US health reform stifled by the Furies of Private Interest

Insurance companies in America have been frenzied in their defence of healthcare profiteering.

The US healthcare debate demonstrates with startling clarity how rabidly the Furies of Private Interest attack the ‘right to life’ of proletarians.

Barack Obama was elected President with a clear mandate from the electorate to reform the system of health care in the US to ensure that everybody, rich and poor, had access to medical care. However, despite the crying need for this reform, Obama is facing an uphill struggle against powerful lobbies representing the privileged, who will apparently stop at nothing to prevent the reforms going through, or at least to get them so watered down that they cannot make the slightest inroads into the right of US capitalism to milk the sick.

In the US, for those on low and middle incomes, let alone the millions of unemployed and destitute, being ill is a frightening thing – because hospital bills can bankrupt you even if you are insured.

A few quotations from the New York Times in August give an idea of some of the problems – and it has to be said that they understate their extent:

It is believed that there are 45.7 million people in the US who have no health insurance, “and there is good evidence that lack of insurance is harmful to their health.

Scores of well-designed studies have shown that uninsured people are more likely than insured people to die prematurely, to have their cancers diagnosed too late, or to die from heart failure, a heart attack, a stroke or a severe injury. The Institute of Medicine estimated in 2004 that perhaps 18,000 deaths a year among adults could be attributed to lack of insurance.

The oft-voiced suggestion that the uninsured can always go to an emergency room also badly misunderstands what is happening. By the time they do go, many of these people are much sicker than they would have been had insurance given them access to routine and preventive care. ” (Editorial, ‘The uninsured’, 23 August 2009)

In addition, “The Commonwealth Fund estimates that 25 million Americans who had health insurance in 2007 had woefully inadequate policies with high deductibles [excesses] and restrictions that stuck them with large amounts of uncovered expenses. Many postponed needed treatments or went into debt to pay medical bills.

According to Associated Press writer Charmain Noronha, “A survey released this month by the nonpartisan Robert Wood Johnson Foundation said more than 86 percent of Americans rated their care as good to excellent. But 52 percent were very or somewhat worried they wouldn’t be able to afford future care, and nearly 30 percent said they were very or somewhat worried it would bankrupt them.” (‘Canadians bristle over US healthcare rhetoric’, 31 August 2009)

There is even a danger of Medicare being bankrupted, notwithstanding that it pays lower rates than private insurance companies: “The skyrocketing cost of health care [average annual growth: 6.2 percent] is driving up federal deficits, threatening to bankrupt Medicare, forcing employers to cut or drop benefits, and leaving workers and their families with unaffordable bills.” (Editorial, New York Times, 2 August 2009)

In this situation, it is not surprising that Obama has mass support for his promise to reform the system. “Sixty-four percent of Americans say the government should guarantee health insurance for all Americans. Just 30 percent think this is not its responsibility. Those percentages have been stable for many years.” (CBS News Online, 20 June 2009)

However, with the US healthcare industry accounting for 18 percent of US GDP, and rising, the opponents of reform within the system are a powerful force, and it is far from sure that Obama will succeed in defeating them.

In his first term, Bill Clinton took on the task of reforming US health care in much the same way as Obama is now proposing, but he was forced to give up the struggle. To have an idea of the extent that the healthcare industry is enriching itself unconscionably, helping itself to workers’ hard-earned money without providing anything meaningful in return, it is worth remembering that other countries that provide a commensurable standard of health care only spend about 10 percent of GDP in doing so (eg, Canada, France, Japan and the UK).

On average, what is spent per year per American on health care is about $8,500 (in fact the real figure is much higher because quite a large number of US citizens are priced out of the market altogether). Japan, which provides universal health care, spends about $2,700 per Japanese and her citizens live much longer than Americans!

In other words, on average, every American man, woman and child is handing over $5,800 to the healthcare industry without receiving the slightest benefit in return. Nice work if you can get it!

Clearly, if the cost of health care could be reduced to Japanese levels – and bearing in mind that through Medicare (government payment of health care for the elderly) and Medicaid (government payment of health care for some of the poor), the government already foots almost half of US medical bills – reform would pay for itself.

Obama, however, is taking an extremely timid approach in this respect. He is not advocating the free universal scheme that operates in Canada (where private medicine is outlawed), or even anything akin to the British National Health Service (which co-exists which private medicine). He is merely proposing subsidising the health insurance of those who could not otherwise afford it and making health insurance compulsory for all US citizens.

However, without dealing with the ‘Spanish practices’ of the healthcare industry, it has been estimated that the effect would be to increase the percentage of US GDP spent on health care to as much as 25 percent, while still not dealing with the problem of unsatisfactory levels of cover.

Furthermore, as it is proposed that the employers should be required to meet the cost of adequately insuring their staff, many businesses, especially small businesses who can only survive by cutting corners, would be landed with payment of large medical insurance premiums, which would quickly bankrupt them.

A New York Times editorial of 13 August stated that: “There is no question that the cost of coverage – which currently averages about $5,000 per individual or $13,000 per family – or paying fines – could take a substantial bite out of the profits of some firms, forcing them to accept lower earnings, reduce wages, shed some jobs or raise prices.

One government estimate suggests that 39,000 firms (out of a total of six million small and large employers in the country) would have to start providing benefits or pay a penalty, and another 240,000 that do provide benefits would have to increase their subsidy levels. The penalties for not offering coverage could be relatively small ($750 per worker … ) or quite substantial (reaching an estimated $2,800 per worker for some firms … ) [on current proposals].” (The money raised from penalties would be used to provide Medicaid cover to a greatly expanded eligible population.)

Therefore, Obama needs a strategy for lowering the cost of medical care, and specifically the portion of that cost that provides no benefit. Some of the factors that should be addressed are:

(a) That it is the recipients of insurance monies who determine how much the insurers should pay for the medical attention that has been provided and, indeed, what medical attention should be provided. Clearly there is a huge temptation on the part of healthcare providers to inflate their bills and to recommend treatments and diagnostic tests that are only marginally requisite, if at all – and it is a temptation into which they as a matter of course only too happily fall.


This has been graphically illustrated by the experience of Medicare: “In the early 1980s, Congress changed the way Medicare paid hospitals so that payments would no longer be based on costs incurred. Instead, hospitals would receive a predetermined amount per admission, based on the patient’s primary problem. This encouraged shorter stays, led to fewer diagnostic services and reduced administrative costs. The Congressional Budget Office predicted that, from 1983 to 1986, this change would slow Medicare hospital spending (which had been rising much faster than the rate of inflation) by $10bn, and that by 1986 total spending would be $60bn. Actual spending in 1986 was $49 billion …” (‘Congress’s health care numbers don’t add up’ by John R Gabel, New York Times, 25 August 2009)

It seems that not only did this system reduce unnecessary diagnostic tests; it even reduced unnecessary hospital admissions.

This approach, though it has obvious practical advantages, is easy to attack because it does not look at each individual patient’s needs, providing to the opponents of reform much ammunition in the form of ‘special cases’ that for one reason or another cannot be adequately treated under this one-size-fits-all approach.

In this context, the opposition are beating drums complaining that clinical decisions are being taken by faceless and unaccountable bureaucrats who, besides being unqualified to make such decisions, never meet the patients whose lives their decisions affect. The proposal “has been wrongly portrayed as an effort by government bureaucrats to dictate ‘cookbook’ medicine that will prevent doctors from doing what’s best for their patients and lead to rationing of care”. (Editorial, New York Times, 2 August 2009)

This kind of emotive appeal is capable of influencing some people against the reforms, provided that they forget that this is a cheap and effective way of lowering the cost of health care to a more affordable level, so that for every ‘special case’ there are hundreds of people receiving care who would not otherwise have been able to afford it.

In fact, some $1.1bn is destined precisely towards assessing what should be the cost of treating each and every kind of ailment so that the appropriate course of treatment and its cost can be pre-determined.

None of that expenditure would be necessary if Obama could even begin to think outside the box of primary reliance on private insurance. If the government simply provided hospitals and medical personnel with an obligation to treat all comers to the best of their ability, as is the case in Canada, it would be quite unnecessary to put a price on the various ailments or to set up an expensive study to ascertain what that price should be.

(c) The private insurance provided by a myriad of different insurance companies, all having different terms and conditions, excesses and restrictions, gives rise to mountains of paperwork, to the extent that it requires every doctor to have one full-time, or close to full-time, employee just to deal with it!


Again, it is insistence of continuing the system’s reliance on private insurance that is pushing up costs to astronomic levels.

Obama, however, is not contemplating an end to this primary reliance on private insurance, at least not for the present. What he was envisaging as being the way to “slow the growth of health care spending” (he is not openly admitting that this spending should be drastically reduced!) was to set up a government-run health plan (ie, insurance scheme, much like National Insurance in the UK, except that it would not cover people with private insurance). This would compete with private insurers at very competitive rates because it would be non-profit making and, in addition, would have the clout to negotiate lower prices for providing health care from the various hospitals and doctors.

Even at present, the government-run Medicare scheme (which only benefits, however, a small fraction of the needy) generally pays 80 percent of private sector rates. However, the opposition to the government health plan on this point reached the greatest fever pitch of hysteria, because the big multinational private insurers stood to lose a lot of money.

Insurance companies are most fearful of facing competition from a government-controlled plan. “Republicans argue that a public plan would invariably drive private insurers out of business and prompt employers to drop private coverage, pushing people who are already insured onto a plan run by the government.” (‘“Public option” in health plan may be dropped’ by Sheryl Gay Stolberg, New York Times, 18 August 2009)

This is obviously correct. Private insurers would lose customers to any cheaper government scheme and would therefore need to scale back, although they would still have a place, as they do in the UK for instance, in providing those willing to pay with more privileged access than would be provided by the government scheme, enabling them to circumvent whatever price guidelines the government may have determined as appropriate for the particular ailments that affect their clients.

In the face of the screaming opposition of certain of the powerful healthcare multinationals to facing competition from a cheap government scheme, Obama has, it would now seem (as of mid-September), been forced to compromise on this point in favour of non-profit cooperative insurance schemes, although the latter would not have the bargaining power vis-à-vis healthcare providers that a government plan would have had.

It would seem that one of the main objectives of the reform has failed in the early stages of the race. Apparently, this was the only way Obama could get enough support to prevent his universal insurance legislation being sabotaged by a filibuster, since for this purpose he needed to be certain of having at least 60 votes. But the Democratic Caucus, following the death of Senator Edward Kennedy, has only 59 and therefore needs at least one Republican to vote with it.

In fact, not all the Democrats agree with the public option either. The general US public, however, certainly appreciates the need for an ‘affordable’ government scheme to be put in place. “When presented with the option of a government-administered health insurance plan similar to Medicare to compete with private health insurance companies, 72 percent are in favour and just 20 percent oppose. Even 50 percent of Republicans favour that option. ” (CBS News Online, op cit)

Without achieving the drastic cuts that would bring the cost of health care in America down to the level per person that is paid in other rich countries, then the estimated $1tr over 10 years has to be found from somewhere.

What Obama proposed is that this money should at least in part be paid for by surtaxes on the 5 percent richest, ie, an extra 1 percent on incomes over $250,000 a year and 5.4 percent (ie, 45 percent) on incomes over $1m a year. The effective tax rate, including the 2.9 percent Medicare payroll tax and state and local income taxes would be 57 percent in the highest-tax states (Oregon, Hawaii, New Jersey, New York and California). There would also be extra taxes on ‘cadillac’ medical insurance policies, and on corporations that benefit from the expansion of health care.

Opponents to the new healthcare proposals constitute a formidable force in terms of power and influence, albeit in no way are they a majority of the population. Obviously, they include most of the 5 percent richest – the rich are not noted for their generosity towards the poor, even though paying higher taxes would make very little impact on their overall wealth and lifestyle. They include the private insurers, as well as hospitals and doctors who are minting it under the present system.

The drug companies, however, appear to have been won over to the new scheme, bearing in mind that what they lose on being required to sell their medications at a lower price is likely to be more than made up for by giving millions of people access to their drugs who never enjoyed such access before. The pharmaceuticals lobby has secured the resignation of Dick Armey (a former House Republican leader) from his job with the lobbying firm DLA Piper, which represents pharmaceutical interests, because of his commitment to the opposition that includes chairmanship of FreedomWorks. In fact, they are spending some $150m on advertisements to support Obama’s reforms.

It would seem that attempts to win over the insurance industry had failed, at least as long as the public option was on the table. Hospitals and doctors, who may lose out as a result of ‘rationing’ to cut out the multitude of unnecessary tests that are a feature of American health care (since they can merrily be charged up to the patient’s insurance), could be brought round by arguments similar to those that have persuaded the drug companies. Yes, you will lose your lucrative unnecessary or over-the-top treatments, but look at the number of new patients you will acquire!

The opponents of reform are, however, continuing to use every means possible to mobilise against it. They are taking a leaf out of the velvet revolution cookbook to mobilise what can be portrayed by the media as mass support, and are prepared to use not only misleading emotive demagogy but even strong-arm tactics:

According to the New York Times of 4 August, the opposition (mainly represented by Republican politicians and such lobbies as FreedomWorks and Americans for Prosperity) “are harnessing social networking websites to organise their supporters … They have called for mobs to pack the halls where Democrats are endeavouring to explain the government proposals to the audience, making it impossible for them to put forward their point of view.

Ian Urbina reported: “‘Become part of the mob!’ said a banner posted Friday on the website of the talkshow host Sean Hannity. ‘Attend an Obama Care Townhall near you!’ The exhortations do not advocate violence, but some urge opponents to be disruptive.

‘Pack the hall’, said a strategy memo circulated by the website Tea Party Patriots that instructed ‘Yell out and challenge the Rep’s statements early.’

‘Get him off his prepared script and agenda,’ the memo continued. ‘Stand up and shout and sit right back down.’” (‘Beyond Beltway, health debate turns hostile’, New York Times, 8 August 2009)

The protests are getting outsize coverage on cable news.

Typical of the misleading demagogy the opposition is trying to spread is the spurious ‘Death Panel’ rumour circulating concerning the proposals to assess an appropriate level of payment for each ailment, which, it is alleged, “would create a bureaucracy to ‘monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective’”.

This is an emotive approach to dealing with what are necessarily difficult decisions in allocating resources (or ‘rationing’ treatments, in the emotive language of the opposition) where these are finite, as is always the case. If there is only one kidney available for transplant, do you give it to the 60-year old professor or the 20-year old unemployed bricklayer?

How easy to deal with these ethical issues when the kidney simply goes to the one who pays the most. “Whenever demand for some resource outstrips supply, as seems to be the case for quality medical care, some form of rationing, whether by official policy or economic advantage starts to operate.” (‘In debate over health policy, some words are never spoken by Peter Steinfels, 15 August 2009)

How much more difficult it is to have an ‘official policy’, rather than leaving the whole thing to ‘economic advantage’! Where the matter is to be determined by ‘official policy’, there is a need for a ‘bureaucracy’ to lay down guidelines to help in making these otherwise impossible decisions as fair as is possible. To help the process further, there was a proposal that Medicare should be authorised to finance patients’ consultations with professionals “on whether to authorise aggressive and potentially life-saving interventions later in life”.

In other words, the patients themselves were to be consulted as to what extent they wanted to receive treatment when it was unlikely to lengthen or improve the quality of their lives to any significant degree. This was equated to government-sponsored forced euthanasia, even though the proposal was for such consultations to be purely voluntary.

The Washington Times, a newspaper owned by the anti-communist ‘Unification Church’ of Sun Myung Moon, the ‘Moonies’, ran an editorial reminding its readers of the “Aktion T4 programme of Nazi Germany in which ‘children and adults with disabilities, and anyone anywhere in the Third Reich was subject to execution who was blind, deaf, senile, retarded or had any significant neurological condition’.” All this hysteria has led to the proposal being dropped.

Cuts proposed to the Medicare budget (intended to be offset by reduced treatment costs) have alienated the elderly, who have been frightened into thinking that the quality of care on offer to them is to be reduced.

The opposition frequently invokes the principle that appears to be permanently etched on the American soul of the superiority of the ‘free market’, and the ‘freedom of choice’, which has supposedly delivered in America ‘the best healthcare in the world’.

A US philosopher, Daniel Callahan, has pointed out one of the absurdities of the notion of ‘freedom of choice’ being an important factor in healthcare: “Mr Callahan, 79, had just returned from hospital … Days earlier, he had undergone a life-saving seven-hour heart procedure. He chuckled at the idea that when the emergency arose, lightheaded and knowing his life could be in danger, he might have exercised ‘consumer choice and ‘shopped around’ for a better deal than the medical centre his cardiologist recommended.

Furthermore, “Three years ago, he [Daniel Callahan] and Angela A Wasunna published ‘Medicine and the market’ (John Hopkins University Press). Brimming with findings from more than two dozen nations, the book makes a formidable case that the frequent invocation of market solutions rests much more on ideology than on empirical outcomes.” (Peter Steinfels, ibid)

The belief that the US has the world’s best health care under its exclusively private ‘no expense spared’ system is ludicrous. “The emptiness of those claims became apparent recently when researchers from the Urban Institute released a report analysing studies that have compared the clinical effectiveness and quality of care in the United States with the care dispensed in other advanced nations. They found a mixed bag, with the United States doing better in some areas, like cancer care, and worse in others, like preventing deaths from treatable and preventable conditions …

Contrary to what one hears in political discourse, the bulk of the research comparing the United States and Canada [which does have a system of public health care] found a higher quality of care in our northern neighbour. Canadians, for example, have longer survival times while undergoing renal dialysis and after a kidney transplant. Of 10 studies comparing the care given to a broad range of patients suffering from a diverse group of ailments, five favoured Canada, three yielded mixed results, and only two favoured the United States.” (Editorial, ‘World’s best health care’, 26 August 2009)

The New York Times does not mention that Cuba, whose per capita spending on health care is a tenth of the US’s, being free from capitalist bloodsuckers, is able to deliver a service to the people that has comparable results. This is despite an economic blockade that prevents Cuba acquiring some of the modern technology and new drugs that rich imperialist countries have developed.

Socialist countries such as Cuba are able to deliver effective health care very cheaply because they are not paying a tax in the form of profits for the corporations that supply the commodities needed in medicine – drugs, instruments, furniture, cleaning services, computer services, legal services, accountancy services, and so on. Nor are they forced, as in the UK for instance, to pay astronomic rents to property companies for use of hospital premises, interest to finance houses and banks on loans to acquire such premises, or the high administration costs of operating in a market system.

And staff employed by socialist health systems also cost less, because the provision of their material and cultural needs is likewise not subjected to the payment of tribute to the capitalist class. Often they live in premises that are almost rent-free and they have free education and medical provision, so that they can live very well on what appear to those of us who are exploited under capitalism to be very low wages. They certainly don’t have to find $13,000 a year to provide themselves and their families with reasonable levels of health insurance!

Whether the Obama reforms are effected or not, and, indeed, the degree to which they are even further watered down, is now dependent on political lobbying and horse trading.

It is ironic that the same ultra-conservatives who are fighting against universalisation of health care tend to be prominent among the ‘right to life’ anti-abortionists. For them, the ‘right to life’ ends at birth. What American proletarians need, however, is a ‘right to life’ that begins at birth! However, that is not something that is easily secured unless and until profiteering is removed from the healthcare equation.