The American Prospect talks to the co-founder of Physicians for a National Health Program about why a single-payer system remains not only the most desirable reform goal in the United States, but an achievable one.
Roger Bybee
The American Prospect
August 6, 2007
The notion of a Canadian-style “single-payer” health system — essentially, replacing costly private insurers with a government body or bodies to pay for healthcare — has long been dismissed by elite politicians and pundits. But the popular response to Michael Moore’s new documentary “Sicko” is adding fuel to an already-smoldering fire of resentment over the domination of the current health system by for-profit insurers, in addition to that system’s high cost (double any other nation’s) and poor performance (37th overall in quality, according to the World Health Organization).
Dr. Steffie Woolhandler, with her partner, Dr. David Himmelstein, co-founded Physicians for a National Health Program. Both are practicing physicians as well as professors at Harvard Medical School. They have written widely on issues of health care reform, including the book Bleeding the Patient: The Consequences of Corporate Health Care (with Dr. Ida Hellander). A native of Shreveport, Louisiana, Dr. Woolhandler earned her medical degree at the LSU-New Orleans Medical School.
As the debate over American healthcare heats up in anticipation of the 2008 presidential race (in which health reform is widely expected to be one of the central issues), Dr. Woolhandler reflects on the flawed U.S. health system, various reform proposals, and the prospects of enacting a system in the single-payer mold.
Roger Bybee: What drew you into fighting for universal healthcare as a doctor?
Steffie Woolhandler: It became obvious that there was a lot we could do for patients in terms of helping them live longer and preventing disease, but we couldn’t do any of it if they didn’t come into our offices. It became really clear that the financing system was an obvious barrier to care for our patients. Tens of millions lack insurance or have poor insurance.
Why is healthcare such an intense issue right now, following a long hiatus after the defeat of the Clintons’ plan in 1994?
There are two main factors. First, health costs have been rising for a while — they slowed down a bit in the late 90s, but have been averaging about 8 percent in increases a year in the 2000s. These cost increases are now much less tolerable because of globalization. U.S. manufacturers in particular have to compete in world markets, and they can’t just pass on higher costs to consumers via higher prices. So globalization has really made health costs a big concern for American business, and that’s one major part of the renewed interest.
The other part is that the quality of insurance coverage is going down even for the middle-class Americans, in terms of co-pays, deductibles, and uncovered services. When a middle-class family faces a major illness, they also face the danger of bankruptcy. So there’s been a shrinkage of coverage for the middle-class even as prices have increased sharply.
What pushed it off the national radar screen — or at least the elites’ political agenda — for the past 13 years?
Business was hoping managed care would solve this problem for them. Business went completely in the direction of managed care, and managed care companies promised they would take care of costs. But after a brief period where costs slowed down, costs are now rising just as fast as before managed care.
Why have HMOs and rising deductibles for workers failed to rein in costs?
What happens with HMOs is that they’re interested in making money, and the easiest way is the cherry-picking of enrollees and seeking subsidies from Congress. Holding down costs just isn’t their priority. Besides, they got a lot of pushback from hospitals and doctors over bossing them around on costs. Managed care is kaput. History has shown managed care doesn’t work.
Neither do Health Savings Accounts. Health spending works on kind of an “80/20” rule, where most spending is on a minority of people with chronic or crisis needs. So most health spending is for a relatively small group of people within a given year. With Health Savings Accounts, the front-end costs are paid, but you can’t control the costs of people who are really injured or really sick.
Also, the high-deductible Health Savings Account plan will force sicker people out of the workforce. For example, Wal-Mart and other employers are using a strategy to push older, chronically ill people out of the workforce. From a social point of view, it’s completely backward to push people with diabetes and high blood pressure out of being covered.
There’s tremendous ferment going on at the state level in terms of reform. How do you evaluate these plans that, for example, require individuals to purchase insurance policies, as in Massachusetts under Mitt Romney?
I think the Massachusetts bill, the Romney plan, is a hoax. It won’t get us to universal coverage. The fundamental assumption is that the uninsured have enough money to buy insurance policies, that they can buy their way out of the predicament. If they had the money, they’d already have insurance! They don’t have money in the first place. Someone my age, in their 50s, and making over $29,400 a year, would get no subsidy. The cost of that premium would be $4,200 a year, but along with that there’s a $2,000 deductible before any coverage begins, co-pays, and co-insurance after that first $2,000.
That kind of coverage is worthless to a low-income person. They don’t have money for the premium, and they can’t pay the $2000 out of pocket. I don’t call that insurance, I call it a hoax. You’re not going to be able to cover everyone with those kinds of premiums. And expansion of Medicaid won’t get us to universal coverage, either. We’ve had 10-plus years of experience with that.
In Illinois, Governor Rod Blagoevich is proposing a tax on business to pay for private insurance. What’s your take on that?
There is a fundamental problem with going through private insurance plans with high overhead costs. It’s not unusual for a private insurer to have 20 percent devoted to overhead and profit. So of every dollar you pay out in insurance premiums, only about 80 cents ever makes its way to a hospital or doctor.
When you put insurance companies in the middle of any kind of coverage you can engineer, you must realize that 20 percent is frittered away in overhead and profits. Quite apart from denials, it’s tremendously costly to doctors and hospitals.
You performed a study showing that about 31 percent of health spending in America goes to administrative overhead and profit. If 20 percent is accounted for by the insurance companies, what explains the rest? Is it, as critics like Paul Krugman say, the strategy of “denial management” followed by insurance companies, where they’ve bloated their staffs so that they can challenge more claims by both providers and patients?
The remainder of the overhead comes from doctors and hospitals. Part of it is in response to “denial management,” but the big portion is just needing a high baseline level of paperwork and administrative support to deal with all the different insurers. In my little practice, you have to deal with all the different insurance companies, different co-payments, different deductibles, and different formularies [listings of approved prescriptions].
While the single-payer approach fares extremely well in polling (67 percent of Americans in a 2005 BusinessWeek poll supported a system akin to Canada’s or Britain’s), policymakers and pundits dismiss this option out of hand. Even some progressives like Ron Pollack of Families USA and SEIU President Andrew Stern have depicted the single-payer plan as being utterly out of reach. How do you respond to that perspective?
There’s not another plan that will work. All of the other proposals lack feasibility in terms of economics. The other plans simply won’t get you to universal healthcare. The key to the economic feasibility of the single-payer plan is administrative savings. We shouldn’t be pouring more money into the insurance system, but saving money on administration in order to cover everyone and provide better coverage.
There’s a fundamental problem with going to private insurers that makes universal coverage unaffordable. It doesn’t matter what the “political feasibility” is. You must start with a plan that will work.
How vital is it to unify progressives behind a single-payer plan in the coming years? How can we avoid the fracturing of progressive and liberal forces that occurred in 1993-94?
I frankly haven’t seen much fragmentation now, because a lot of people are very knowledgeable about single-payer. I’m not really that worried about fragmentation. There will be a lot of debate, but when people fully understand the economics of healthcare, there will be more support for single-payer.
John Edwards and the political scientist Jacob Hacker are advocating plans that would give all Americans a choice of traditional private insurance or enrolling in a regional single-payer plan.
We already have experience with Medicare Plus. These plans are supposed to compete on equal footing with Medicare, but private HMOs have used selective recruiting of healthier people and gone to Congress and gotten embedded into the Medicare Advantage Drug plan, and they get huge over-payments of 11 to 13 percent. The private plans won’t let Medicare compete.
It’s incumbent upon those who favor competition to show how this won’t happen if single-payer is competing with traditional insurance.
If you have two groups trying to enroll people in health plans, the bad guys will drive the good guys out of business. The bad guys will selectively recruit healthier people, and push sicker people onto the single-payer plan. Competition is not something that works with healthcare.
How do you envision closing the gap between big firms like Wal-Mart making vague commitments to universal healthcare and actual recognition that only a single-payer system can hold down costs, reach all citizens, and provide free choice of doctors?
If companies want to hold down costs, they need to support universal healthcare. Otherwise, it won’t solve the problem of healthcare for low-wage workers. The good news is that no one would miss the administrative burden that accounts for such high costs in the U.S. However, we would have to provide retraining and income support to displaced health insurance workers.
Polls of doctors in Minnesota (Feb., 2007) and Massachusetts (2004) both show a remarkable 64 percent favoring a single-payer plan. What accounts for this historic shift in the sentiment of doctors, when you think back to how the American Medical Association successfully mobilized doctors in every community to block Harry Truman’s health reform effort? This new polling seems extraordinary; both because doctors’ support for single-payer is just slightly below the general public’s and because doctors are presumably much more knowledgeable about health systems than the average citizen. How do you see things developing among doctors and the health industry?
The opposition in Truman’s era was the medical profession, and the AMA still is opposed even though a high percentage of doctors support a single-payer plan.
But now there are two other powerful forces: the health insurance industry [that emerged since the Truman plan] and the pharmaceutical companies. Under a single-payer plan, the government steps into the pharmaceutical pricing picture with a lot of bargaining power, so both of these forces feel threatened.
It’s ironic that hospitals aren’t more supportive. The health insurance industry would be put out of business, so it’s life or death for them. But hospitals would still be there. Some for-profit hospitals oppose national health insurance, and our plan calls for reconversion to non-profit status. With the non-profit hospitals, I think opposition to single-payer is mostly fear of change. I think that they can live with a single-payer national health insurance plan, so I don’t see them as our biggest enemy.
Given the power of the insurers, hospitals, and the rest of the medical-industrial complex, how optimistic do you feel about reaching the goal of universal care, free choice of doctors, and cost containment?
I’m really optimistic, because the current system can’t keep going. There will be increasing pressures from employers and state and federal governments for change because of the soaring costs. The American people do have the power to make change, and private interests cannot hold back change forever and for all time. So I’m optimistic!
Roger Bybee is a Milwaukee-based writer and progressive activist, who formerly edited the official labor weekly Racine Labor. He has written for a number of state and national publications and websites on issues such as health care reform and corporate globalization.