Health care is broken
by David Lazarus of San Francisco Chronicle
Wednesday, January 14, 2004
Businesses large and small are drowning in health-care costs, and their solution by and large is to pass the buck to cash-strapped employees.
In Southern California, about 70,000 supermarket workers have been striking for several months as their employers seek to shoulder them with a greater share of medical expenses. Similar disputes are under way in a variety of other industries.
Nearly 100,000 workers at telecom giant SBC say they’re prepared to walk off the job when their contract expires in April if the company attempts to have them pay a greater share of insurance premiums.
The nation’s largest pension fund, the California Public Employees’ Retirement System, increased health-care premiums for its 1.2 million members this year by an average 16 percent, in line with double-digit increases for nearly all insurance providers.
The U.S. health care system is clearly broken. Companies are being strangled by runaway medical expenses — SBC alone pays more than $2 billion annually in health-care costs — while employees and other members of the public are increasingly struggling to obtain adequate care at reasonable prices.
More than 43 million Americans now lack health insurance and account for as much as $130 billion in annual economic losses resulting from poor health or early death, according to the influential Institute of Medicine in Washington.
The United States needs a universal health care system, and it needs it now.
“There’s a crisis right this minute,” said Steffie Woolhandler, a physician and Harvard Medical School researcher who advocates a national health care system.
“It’s conservatively estimated that 18,000 adults die every year because they don’t have insurance,” she observed. “That means at least 1,500 people will die this month and about 50 people are dying today, as we speak.”
The situation is so grave that the Institute of Medicine, which works closely with the federal government on health issues, is expected to issue an unprecedented call today for creation of a universal insurance system by 2010.
At the same time, though, the question of universal insurance is so complex that the institute, a component of the National Academy of Sciences, is unlikely to advocate a specific plan or approach. Sources familiar with the matter say the institute is expected to instead merely encourage policy-makers to take a fresh look at expanding health coverage.
The last time universal coverage received in-depth scrutiny, under the Clinton administration, the issue became mired in complex questions of implementation and funding. It was also aggressively attacked by entrenched special interests, particularly the $300 billion insurance industry and $160 billion pharmaceutical industry.
Now, however, things are different. Calls are gradually emerging from the private sector for a radical overhaul of the existing health-care system. The U.S. auto industry, for example, estimates that it spends as much as $1,200 on employee and retiree medical benefits for every vehicle it builds.
General Motors is the largest purchaser of private health-care coverage in the country. It spent $4.5 billion in 2002 to insure 1.2 million active and retired workers. Those costs in turn are passed on to buyers of GM cars and trucks.
Bill Ford, chief executive of Ford Motor Co., has called rising health- care costs “our biggest issue.” He’s asked his company’s vice chairman, Allan Gilmour, to study proposals for a national insurance system and to share his findings with other business leaders.
“Big businesses are finally standing up and saying that they can’t compete internationally with the current system the way it is,” said Ida Hellander, executive director of Physicians for a National Health Program, a Chicago advocacy group with more than 10,000 members nationwide.
Her organization argues that a so-called single-payer system, similar to Canada’s state-backed insurance network, is the best solution for the United States. Under this system, tax dollars would fund universal coverage that would allow any American to receive treatment from any doctor at any hospital.
It’s not such a far-fetched idea. Federal and state taxes, along with tax subsidies for businesses, already account for more than 60 percent of the $1.6 trillion spent annually on health care in the United States, primarily through Medicare and Medicaid.
Physicians for a National Health Program, or PNHP, argues that existing public financing for Medicare and Medicaid should be retained. Meanwhile, a payroll tax of about 7 percent would replace all other employer expenses for medical costs, and an income tax of about 2 percent would replace employees’ current insurance premiums, co-pays, deductibles and other out-of-pocket expenses.
The organization notes that such a change would represent a savings for the vast majority of working Americans. It would be costlier for firms that do not presently offer workers medical benefits, but would extend health coverage to millions of workers now left to fend for themselves (often at the expense of other taxpayers).
Smaller companies that do provide health coverage would benefit enormously from lower rates resulting from economies of scale. Universal insurance would also be significantly less expensive for most larger companies and would put a halt to double-digit increases in premiums seen annually for the past four years.
No less important, PNHP says, universal coverage would eliminate the thorny question of medical benefits in all future negotiations between employers and employees.
“We’re already spending enough money each year to pay for a national health plan,” Hellander said. “The problem is that we’re throwing a lot of that cash down the drain.”