employee premiums by 10%. In addition, there would be tax credits of up to 50% of the cost of covering employees, and employers would profit from buying into the federal worker-insurance programme. Meanwhile, everyone—firms, employees and states—would benefit from discounts gained by the bulk purchasing of drugs. (At the moment, the drug companies are loth to co-operate with any buyer except Medicaid, the federal/state programme for the poor.)
Add in a “quality bonus” to give hospitals a financial incentive to reduce medical errors; add, too, a “technology bonus” to favour computerisation and so cut non-medical costs (now running at $350 billion a year) from $12-25 per health-care transaction to less than a cent. The result is a health plan which the 35m-strong AARP, the formidable lobby group for the elderly—which supported Mr Bush’s Medicare scheme—finds much more convincing than the president’s.
That does not mean it is without problems. Mr Bush’s team notes that while Mr Kerry claims it will be harder to bring undeserving malpractice suits, he refuses to cap the awards—even though the Bush camp says that the “broken medical liability system” drives up costs by at least $28 billion a year for the federal government alone. (It certainly pushes up the cost of doctors’ malpractice insurance.)
The Bush team also attacks Mr Kerry for adding to the burden of regulation. Small businesses would have to offer costly benefits in order to join the federal employees’ health-benefits programme. Overall, say the Republicans, the Kerry plan simply shifts the burden to the taxpayer. But given the unpopularity of the present system, this is a burden that taxpayers sometimes seem ready to bear.