The Price of Inequality

By Joseph E. Stiglitz
W. W. Norton & Company, June 2012

This book attempts to fathom the depths of one aspect of what has happened in the United States – how we became a society that was so unequal, with opportunity so diminished, and what those consequences are likely to be.

****

As we look out at the world, the United States not only has the highest level of inequality among the advanced industrial countries, but the level of its inequality is increasing in absolute terms relative to that in other countries.

****

Our political system has increasingly been working in ways that increase the inequality of outcomes and reduce equality of opportunity. This should not come as a surprise: we have a political system that gives inordinate power to those at the top, and they have used that power not only to limit the extent of redistribution but also to shape the rules of the game in their favor, and to extract from the public what can only be called large “gifts.” Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by grabbing a larger share of the wealth that would otherwise have been produced without their effort. Those at the top have learned how to suck out money from the rest in ways that the rest are hardly aware of – that is their true innovation.

****

This book is not about the politics of envy: the bottom 99 percent by and large are not jealous of the social contributions that some of those among the 1 percent have made, of their well-deserved incomes. This book is instead about the politics of efficiency and fairness. The central argument is that the model that best describes income determination at the top is not one based on individuals’ contributions to society (the “marginal productivity theory”), even though, of course, some at the top have made enormous contributions. Much of the income at the top is instead what we have called rents. These rents have moved dollars from the bottom and middle to the top, and distorted the market to the advantage of some and to the disadvantage of others.

****

Health care for all

The two most important impediments to individuals’ achieving their economic aspirations are the loss of a job and an illness. The two together form a lethal combination, one often associated with bankruptcy. Health care in America has traditionally been provided by employers. This inefficient and antiquated system has contributed greatly to the reality that the United States has the most inefficient and poorest-performing, overall, health care system among the advanced industrial countries. The problem with our health care system is not that we spend too much; it’s that we don’t get value for our money and that too many people don’t have access to health care. Obama’s health care reform partially addressed the latter problem… but it did little to improve efficiency. Our high costs are due in part to rent seeking by insurance companies and the pharmaceutical industry. Other countries have curbed these rents. We have not. Other countries not as well-off as the United States have managed to provide universal access to health care. Most countries treat access to medicine as a basic human right. But even if one doesn’t approach the issue from this principled perspective, our failure to provide access to health care increases the inefficiency of our health care system.

Lack of access to health care contributes significantly to inequality, and this inequality in turn undermines the performance of our economy.

http://books.wwnorton.com/books/detail.aspx?ID=4294967848

And…

OECD Health Working Paper No. 58: Income-Related Inequalities in Health Service Utilisation in 19 OECD Countries, 2008-09

By Marion Devaux and Michael de Looper
OECD (Organisation for Economic Co-operation and Development) ,July 10, 2012

This Working Paper examines income-related inequalities in health care service utilisation in OECD countries. For doctor visits, horizontal equity was assessed, i.e. the extent to which adults in equal need of physician care appear to have equal rates of utilisation.

OECD Working Paper on Income-Related Inequalities in Health Service Utilization

http://www.oecd-ilibrary.org/social-issues-migration-health/income-related-inequalities-in-health-service-utilisation-in-19-oecd-countries-2008-2009_5k95xd6stnxt-en
Click on “PDF” for the 61 page paper.

Comment: 

By Don McCanne, MD

Today’s comment is very brief in order to give you more time to read the excerpts from Nobel Prize-winning economist Joseph Stiglitz’s new book, “The Price of Inequality.” One of the prices we pay is our most expensive but poorest performing health care system. Supporting his theme is the coincidental release of a new OECD working paper showing that the United States has the most inequitable access to physicians of the 19 OECD nations studied.

When you read about rents and inequality in Stiglitz’s book, you’ll understand better why the United States is again first… this time in inequitable access to physician visits!

The Price of Inequality

By Joseph E. Stiglitz
W. W. Norton & Company, June 2012
This book attempts to fathom the depths of one aspect of what has happened in the United States – how we became a society that was so unequal, with opportunity so diminished, and what those consequences are likely to be.
****
As we look out at the world, the United States not only has the highest level of inequality among the advanced industrial countries, but the level of its inequality is increasing in absolute terms relative to that in other countries.
****
Our political system has increasingly been working in ways that increase the inequality of outcomes and reduce equality of opportunity. This should not come as a surprise: we have a political system that gives inordinate power to those at the top, and they have used that power not only to limit the extent of redistribution but also to shape the rules of the game in their favor, and to extract from the public what can only be called large “gifts.” Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by grabbing a larger share of the wealth that would otherwise have been produced without their effort. Those at the top have learned how to suck out money from the rest in ways that the rest are hardly aware of – that is their true innovation.
****
This book is not about the politics of envy: the bottom 99 percent by and large are not jealous of the social contributions that some of those among the 1 percent have made, of their well-deserved incomes. This book is instead about the politics of efficiency and fairness. The central argument is that the model that best describes income determination at the top is not one based on individuals’ contributions to society (the “marginal productivity theory”), even though, of course, some at the top have made enormous contributions. Much of the income at the top is instead what we have called rents. These rents have moved dollars from the bottom and middle to the top, and distorted the market to the advantage of some and to the disadvantage of others.
****
Health care for all
The two most important impediments to individuals’ achieving their economic aspirations are the loss of a job and an illness. The two together form a lethal combination, one often associated with bankruptcy. Health care in America has traditionally been provided by employers. This inefficient and antiquated system has contributed greatly to the reality that the United States has the most inefficient and poorest-performing, overall, health care system among the advanced industrial countries. The problem with our health care system is not that we spend too much; it’s that we don’t get value for our money and that too many people don’t have access to health care. Obama’s health care reform partially addressed the latter problem… but it did little to improve efficiency. Our high costs are due in part to rent seeking by insurance companies and the pharmaceutical industry. Other countries have curbed these rents. We have not. Other countries not as well-off as the United States have managed to provide universal access to health care. Most countries treat access to medicine as a basic human right. But even if one doesn’t approach the issue from this principled perspective, our failure to provide access to health care increases the inefficiency of our health care system.
Lack of access to health care contributes significantly to inequality, and this inequality in turn undermines the performance of our economy.
http://books.wwnorton.com/books/detail.aspx?ID=4294967848

And…

OECD Health Working Paper No. 58: Income-Related Inequalities in Health Service Utilisation in 19 OECD Countries, 2008-09

By Marion Devaux and Michael de Looper
OECD (Organisation for Economic Co-operation and Development) ,July 10, 2012
This Working Paper examines income-related inequalities in health care service utilisation in OECD countries. For doctor visits, horizontal equity was assessed, i.e. the extent to which adults in equal need of physician care appear to have equal rates of utilisation.
By Marion Devaux and Michael de Looper
OECD (Organisation for Economic Co-operation and Development) ,July 10, 2012
This Working Paper examines income-related inequalities in health care service utilisation in OECD countries. For doctor visits, horizontal equity was assessed, i.e. the extent to which adults in equal need of physician care appear to have equal rates of utilisation.
OECD Working Paper on Income-Related Inequalities in Health Service Utilization
http://www.oecd-ilibrary.org/social-issues-migration-health/income-related-inequalities-in-health-service-utilisation-in-19-oecd-countries-2008-2009_5k95xd6stnxt-en
Click on “PDF” for the 61 page paper.

Today’s comment is very brief in order to give you more time to read the excerpts from Nobel Prize-winning economist Joseph Stiglitz’s new book, “The Price of Inequality.” One of the prices we pay is our most expensive but poorest performing health care system. Supporting his theme is the coincidental release of a new OECD working paper showing that the United States has the most inequitable access to physicians of the 19 OECD nations studied.
When you read about rents and inequality in Stiglitz’s book, you’ll understand better why the United States is again first… this time in inequitable access to physician visits!

By Karen Davis, Kristof Stremikis, Michelle M. Doty and Mark A. Zezza
Health Affairs, July 18, 2012

The 2010 survey results indicate that compared to people who are privately insured, Medicare beneficiaries are less likely to have cost-related access problems, high premium and out-of-pocket health care expenses as a share of income, and financial problems because of medical bills. And compared to nonelderly adults with employer-based coverage, Medicare beneficiaries are more likely to have access to a medical home—a primary care provider who knows their medical history well, is accessible, and helps coordinate their care. Studies show that patients with medical homes are less likely to report medical errors or gaps in the coordination of their care and are more likely to be up-to-date with their preventive care.

Given these findings, it is not surprising that Medicare beneficiaries are far less likely than privately insured adults to give their health insurance plan a fair or poor rating, while being far more likely to report excellent quality of care.

Among Medicare beneficiaries, those with Medicare Advantage are more likely than adults with traditional Medicare to give their insurance a fair or poor rating. Although Medicare Advantage enrollees are less likely to spend 10 percent or more of their income on premiums and out-of-pocket expenses, they are more likely to report cost-related access problems than adults with traditional Medicare. This may in part reflect beneficiaries’ experience with private health maintenance organization plans that offer lower premiums in return for limited access to a smaller network of providers.

The evidence reported here from surveys now spanning a decade shows that Medicare is doing a better job than employer-sponsored plans at fulfilling the two main purposes of health insurance: ensuring access to care and providing financial protection.

http://content.healthaffairs.org/content/early/2012/07/16/hlthaff.2011.1357.abstract

Summary by The Commonwealth Fund:
http://www.commonwealthfund.org/~/media/Files/Publications/In%20the%20Literature/2012/Jul/1613_Davis_Medicare_vs_employer_ins_HA_07_18_2012_ITL.pdf

Comment:

By Don McCanne, MD

One of the goals of the Affordable Care Act was to protect private, employer-sponsored health plans – a sector that was considered to be functioning well. In so doing, a less expensive Medicare for all model was rejected. So how do the private plans compare to Medicare?

According to this report, “Medicare beneficiaries are less likely to have cost-related access problems, high premium and out-of-pocket health care expenses as a share of income, and financial problems because of medical bills. And compared to nonelderly adults with employer-based coverage, Medicare beneficiaries are more likely to have access to a medical home – a primary care provider who knows their medical history well, is accessible, and helps coordinate their care,” and are “far more likely to report excellent quality of care.”

Medicare is not perfect and does need improvement, but it performs far better than the best of the private plans – the employer-sponsored health plans. Individual and small group plans have an even worse performance.

Above all, “Medicare is doing a better job than employer-sponsored plans at fulfilling the two main purposes of health insurance: ensuring access to care and providing financial protection.”

Right now, efforts are being made to convert Medicare into a market of private plans. Why should we pay more for less health care choice, greater risk exposure, and poorer quality? Any sane individual who is paying attention should realize that we should be doing the opposite – improve Medicare and then provide it for everyone.

Medicare Beneficiaries Less Likely To Experience Cost- And Access-Related Problems Than Adults With Private Coverage

By Karen Davis, Kristof Stremikis, Michelle M. Doty and Mark A. Zezza
Health Affairs, July 18, 2012
The 2010 survey results indicate that compared to people who are privately insured, Medicare beneficiaries are less likely to have cost-related access problems, high premium and out-of-pocket health care expenses as a share of income, and financial problems because of medical bills. And compared to nonelderly adults with employer-based coverage, Medicare beneficiaries are more likely to have access to a medical home—a primary care provider who knows their medical history well, is accessible, and helps coordinate their care. Studies show that patients with medical homes are less likely to report medical errors or gaps in the coordination of their care and are more likely to be up-to-date with their preventive care.
Given these findings, it is not surprising that Medicare beneficiaries are far less likely than privately insured adults to give their health insurance plan a fair or poor rating, while being far more likely to report excellent quality of care.
Among Medicare beneficiaries, those with Medicare Advantage are more likely than adults with traditional Medicare to give their insurance a fair or poor rating. Although Medicare Advantage enrollees are less likely to spend 10 percent or more of their income on premiums and out-of-pocket expenses, they are more likely to report cost-related access problems than adults with traditional Medicare. This may in part reflect beneficiaries’ experience with private health maintenance organization plans that offer lower premiums in return for limited access to a smaller network of providers.
The evidence reported here from surveys now spanning a decade shows that Medicare is doing a better job than employer-sponsored plans at fulfilling the two main purposes of health insurance: ensuring access to care and providing financial protection.
http://content.healthaffairs.org/content/early/2012/07/16/hlthaff.2011.1357.abstract
Summary by The Commonwealth Fund:
http://www.commonwealthfund.org/~/media/Files/Publications/In%20the%20Literature/2012/Jul/1613_Davis_Medicare_vs_employer_ins_HA_07_18_2012_ITL.pdf

One of the goals of the Affordable Care Act was to protect private, employer-sponsored health plans – a sector that was considered to be functioning well. In so doing, a less expensive Medicare for all model was rejected. So how do the private plans compare to Medicare?
According to this report, “Medicare beneficiaries are less likely to have cost-related access problems, high premium and out-of-pocket health care expenses as a share of income, and financial problems because of medical bills. And compared to nonelderly adults with employer-based coverage, Medicare beneficiaries are more likely to have access to a medical home – a primary care provider who knows their medical history well, is accessible, and helps coordinate their care,” and are “far more likely to report excellent quality of care.”
Medicare is not perfect and does need improvement, but it performs far better than the best of the private plans – the employer-sponsored health plans. Individual and small group plans have an even worse performance.
Above all, “Medicare is doing a better job than employer-sponsored plans at fulfilling the two main purposes of health insurance: ensuring access to care and providing financial protection.”
Right now, efforts are being made to convert Medicare into a market of private plans. Why should we pay more for less health care choice, greater risk exposure, and poorer quality? Any sane individual who is paying attention should realize that we should be doing the opposite – improve Medicare and then provide it for everyone.

The Battle for Healthcare Has Just Begun

By the Editors
The Nation, July 11, 2012
If you thought the battle over healthcare reform came to an end when the Supreme Court declared the Affordable Care Act’s individual mandate constitutional, think again. The fight is just beginning. On one side the Republican Party and its big money allies aspire to defeat President Obama, take control of Congress and repeal the largest piece of domestic legislation in forty-five years. Mitt Romney’s plan is even more regressive. He’d not only eliminate insurance for the 30 million Americans covered by the ACA; he would change the way the industry is taxed and regulated, turn Medicare into a voucher program and transform Medicaid into a block grant, which together would strip access to healthcare from as many as 28 million Americans who are currently insured.
On the other side are people-powered progressives determined to implement the law and strengthen its less than ideal aspects to achieve universal coverage (see Wendell Potter, page 4). Under the ACA, for example, states will be empowered to create state-based single-payer systems. Vermont has already passed such legislation, and advocates in California are pushing a similar plan, passed by the legislature twice, only to be vetoed both times by then–Governor Schwarzenegger.
But if the fast and furious attack from the right is any indication, we have our work cut out for us. As many as eight Republican governors—led by Tea Party ideologues like Florida’s Rick Scott, Wisconsin’s Scott Walker, South Carolina’s Nikki Haley, Texas’ Rick Perry and Louisiana’s Bobby Jindal—have refused to implement the law’s expansion of Medicaid to cover some of America’s poorest. In Florida, that would affect some 1.3 million people who make less than 133 percent of the federal poverty level (about $31,000 a year for a family of four). In Texas, where 25 percent of residents are uninsured—the highest rate in the nation—Perry’s intransigence would leave 1.8 million out in the cold.
This cruel, cynical agenda has been enabled by a cabal of groups bankrolled by the 1 percent, such as the Chamber of Commerce and Karl Rove’s Crossroads GPS. Even before the Supreme Court decision came down, these organizations had spent some $235 million on attack ads vilifying “Obamacare,” and they are on track to spend much more by November. Already the Koch-backed Americans for Prosperity has launched a $9 million campaign against the ACA and the Democrats who voted for it. Concerned Women for America has pledged another $6 million.
These ads and the rhetoric emanating from the Tea Party guvs are nothing but open fearmongering and baldfaced lies. They insinuate that the ACA would ration healthcare (in fact, the ACA rations it no more or less than the current system). Governor Scott justified his refusal to expand Medicaid by claiming it would add $1.9 billion to Florida’s budget (though the federal government funds 100 percent of Medicaid expansion in the first three years, and Florida’s own healthcare agency estimates it would cost the state far less). Not to be outdone, Rush Limbaugh hysterically called the ACA the “biggest tax increase in the history of the world” (when, in fact, it contains tax breaks for middle-class Americans).
These lies have done a great deal of damage. Many people are confused about what the act does and does not do, creating a debate that seems to take place in an alternate reality. The stakes in this fight, then, are profound: the health of millions of Americans, of our shared social safety net and—not least—of our democracy itself.

Originally posted as a reader comment:
It is disappointing to see that the editorial position of The Nation has framed the current status of the health care debate as, on the left, a determination to “implement” and “strengthen” the Affordable Care Act, and, on the right, an effort to “repeal” ACA.
The objection is not with the characterization of the right, but with the implication that the left has settled on a right-center approach designed by conservatives. Token mention is made of the Vermont and California efforts to enact single payer, but, in fact, states do not have the option of diverting federal funds from programs such as Medicare and Medicaid into a state-based single payer program, nor can they bypass federal requirements such as the ERISA restrictions, usurping funds from employer-sponsored self-insured plans.
All the tweaking in the world cannot repair the highly-flawed, fragmented, and egregiously administratively wasteful model of ACA. It needs to be replaced with a bona fide model of social insurance – the most appropriate for the United States being a single payer, improved and expanded Medicare that covers everyone.
Also, it is a mistake to be hung up on a left-right linear polarity when the issue of health care justice should be much more inclusive. In an article this week in the Des Moines Register, retired health executive Jack Bernard stated, “If we Republicans took the Medicare-for-all approach, it would thrust us into the vanguard of reform. Instead of the Democrats stealing our ideas, we could steal theirs.”
The Democrats did steal the Heritage model which was originally introduced by Republicans as a conservative response to the Clinton proposal. Democrats have now succeeded in enacting it, but what a terrible model. It will leave tens of millions uninsured while creating a new standard of underinsurance, imposing financial hardship on those with health care needs.
Everyone should read Jack Bernard’s article, and then we should see if we can get past the simplistic polarization to bring us together to improve our health as individuals and to improve the health of the nation.
Jack Bernard, “Head-in-the-sand ‘solution’ is killing GOP”:
http://www.desmoinesregister.com/article/20120716/OPINION01/307160040/
The Nation editorial:
http://www.thenation.com/article/168844/battle-healthcare-has-just-begun

Head-in-the-sand ‘solution’ is killing GOP

By Jack Bernard
DesMoinesRegister.com, July 16, 2012

We Republicans have ourselves to blame for the Affordable Care Act, or Obamacare.

Our reaction to the Clinton health reform proposals in the early 1990s was to have conservative think tanks come up with a free competition model based on expansion of private insurance and Medicaid. That idea became Romneycare, which evolved into Obamacare.

It is our baby, ugly or not.

It is the height of hypocrisy for us now to criticize our own idea unless we have something better to replace it. And, the replacement needs to be comprehensive, not just a series of unacceptable statements and proposals based on doing away with traditional Medicare by turning it into a voucher program and gutting Medicaid by making it into a block grant.

Using vouchers for Medicare just dumps the cost problem into the lap of the powerless patient, rather than the federal government that has clout, making the cost escalation problem worse. The block grants for Medicaid idea just shifts the cost issue onto the states rather than the federal government, which once again solves nothing and only makes things worse.

States will just cut services and people from their Medicaid roles, creating more uninsured. Don’t Iowa hospitals serve enough uninsured in their emergency rooms now?

This gets us to what we as Republicans should do: throw out our rule book and be innovative. People my age will remember how we Republicans were 100 percent against recognizing China before Richard Nixon, the anti-communist crusader, came out for it. We must do the same with health care.

There is only one way to control health care costs and insure universal access — and that is by first admitting that the U.S. system has failed and then adopting ideas that have been proven to work elsewhere. We should take a look at how health care is financed and delivered in other developed nations with lower cost and better morbidity and mortality rates.

A Commonwealth Fund study was issued in May 2012 which did just that for 13 countries. The bottom line is that we spend 17.4 percent of our gross national product on health care, far more than other developed nations, which averaged 9.5 percent. Our per-capita spending was $7,960 versus $3,182 for the group as a whole.

Why? One key factor is prices. For example, U.S. pricing on the 30 most commonly prescribed brand name drugs is one-third higher than Canada and double France, both of which have a form of Universal Medicare.

From looking at the international data, if we Republicans really want to dump the Affordable Care Act, the way to go is Medicare for all. Studies show that the nations with universal health care have better overall health care outcomes than we do, not worse.

And, according to the respected Physicians for a National Health Program, www.pnhp.org, yearly savings generated under Medicare for all would be $400 billion. That would go a long way towards paying for universal coverage, versus the Affordable Care Act, which will increase systemic costs because it relies on private insurance.

The canard about waiting times to see doctors is just a tactic to scare the public. If you need a knee replacement for a knee that has been going bad for years, waiting a little longer for an operation should not be a major issue for the patient. Despite the scare tactics, no one who needs immediate care in Canada is ever left to sit in a line. In any case, there should be no waiting lists at all here. Canada spends just $4,363 per capita on health care versus our $7,960.

If we Republicans took the Medicare-for-all approach, it would thrust us into the vanguard of reform. Instead of the Democrats stealing our ideas, we could steal theirs. When it was implemented and turned out to be widely accepted, as was Medicare in the 1960s, we would be the party the public would look to for the future.

Of course, there is an alternative. We can stick our heads in the sand and push for infeasible actions. That approach is killing us regarding immigration and will work just as well for health care.

(JACK BERNARD of Monticello, Ga., is a retired health care executive who worked extensively with Iowa health care providers, including Iowa Health System. He now is a member of the Jasper County (Ga.) Board of Commissioners and Jasper County Board of Health. Contact: bernard_jack@hotmail.com)

http://www.desmoinesregister.com/article/20120716/OPINION01/307160040/

Comment: 

By Don McCanne, MD

This article should be distributed widely. Although it is written by a Republican, targeting his fellow Republicans, if his party can understand this message, then the Democrats and others who bailed on Medicare for all should be able to understand it as well.