February 4, 2003
Washington D.C.

We are here today to introduce a national health insurance program. Such a program is no longer optional; it’s necessary.

Americans have the most expensive health care system in the world. We spend about twice as much per person as other developed nations, and that gap is growing. That’s not because we are sicker or more demanding (Canadians, for example, see their doctors more often and spend more time in the hospital). And it’s not because we get better results. By the usual measures of health (life expectancy, infant mortality, immunization rates), we do worse than most other developed countries. Furthermore, we are the only developed nation that does not provide comprehensive health care to all its citizens. Some 42 million Americans are uninsured – disproportionately the sick, the poor, and minorities — and most of the rest of us are underinsured. In sum, our health care system is outrageously expensive, yet inadequate. Why? The only plausible explanation is that there’s something about our system – about the way we finance and deliver health care – that’s enormously inefficient. The failures of the system were partly masked during the economic boom of the 90’s, but now they stand starkly exposed. There is no question that with the deepening recession and rising unemployment, in the words of John Breaux, “The system is collapsing around us.”

The underlying problem is that we treat health care like a market commodity instead of a social service. Health care is targeted not to medical need, but to the ability to pay. Markets are good for many things, but they are not a good way to distribute health care. To understand what’s happening, let’s look at how the health care market works.

Most Americans receive tax-free health benefits from their employers, who pay insurers a portion of the premiums for health coverage. But not all employers offer benefits, and when they do, the benefits may not be comprehensive. It’s entirely voluntary. When employers are competing for workers, they offer good benefits; when unemployment rises, they drop them.

The insurers with whom employers do business are mostly investor-owned, for-profit managed care businesses. They try to keep premiums down and profits up by stinting on medical services. In fact, the best way for insurers to compete is by not insuring high-risk patients at all; limiting the coverage of those they do insure (for example, by excluding expensive services, such as heart transplantation); and by passing costs back to patients by denying claims or as deductibles and co-payments. We are the only nation in the world with a health care system based on dodging sick people. These practices add greatly to overhead costs because they require a mountain of paperwork. They also require creative marketing to attract the affluent and healthy and avoid the poor and sick. Not surprisingly, the U. S. has by far the highest overhead costs in the world.

It’s instructive to follow the health care dollar as it wends its way from employers toward the doctors and nurses and hospitals that actually provide medical services. First, private insurers regularly skim off the top a substantial fraction of the premiums – anywhere from 10 to 25 percent – for their administrative costs, marketing, and profits. The remainder is then passed along a veritable gauntlet of satellite businesses that feed on the health care industry, including brokers to cut deals, disease-management and utilization review companies, drug-management companies, legal services, marketing consultants, billing agencies, information management firms, and so on and so on. Their function is often to limit services in one way or another. They, too, take a cut, including enough for their own administrative costs, marketing, and profits. I would estimate that no more than 50 cents of the health care dollar actually reaches the providers – who themselves face high overhead costs in dealing with multiple insurers.

What are the signs of the imminent collapse of this system? Private health insurance premiums are now rising at an unsustainable rate of about 13 percent per year – and as much as 25 percent in some areas of the country. Coverage is shrinking, as more employers decide to cap their contributions to health insurance and workers find they cannot pay their rapidly growing share. And finally, with the rise in unemployment, more people are losing what limited coverage they had. This is not a system that can be tinkered with. It needs to change.

The program we are introducing today is the very soul of simplicity and efficiency, compared with our private health care system. It is a single-payer system – that is, health care funds would be distributed by a single, public entity, so that health care could be coordinated to eliminate both gaps and overlap. In many ways, our program would be tantamount to extending Medicare to the entire population. Medicare is, after all, a government-financed single-payer system embedded within our private, market-based system. It’s by far the most efficient part of our health-care system, with overhead costs of less than 3 percent, and it covers virtually everyone over the age of 65, not just some of them. Medicare is not perfect, but it is by far the most popular part of the U. S. health care system, and in my opinion its problems would be relatively easy to remedy – but that is another subject.

What are the usual objections to the sort of national program we are calling for today? They are mostly based on a number of myths.

Myth #1 is that we can’t afford a national health care system, and if we try it, we will have to ration care. My answer is that we can’t afford not to have a national health care system. A single-payer system would be far more efficient, since it would eliminate excess administrative costs, profits, cost-shifting and unnecessary duplication. Furthermore, it would permit the establishment of an overall budget and the fair and rational distribution of resources. We should remember that we now pay for health care in multiple ways – through our paychecks, the prices of goods and services, taxes at all levels of government, and out-of-pocket. It makes more sense to pay just once.

According to Myth #2, innovative technologies would be scarce under a single-payer system, we would have long waiting lists for operations and procedures, and in general, medical care would be threadbare and less available. This misconception is based on the fact that there are indeed waits for elective procedures in some countries with national health systems, such as the U. K. and Canada. But that’s because they spend far less on health care than we do. (The U. K. spends about a third of what we do per person.) If they were to put the same amount of money as we do into their systems, there would be no waits and all their citizens would have immediate access to all the care they need. For them, the problem is not the system; it’s the money. For us, it’s not the money; it’s the system.

Myth #3 is that a single-payer system amounts to socialized medicine, which would subject doctors and other providers to onerous, bureaucratic regulations. But in fact, although a national program would be publicly funded, providers would not work for the government. That’s currently the case with Medicare, which is publicly funded, but privately delivered.

As for onerous regulations, nothing could be more onerous both to patients and providers than the multiple, intrusive regulations imposed on them by the private insurance industry. Indeed, many doctors who once opposed a single-payer system are now coming to see it as a far preferable option.

Myth #4 says that the government can’t do anything right. Some Americans like to say that, without thinking of all the ways in which government functions very well indeed, and without considering the alternatives. I would not want to see, for example, the NIH, the National Park Service, or the IRS privatized. We should remember that the government is elected by the public and we are responsible for it. An investor-owned insurance company reports to its owners, not to the public.

Some people say that a single-payer system is a good idea, but politically unrealistic. That is a self-fulfilling prophecy. In my opinion, the medical profession and the public would be enthusiastic about a single-payer system if the facts were known and the myths dispelled. Yes, there would be powerful special interests opposing it and I don’t underestimate them, but with courageous leadership, such as Representative Conyers is providing, and the support of the medical profession and public, I believe there is nothing unrealistic about a National Health Insurance Program.

I want to mention one final and very important reason for enacting a national health program. We live in a country that tolerates enormous disparities in income, material possessions, and social privilege. That may be an inevitable consequence of a free market economy. But those disparities should not extend to denying some of our citizens certain essential services because of their income or social status. One of those services is health care. Others are education, clean water and air, equal justice, and protection from crime, all of which we already acknowledge are public responsibilities. We need to acknowledge the same thing for health care. Providing these essential services to all Americans, regardless of who they are, helps ensure that we remain a cohesive and optimistic country. It says that when it comes to vital needs, we are one community, not 280 million individuals competing with one another. In seeking to ensure adequate health care for all our citizens, we have an opportunity today to reassert that we are indeed a single nation.

— Marcia Angell, M. D.
Senior Lecturer, Department of Social Medicine, Harvard Medical School
Former Editor-in-Chief, New England Journal of Medicine
February 4, 2003
Washington, D.C.

New York Times Letters to the Editor
January 31, 2003

To the Editor:

To satisfy President Bush’s call for universal health insurance, Ted Halstead wants to make it mandatory (Op-Ed, Jan. 31). He wants to enroll the uninsured “in a default private plan by the government, and either billed or subsidized accordingly.” This would be tough to enforce.

In Mr. Halstead’s model, non- insurance would be disclosed on tax returns next year; what about sick or injured scofflaws in the interim? And what about the millions who don’t file Form 1040’s?

Despite major government subsidies, Mr. Halstead shuns new regulations. Lower premiums would be only the hoped-for result of insuring more young and healthy participants. In fact, the plan’s objective seems simply to finance private insurers, whose more than 14 percent overhead compares unfavorably with Medicare’s 2 percent administrative cost.

Wouldn’t it be easier and more cost-effective to improve and expand Medicare to cover everyone?
JOHN GLASEL
Hoboken, N.J., Jan. 31, 2003

To the Editor:

Forcing all Americans to buy health coverage would not drive down coverage. As the laws of economics tell, increase the demand, and the prices will go up.

Ted Halstead’s plan (Op-Ed, Jan. 31) would force millions of Americans who have made a choice about their needs to buy coverage they may or may not need.

In addition, his suggestion that Americans would get better care from the insurance companies once everyone was forced to buy it flies in the face of experience.

If Mr. Halstead’s insurance companies want “young and relatively healthy Americans” to buy health insurance, they should focus on lowering the price rather than forcing the government to cover its shortfalls.
CHRISTOPHER BOWEN
Washington, Jan. 31, 2003

To the Editor:

I appreciate Ted Halstead’s attempt at solving our health care crisis (Op-Ed, Jan. 31). But there is a flaw in his plan.

If we require all young individuals to buy insurance, the premiums would pay for only the medical resources they use. This would have no impact on the cost of health insurance for older individuals. If we require them to pay premiums higher than the resources they use, then we are taxing them to help offset higher costs for older individuals.

It is understandable that the general public does not understand the pricing of health insurance since the cost of medical services are harder to find than Iraq’s chemical weapons. But it is becoming increasingly frustrating that most people in a position to affect public policy do not understand the financial aspects of health insurance.
CHRIS S. CARLSON
Milwaukee, Jan. 31, 2003

To the Editor:

I commend Ted Halstead’s endorsement of universal health coverage (Op-Ed, Jan. 31). However, his idea for putting it into effect is unfeasible on one major count.

Comparing mandatory health insurance to car insurance is misguided in that many Americans do not even own cars. Either they can’t afford one, or paying for insurance would cripple their quality of life.

For many, paying for this coverage would be an insurmountable task, even with a reduced cost. Why don’t we instead do away with this bureaucracy of privatized for-profit insurance companies? The powers that be could create a national health care system in which the money that was originally going to individual health costs would instead be collected in taxes, and health insurance would be provided for all. For those who cannot afford to pay for health insurance, this would allow them access to proper health care. STEVEN SOBEY
Allston, Mass., Jan. 31, 2003

http://www.nytimes.com/2003/02/03/opinion/L03INSU.html?tntemail0

How not to fix Medicare
Marcia Angell M.D.

Sen. Bill Frist (R-Tenn., whom The New York Times has taken to calling Dr. Frist), the Senate majority leader and President Bush’s new fair-haired boy, wants to fix Medicare. This is the same Bill Frist whose father founded a for-profit hospital chain, Hospital Corporation of America (HCA). Headed by Frist’s brother, HCA merged with another hospital chain, Columbia, to form the behemoth Columbia/HCA. After riding high for a few years, Columbia/HCA (now again called HCA) came crashing down when it was charged with massively defrauding Medicare and other insurers. So far it has paid $1.7 billion in fines to settle those charges, and its legal troubles are not over.

Not surprisingly, Bush and Frist would fix Medicare by making it more like the fragmented, for-profit insurance system that people under 65 find increasingly unreliable, inadequate and arbitrary. If Democrats engage this issue properly, it should be one of the epic battles of this session of Congress.

It’s not clear that Medicare needs fundamental fixing. It succeeds very well in its main purpose, which is to provide nearly every American over the age of 65 with a uniform package of benefits. Those benefits cannot be taken away from anyone or reduced for any reason. And because it is a non-profit, single-payer system, Medicare is fairly efficient, with low overhead costs.

Still, Medicare could use some fixing at the margins. It pays doctors too much for doing high-technology tests and procedures and too little for examining and talking with patients. Its benefit package needs updating to provide long-term care and drug benefits. And its finances need overhauling. More about this shortly.

So is this the kind of fixing Sen. Frist has in mind? Not on your life. Sen. Frist and his White House friends want the very opposite. They want to introduce commercial competition, encourage Medicare recipients to join managed-care plans, cap what Medicare will pay for services and pass more of the costs on to recipients themselves. Yes, they include a prescription-drug benefit, but apparently without any regulation of the pharmaceutical industry’s prices or of the drugs covered. Most Republicans favor paying private insurers to offer limited drug coverage under Medicare. Drug companies would remain free to charge whatever they like for expensive, new brand-name drugs often no better and sometimes worse than older, generic drugs. In other words, Sen. Frist and the White House would introduce the blessings of the private health market to Medicare.

Let’s take a closer look at those blessings. The majority of people under the age of 65 are covered by employer-sponsored private insurers, mostly through investor-owned managed-care plans. Health benefits vary widely and are often grossly inadequate. The hallmark of this market is the extent to which health dollars are diverted from medical care to corporate profits and overhead. Private insurers keep an average of 14 percent of premiums for their own profits and overhead; they outsource other tasks, such as utilization review and case management, to other for-profit businesses that also divert money from actual care. Compare that with the less than 3 percent overhead costs of Medicare.

Managed-care plans maximize profits in several ways. They try to avoid marketing their products to people likely to get sick. They cut costs by stinting on medical services and making patients pay more out of pocket. They usually limit the choice of doctors or charge higher premiums for the privilege of free choice. No wonder Americans hate managed care.

In fact, surveys have shown that Medicare is far more popular with its recipients than the private health-care system is. Furthermore, despite every effort to reduce costs by limiting services, private insurance premiums are now rising at double-digit rates — much faster than the rate of inflation for Medicare. Why on earth would anyone want to visit these conditions on Medicare? One might as well wish for locusts.

Furthermore, we have had experience with pushing Medicare recipients into private managed-care plans, and it was a disaster. In the early 1990s, Congress directed Medicare to encourage seniors to enroll in managed-care plans as a means of containing costs. For each senior, Medicare paid health plans 95 percent of the average Medicare costs per beneficiary in that geographic region. If the health-plan sponsors could provide coverage for less, they could pocket what they saved. Seniors were lured by the promise of smaller co-payments and broader benefits, such as coverage for prescription drugs and eyeglasses.

But look at what happened. The plans — deliberately — attracted mainly the youngest and healthiest of seniors, people who cost far less than 95 percent of the average. According to one study, Medicare ended up paying 12 percent more for enrollees in managed-care plans than it would have paid for the same patients outside the plans. “Choice” was a bonanza for the managed-care companies, but not for consumers or taxpayers. As patients aged or became seriously ill, they often left the plans and returned to the regular Medicare system, where coverage was usually more accessible and they could choose their own doctors and see specialists if they wanted.

When Medicare officials grasped that they were losing money, not saving it, on managed care, they cut back on reimbursement levels. At that point, deprived of their excess profits, private health plans began to bail out. Many curbed the benefits of Medicare recipients or stopped accepting them altogether (a couple of million seniors were simply dumped). Why would Sen. Frist, or anyone for that matter, want to repeat that failed experiment?

The answer may lie in a conservative ideology that believes private enterprise is always better and — even in the face of abundant evidence to the contrary — more efficient in providing just about anything, including a social service such as health care. And it may also lie in Republican gratitude for the lavish financial support the party receives from the health and pharmaceutical industries. But Sen. Frist’s own background is surely an important factor. His family is in the for-profit health-care business. Although he himself is said to have put his large interest in HCA into a blind trust (with the approval of the Senate Select Committee on Ethics), it still remains true that whatever is good for HCA is good for Bill Frist. And it is undeniable that Medicare policies affect the fortunes of the company. Yet Frist has become an important voice on health policy in the Senate, and now that he is majority leader, his influence will grow. It is astonishing that this obvious conflict of interest has been so little noted.

How, then, should we shore up Medicare? its fees should be adjusted to reward high-tech medicine less and time spent with patients more. It needs a mechanism for discouraging physicians from providing unnecessary services to generate more income. Other advanced countries with single-payer systems achieve that. In Canada, for example, doctors who are found to do much more than the average number of tests in their specialty may have their practices reviewed.

In addition, the benefit package should be updated to reflect current medical realities. Medicare, remember, was crafted in the mid-1960s, when medicine was quite different. Long-term care for chronic diseases was less important then (the focus was on acute diseases), as were prescription drugs for outpatients (there were not many effective drugs and they were cheap). That is why Medicare does not cover these things. But conditions have changed. Long-term care and outpatient prescription drugs are now not only medically necessary but also very expensive. It makes no sense for Medicare to continue to exclude them. However, any prescription-drug benefit would need to be restricted to the least-expensive effective drugs and include a mechanism for bargaining with drug companies for the best prices. Otherwise it would be an unaffordable windfall for the pharmaceutical industry.

The funding of Medicare also needs some attention. Medicare is divided into two parts. Part A, which covers hospital care and skilled nursing and home health care, is funded by a 2.9 percent payroll tax. Part B, which covers doctors’ services and outpatient care, comes out of general tax revenues and monthly payments from recipients. Those payments, now $58.70 per month, have increased over the years. Seniors are also responsible for substantial co-payments for services. The result is that Medicare recipients now pay more out of pocket (in constant dollars) for their health care than they did before Medicare was instituted. That tends to undermine the whole purpose of the program, which is to shield vulnerable seniors from the burdens of illness. I would favor eliminating the monthly Part B premiums and greatly reducing co-payments, as well as shifting more of the cost to general federal revenue.

Whether these reforms would have a net effect of increasing or reducing total Medicare costs is hard to say. Reducing overtreatment by physicians would save money. On the other hand, expanding benefits, eliminating Part B premiums and reducing co-payments would increase costs to the program. Seniors themselves would certainly save money, as would Medicaid, which now pays for much of long-term care. The fact is, countries with single-payer systems get more appropriate care for less overall money. Advances in technology and the aging population may well raise total health-care costs over time. But that’s all the more reason to spend health dollars efficiently. And if we Americans want to spend a little more of our gross domestic product on health care, that’s our choice.

Sen. Frist and the White House have it exactly backward. Turning Medicare over to the private sector would duplicate all of the health market’s arbitrariness, cost shifting and inefficiency. Instead, we should be thinking about strengthening and expanding Medicare as a public program. After all, it’s the only part of our health-care system that works even reasonably well. And if irony were not dead, we would surely notice how strange it is that the future of Medicare is in the hands of someone whose family business is paying enormous fines to settle charges of defrauding that very same program.
Marcia Angell M.D.

Copyright © 2003 by The American Prospect, Inc. Preferred Citation: Marcia Angell M.D., “Dr. Frist to the Rescue,” The American Prospect vol. 14 no. 2, February 1, 2003. This article may not be resold, reprinted, or redistributed for compensation of any kind without prior written permission from the author. Direct questions about permissions to permissions@prospect.org.

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