The Commodification of Health Care and the Search for a Universal Health Program in the United States

By Howard Waitzkin, M.D.
Robert Wood Johnson Foundation, Human Capital Blog, October 11, 2012
For better or worse, we treat health care in the United States as a commodity. We buy and sell it, and would-be patients who don’t have enough money to buy it must either rely on limited public assistance or go without care. In very real terms, it’s not just health care that we have turned into a commodity, it’s health itself, so it should come as no surprise that poor Americans die sooner than affluent ones, by an average of close to five years.
I observed this dynamic up close for the first time about 40 years ago, while working as a primary care practitioner in the clinic system of the United Farm Workers (UFW) Union in the 1970s (which, for a time, my mentors in the RWJF Clinical Scholars Program viewed as my required activity in clinical medicine). As I treated hard-working patients living in unhealthy circumstances, it was easy to conclude that one does not need to travel outside the United States to find the so-called “Third World.” As I observed with many of the patients I treated while working with the UFW, the living conditions of the poor contribute to ill health.
Shortly after the military coup in Chile that occurred on September 11, 1973, while researching an article on the health consequences of the military dictatorship that later appeared in the New England Journal of Medicine, I discovered the work that President Salvador Allende had accomplished in the field of social medicine. In 1939, three decades before he became Chile’s democratically elected President, Allende wrote “La Realidad Médico-Social Chilena” (The Chilean Medico-Social Reality), in which he presented an analysis of the relationships among social structure, disease and suffering.  The book conceptualized illness as a disturbance of the individual fostered by deprived social conditions. Breaking new ground in Latin America at the time, Allende­—himself a pathologist—described the “living conditions of the working classes” that generated illness, with emphasis on the social conditions of underdevelopment, international dependency, and the effects of foreign debt and the work process. Growing out of those conditions, in his description, were a number of specific health problems, including maternal and infant mortality, tuberculosis, sexually transmitted and other communicable diseases, emotional disturbances, and occupational illnesses.
Making the case that improved living conditions exerted a more profound impact on population health than medical advances, Allende described the responsiveness of tuberculosis to economic advances rather than treatment innovations, the role of housing density in the causation of infectious diseases, and the adverse effects of the pharmaceutical industry’s financial practices (for instance, Allende offered the earliest known account of the differences between generic and brand-name pricing of essential medications). In this context, Allende also put his finger on a dynamic that has come to trouble physicians, patients, and policy makers worldwide during recent years, writing colorfully that a “problem in relation to the pharmaceutical specialties is…the excessive and charlatan propaganda attributing qualities and curative powers which are far from their real ones.”
After his election to Chile’s presidency in 1970, Allende began to move health care toward a universal model, while at the same time initiating a variety of public health initiatives, such as establishing maternity clinics in rural areas, imposing new health and safety requirements on mining companies, improving sanitation and housing in low-income areas, and more. But Allende’s nationalization of several industries dominated by North American interests, despite the compensation provided to those corporations, earned him powerful enemies, and a U.S.-supported military coup drove him from power three years into his administration, ending his efforts to improve Chileans’ health.
In Central and South America, the part of the world where I’ve focused much of my research, the United States and various international financial institutions have worked to support health care systems structured along the for-profit model. The World Bank, for example, worked to foster health care systems that served the objectives of private capital accumulation in less developed nations, with the inevitable result that health and health care became a commodity. Commodification burdens poor people’s health in many ways, and the adverse impacts of corporatized health care have spread throughout the world.
One irony, however, is that some less developed countries have found ways to uncouple health from wealth. But it hasn’t come easily. In recent years, the commodification of health in Latin America has receded somewhat, particularly in the wake of the worldwide economic crisis and widespread protests that have followed. Regimes that previously embraced corporate interests have grown weak and largely have disappeared, replaced by elected governments that have refused to accept the historical patterns of economic empire that fostered exploitation and poverty around the world. National and local leaders have entered into novel coalitions that have given rise to a new era of social medicine in Latin America.
In the 1990s, for example, El Salvador saw sustained efforts to resist efforts by the World Bank and the ruling right-wing political party to privatize public hospitals. Strikes by health care workers at affected hospitals spread elsewhere, leading to a commitment from the government that it would abandon the privatization push. When the government subsequently began contracting out hospital services to private entities, more strikes followed. Eventually, the World Bank flinched, backing away from a privatization requirement in a loan it was extending to the country, and efforts to expand public-sector health care are again under way.
Popular efforts to accomplish similar objectives have taken root in a number of Latin American nations, and the idea of universal health care has even taken root right here in the United States. It was a key part of the agenda on which Barack Obama rode to victory in the 2008 Democratic election. However, the principle of universal access to health services through a strengthened public sector largely disappeared from the health care reform bill he eventually signed into law.
As many critics have pointed out, Obamacare, the Patient Protection and Affordable Care Act (PPACA), uses public-sector funds and mandatory patient-generated premiums to buy insurance coverage from the private, for-profit insurance industry. This approach ultimately will provide coverage for only about half of the uninsured, with costs that will continue to rise over time due to the administrative waste inherent in private insurance. In addition, Obamacare will provide yet another enormous public subsidy for the private insurance industry, despite its dismal historical record. Ironically PPACA closely resembles the “neoliberal” health reforms promoted previously by the World Bank in Latin America and other regions, for instance the widely criticized reform that began in Colombia during 1994.
This paradoxical situation becomes quite striking because Medicare offered a model for a successful system. Medicare provides universal access to publicly financed services with low levels of administrative waste and more effective cost control than seen under private insurance. Although Medicare retains various flaws, these flaws are far less critical than the continued commodification of health as preserved under Obamacare. The Obama administration could have proposed an expansion of Medicare for the entire population of the United States. Obama himself favored this type of “single payer” approach while he was a state legislator in Illinois but later changed his views when he began to accept large financial contributions from the private insurance industry.
Despite widespread support from professionals (see for instance Physicians for a National Health Program) and the general public (see for instance Health Care Now), “opinion leaders” like those who lead the RWJF have declined to advocate for the particular model of universal health care embodied in the Medicare for All approach. At the risk of appearing to bite the hand that feeds (which actually feeds only to a very minor extent), let me say that one of my major disappointments in the RWJF during its more than 40 years of trying to improve access to affordable health care is that its leaders consistently have declined to advocate for a coherent, unified model for a national health program.
The simple truth is that the United States remains the only economically advanced country without a viable national program that ensures access to needed care for all. As a result health care—and health—remain a commodity for sale. Until we in the United States decide to de-commodify our health care and health by implementing a universal, single, publicly financed, national health program such as Medicare for All, we will remain in our current state of ethical underdevelopment.
Howard Waitzkin, MD, PhD, is senior fellow at the Robert Wood Johnson Foundation (RWJF) Center for Health Policy at the University of New Mexico, as well as distinguished professor emeritus in the Department of Sociology, and clinical professor in the Department of Medicine. He is an alumnus of the RWJF Clinical Scholars Program. Waitzkin recently received the American Sociology Association Medical Sociology Section’s 2012 Eliot Freidson Outstanding Publication Award for his new book, “Medicine and Public Health at the End of Empire,” from which this blog post draws.
http://www.rwjf.org/en/blogs/human-capital-blog/2012/10/the_commodificat…

Howard Waitzkin’s article is too important to edit it for Quote of the Day. It is presented here in its entirety. No comment necessary.

By Ida Hellander, M.D., Steffie Woolhandler, M.D., M.P.H., David U. Himmelstein, M.D.
International Journal of Health Services (Forthcoming), October 2012

Abstract

Previous research has documented Medicare overpayments to the private Medicare Advantage (MA) plans (also known as Medicare Part C or Medicare HMOs) that compete with traditional fee-for-service Medicare. This research has assessed individual categories of overpayment for a single year, or at most a few years. However, no previous study has calculated the total Medicare overpayments to private plans since the inception of the Medicare program.

There are five ways in which private insurers systematically garner excess Medicare Advantage payments from the Medicare program.

Prior to 2004, the selective enrollment of healthier seniors by private plans – what we call “old cherry-picking” – was the major source of excess payments. We conservatively estimate that this old cherry-picking has added $41 billion to Medicare’s costs since 1985. Medicare adopted a new risk-adjustment scheme in 2004 based on 70 medical diagnoses (“hierarchical condition categories”), but this scheme has not curbed, and may have increased, private plans’ ability to game Medicare’s payment system, albeit with a new strategy: now, plans seek to selectively enroll patients who have mild versions of the medical conditions that determine payment. This “new cherry-picking” has added $122.5 billion to Medicare’s costs since 2004.

Congress mandated increased payment to private plans in the 2003 Medicare Modernization Act, adding $84.4 billion to the cost of Medicare through 2012.

The Affordable Care Act (ACA) mandated a drop in these overpayments, but a new demonstration project on quality will offset one-third of the reductions called for by the ACA through 2014.

Another major way that private plans are overpaid is by enrolling persons who are eligible for Veterans Health Administration (VA) benefits. The VA has provided $34.8 billion in care to MA enrollees since 1985.

In total, we find that Medicare has overpaid private insurers by $282.6 billion, or 24.4 percent of all MA payments, since 1985. In 2012 alone, we find that MA plans are being overpaid by $34.1 billion, or 6.2 percent of total Medicare spending.

In 2012, 13.5 million Medicare beneficiaries are in private plans, 27 percent of total enrollment. Some proposals would push millions more beneficiaries into private plans (e.g. voucher-type Medicare reform).

Risk adjustment does not and cannot work in the setting of for-profit MA plans, which have a strong financial incentive, and the data and ingenuity, to game whatever payment system Medicare devises. It is time to end Medicare’s long experiment with privatization and look toward proven-effective methods for controlling costs and improving coverage.

PNHP press release (The full article can be accessed through a link provided in this press release):
https://pnhp.org/news/2012/october/private-insurers-have-cost-medicare-2826-billion-in-excess-payments-since-1985

Comment:

By Don McCanne, MD

Although we have known all along that the private Medicare Advantage plans have been ripping off the taxpayers, this study brings together the data that quantifies the extent to which the taxpayers have been cheated by the private insurance firms: $282.6 billion!

The full report provides the details. It should be downloaded and read in full, and then used in your activism. Use the link above to access the press release (which is also well worth reading), and then use the link in the press release to download the full report.

The reason that this is so important is that it reveals the dishonesty behind the efforts to privatize Medicare through “premium support” – code for vouchers. Telling us that private insurers could provide equivalent Medicare benefits at a lower cost was the first deception, now proven false by three decades of experience. Nevertheless, because of anti-government ideology, legislators moved forward with the Medicare Advantage plans, deliberately paying them extra in order to draw beneficiaries into their plans through extra funds for high-profile marketing while affording them the ability to offer attractive extra benefits.

Once enough beneficiaries are drawn into these private plans, legislators could then begin the gradual process of defunding the traditional Medicare program. The premium support vouchers would provide a means to that end. As access in the underfunded traditional program diminished due to a decline in willing providers, beneficiaries would be able to use their premium support to move into the “better” plans offered in the private sector.

The traditional program might survive as a vestigial Medicaid-like welfare program, but essentially all who could afford it would have moved into the private plans. The next step? Reduce the value of the premium support both through attrition and through more nudges and pushes that the politicians would claim are absolutely essential to help close the gaping deficit hole.

As many have figured out, a primary purpose of the tax cuts that the politicians are telling us are essential is to increase the deficit even more to force other cuts in spending – deficits that “cannot be made up by tax increases because those taxes would destroy the economy.” Closing the deficit with tax cuts is one of the biggest lies of this campaign. They want to increase the deficit to force upon us a government austerity program.

We desperately need single payer – an improved Medicare that covers everyone. A more urgent task for us to address immediately is to cut the overpayments in the Medicare Advantage plans before the politicians shove us into their fraudulent premium support scheme. Check Figure 1 in the full report that you are downloading.  When we had Medicare + Choice plans, the deception was exposed and you will see that the plans started dropping out. The rebound of the plans is directly attributable to the fraud exposed in this report – deliberate overpayment of the private Medicare Advantage plans.

People keep asking what they can do. This one’s easy. Start organizing protests against this outrageous scheme that has cheated us taxpayers out of so much. Begin now, or start planning for your own austerity program when premium support vouchers won’t buy you or your children the health care plan that you need. It’s your choice.

Medicare Overpayments to Private Plans, 1985-2012: Shifting seniors to private plans has already cost Medicare $282.6 billion

By Ida Hellander, M.D., Steffie Woolhandler, M.D., M.P.H., David U. Himmelstein, M.D.
International Journal of Health Services (Forthcoming), October 2012
Abstract
Previous research has documented Medicare overpayments to the private Medicare Advantage (MA) plans (also known as Medicare Part C or Medicare HMOs) that compete with traditional fee-for-service Medicare. This research has assessed individual categories of overpayment for a single year, or at most a few years. However, no previous study has calculated the total Medicare overpayments to private plans since the inception of the Medicare program.
There are five ways in which private insurers systematically garner excess Medicare Advantage payments from the Medicare program.
Prior to 2004, the selective enrollment of healthier seniors by private plans – what we call “old cherry-picking” – was the major source of excess payments. We conservatively estimate that this old cherry-picking has added $41 billion to Medicare’s costs since 1985. Medicare adopted a new risk-adjustment scheme in 2004 based on 70 medical diagnoses (“hierarchical condition categories”), but this scheme has not curbed, and may have increased, private plans’ ability to game Medicare’s payment system, albeit with a new strategy: now, plans seek to selectively enroll patients who have mild versions of the medical conditions that determine payment. This “new cherry-picking” has added $122.5 billion to Medicare’s costs since 2004.
Congress mandated increased payment to private plans in the 2003 Medicare Modernization Act, adding $84.4 billion to the cost of Medicare through 2012.
The Affordable Care Act (ACA) mandated a drop in these overpayments, but a new demonstration project on quality will offset one-third of the reductions called for by the ACA through 2014.
Another major way that private plans are overpaid is by enrolling persons who are eligible for Veterans Health Administration (VA) benefits. The VA has provided $34.8 billion in care to MA enrollees since 1985.
In total, we find that Medicare has overpaid private insurers by $282.6 billion, or 24.4 percent of all MA payments, since 1985. In 2012 alone, we find that MA plans are being overpaid by $34.1 billion, or 6.2 percent of total Medicare spending.
In 2012, 13.5 million Medicare beneficiaries are in private plans, 27 percent of total enrollment. Some proposals would push millions more beneficiaries into private plans (e.g. voucher-type Medicare reform).
Risk adjustment does not and cannot work in the setting of for-profit MA plans, which have a strong financial incentive, and the data and ingenuity, to game whatever payment system Medicare devises. It is time to end Medicare’s long experiment with privatization and look toward proven-effective methods for controlling costs and improving coverage.
PNHP press release (The full article can be accessed through a link provided in this press release):
https://pnhp.org/news/2012/october/private-insurers-have-cost-medicar…

Although we have known all along that the private Medicare Advantage plans have been ripping off the taxpayers, this study brings together the data that quantifies the extent to which the taxpayers have been cheated by the private insurance firms: $282.6 billion!
The full report provides the details. It should be downloaded and read in full, and then used in your activism. Use the link above to access the press release (which is also well worth reading), and then use the link in the press release to download the full report.
The reason that this is so important is that it reveals the dishonesty behind the efforts to privatize Medicare through “premium support” – code for vouchers. Telling us that private insurers could provide equivalent Medicare benefits at a lower cost was the first deception, now proven false by three decades of experience. Nevertheless, because of anti-government ideology, legislators moved forward with the Medicare Advantage plans, deliberately paying them extra in order to draw beneficiaries into their plans through extra funds for high-profile marketing while affording them the ability to offer attractive extra benefits.
Once enough beneficiaries are drawn into these private plans, legislators could then begin the gradual process of defunding the traditional Medicare program. The premium support vouchers would provide a means to that end. As access in the underfunded traditional program diminished due to a decline in willing providers, beneficiaries would be able to use their premium support to move into the “better” plans offered in the private sector.
The traditional program might survive as a vestigial Medicaid-like welfare program, but essentially all who could afford it would have moved into the private plans. The next step? Reduce the value of the premium support both through attrition and through more nudges and pushes that the politicians would claim are absolutely essential to help close the gaping deficit hole.
As many have figured out, a primary purpose of the tax cuts that the politicians are telling us are essential is to increase the deficit even more to force other cuts in spending – deficits that “cannot be made up by tax increases because those taxes would destroy the economy.” Closing the deficit with tax cuts is one of the biggest lies of this campaign. They want to increase the deficit to force upon us a government austerity program.
We desperately need single payer – an improved Medicare that covers everyone. A more urgent task for us to address immediately is to cut the overpayments in the Medicare Advantage plans before the politicians shove us into their fraudulent premium support scheme. Check Figure 1 in the full report that you are downloading.  When we had Medicare + Choice plans, the deception was exposed and you will see that the plans started dropping out. The rebound of the plans is directly attributable to the fraud exposed in this report – deliberate overpayment of the private Medicare Advantage plans.
People keep asking what they can do. This one’s easy. Start organizing protests against this outrageous scheme that has cheated us taxpayers out of so much. Begin now, or start planning for your own austerity program when premium support vouchers won’t buy you or your children the health care plan that you need. It’s your choice.

After Millions of Californians Gain Health Coverage Under the Affordable Care Act, Who Will Remain Uninsured?

By Laurel Lucia, Ken Jacobs, Miranda Dietz, Dave Graham-Squire, Nadereh Pourat, and Dylan H. Roby
UC Berkeley Labor Center, September 2012
The implementation of the Affordable Care Act (ACA) is predicted to expand coverage to millions of Californians by 2019. This increase in coverage will primarily result from the expansion of Medi-Cal and the availability of subsidized coverage in the California Health Benefit Exchange (Exchange). However, three to four million Californians could remain uninsured even after the law is fully implemented.
Many Californians will remain uninsured
* 3.1 to 4 million Californians are predicted to remain uninsured in 2019.
* Almost three-quarters of the remaining uninsured in California will be U.S. citizens or lawfully present immigrants.
* Half of all remaining uninsured, or two million Californians, will be eligible for Medi-Cal or Exchange subsidies but remain unenrolled under the base scenario. Barriers to enrollment could include lack of awareness about the programs, challenges in the enrollment process, or inability to afford subsidized coverage.
* 72 percent of remaining uninsured Californians will be exempt from paying tax penalties under the minimum coverage requirements of the ACA due to income, lack of an affordable offer of coverage or immigration status. Approximately three percent of all Californians will owe a tax penalty due to not obtaining minimum coverage.
* Nearly 40 percent of the remaining uninsured will lack an offer of affordable coverage with premiums costing eight percent of household income or less. Some uninsured Californians will be ineligible for subsidized coverage due to income or immigration status, while others will be eligible for subsidized plans in the Exchange with premiums that exceed the affordability standard.
* Some of the remaining uninsured will lack coverage for short time periods due to life transitions.
Some demographic groups will be more likely to remain uninsured
* Two-thirds (66%) of Californians remaining uninsured will be Latino, compared to a projected 45 percent of the non-elderly population in 2020.
* Nearly three out of five California adults who remain uninsured will be Limited English Proficient.
* 57 percent of Californians who remain uninsured will have household incomes at or below 200 percent of the Federal Poverty Level.
http://laborcenter.berkeley.edu/healthcare/aca_uninsured.shtml

The projected numbers and demographics of the uninsured after full implementation of the Affordable Care Act in California are shameful. Although there would be regional differences in demographics, the national numbers would be roughly tenfold. We can do far better by enacting an improved Medicare for all.