The Health Care Battle Lines   

Tikkun Magazine, July/August 2009

OP-ED

The Health Care Battle Lines

by Aaron M. Roland

One morning last spring I reached a watershed in my determined fight for health care finance reform. I was in the middle of a typical clinic, when I met with an old patient of mine whom I had not seen for about two years. Sione Tukuafu (name changed to protect privacy) is a Tongan man whom I had come to know as we attempted to deal with his diabetes and its complications. In the years I had known him, his illness had never been under control. He had been hospitalized repeatedly for diabetic complications, including once for a particularly terrifying fungal infection of the eye that leaves most victims blind. Even the pain and fear provoked by this hospitalization failed to result in better control of his diabetes. So you can imagine my surprise when testing done in advance of his visit showed his diabetes finally under control!

"What happened?" I asked, incredulous. As it turned out, the reason why I had not seen Mr. Tukuafu for some time was that he had been in his native country for an extended visit. Thus his matter-of-fact response: "Health care in Tonga is free."

In the United States, despite my exhortations and Mr. Tukuafu's own experience of the complications of diabetes, the economic barriers created by co-pays and deductibles had led him habitually to fail to properly care for his illness. The irony that the tiny island nation of Tonga, with few natural resources and little industry, could provide Mr. Tukuafu with free medical care that allowed him to control his diabetes for the first time in years, while in this rich country he was unable to control his disease, has become an icon for me in my battle to enact fundamental health care reform.

In recent weeks, especially, with public hearings beginning in the United States Senate and with President Barack Obama's "Organizing for America" encouraging citizens to gather support for health care reform, the terms of the debate are beginning to become clear. Yet there is great confusion, even among supporters of fundamental health care reform, about the alternatives and issues involved.

Single-Payer Reform

The starting point for most progressives, the gold standard for health care reform, is what has been called single-payer reform. Essentially, this describes a transformation in the financing of health care so that funds are collected from taxes instead of from a mixture of individually paid and employer-underwritten insurance premiums, co-payments, and deductibles, and payment is provided by a single entity. In many respects, proposals for a single-payer system resemble Medicare, but most envision the elimination of the 20 percent co-payment that Medicare requires. Most would be fully funded by taxes rather than through a mixture of taxes and individual contributions. These measures are embodied in the following bills: HR 676 (the leading piece of legislation, introduced by Rep. John Conyers), HR 1200 (sponsored by Rep. Jim McDermott), and S 703 (introduced by Sen. Bernie Sanders).

A single-payer program has special appeal because it would add little or nothing to our nation's overall health care expenses while providing truly universal care. Although taxes and direct government spending would go up, this would be more than offset by a drop in business and personal expenditures because of the elimination of the administrative waste inherent in our existing balkanized health care delivery system. Savings would appear immediately from the elimination of advertising, marketing, exorbitant executive compensation ($124 million for United Health Care's CEO in 2004), "product" development, and duplicative corporate bureaucracies.

Beyond the savings from elimination of this corporate waste, a single payer plan would save billions by streamlining the interactions of providers with the insurance system. As highlighted in the academic journal "Health Affairs," a recent Robert Wood Johnson Foundation study revealed that doctors waste between $23 billion and $31 billion annually while interacting with various health plans, a cost that would be sharply reduced if providers could interact with only a single payer.

The savings go further still: with a comprehensive national health program in place, there would be no need for Medicare, Medicaid, SCHIP, FEHBP, CHAMPUS, or other categorical health care programs. With the medical component no longer needed, costs of other types of insurance (auto, homeowners, workers' compensation, malpractice, etc.) would decrease; the scope of corporate human resources operations would diminish; and a central component of labor relations conflict would be resolved.

The Reality of Health Care Politics

Whether because of inertia, the pull of corporate lobbyists and their corrupting money, or a philosophical belief that the private insurance industry should be part of our national landscape, all the leading plans to reform our health care system include a prominent role for an ongoing private insurance industry. Although there are several pieces of legislation in the Congress that would bring about a single-payer health finance system, political support is thin. The leading bill in the House, HR 676, has never had more than ninety-three co-sponsors, while the Senate incarnation, S 703, has not a single one.

So far, most of the focus on health care legislation has been in the Senate. As the co-sponsorship totals noted above indicate, the Senate is crafting more conservative pieces of legislation, which are being debated in the Senate's finance and health committees, chaired by Sen. Max Baucus and Sen. Ted Kennedy, respectively.

Differences Without Distinction

Although spoken of as if there were substantial differences, the health care reform proposals being discussed by Obama, by Baucus' committee, and even by Senator Kennedy are, so far, very similar and not all that far-reaching. All maintain the existence of the insurance industry and indeed call for enlargement of its role through various measures, ranging from incentives to provide employment-based coverage, to an individual mandate to buy insurance. All simplify the offerings that insurers may sell. All eliminate "pre-existing conditions" limitations on purchasing insurance, although they do allow for rate variations by age, the ultimate pre-existing condition. Nearly all (disturbingly, the bill offered by Senator Kennedy's health committee on June 9 lacks this element) envision some sort of government-run health insurance plan, a "public option," to serve as competition for the private insurance industry.

A "Public Option" is NOT "Single-Payer"

Great confusion in the health care debate has resulted from the conflation of the terms "public option" and "single-payer." The distinction is crucial, however. A single-payer plan is a program of publicly funded, truly universal, privately delivered health care that would be used by all residents of the country. It is essentially an improved Medicare for all. A "public option," however, has been envisioned as any of a number of publicly run health insurance alternatives that would exist side by side with private health insurance options. Some have proposed that the government set up an insurance company that would operate just like any other, a straw man of a "public option" that would have nothing to recommend it over the private alternatives. On the other hand, Rep. Pete Stark (with a mere three co-sponsors) has proposed HR 193, The Americare Health Act, which would create a universally available, beefed-up Medicare program that would enroll all Americans automatically, yet would allow those who prefer a private insurance plan to choose that instead. Although these reforms would open up access to health care for some who lack it now, most would fail to begin to control the explosion of health care costs, and those (like my patient Mr. Tukuafu) who are buried in the "incidental" costs of co-pays and deductibles most likely will not benefit.

A Progressive Public Option

Chiming in on the options within the public option, the Congressional Progressive Caucus -- which had seventy-five members at last count, twenty more than the more well-known conservative Blue Dog Coalition -- recently released its criteria for evaluating a public option. The language of its pronouncement is coded with allusions to the variations in other proposals and must be parsed carefully to understand the issues involved. A guide to understanding this is outlined below:

Minimal criteria for a meaningful public option (I have boldfaced those I consider especially important) must include:

• Enactment concurrent with other significant expansions of coverage; the enactment must not be conditioned on private industry actions.

There has been discussion of creating a public option that only would come into play (i.e., be "triggered") after a set time period, perhaps seven years, and then only if the private health insurance system has failed to prove that it can provide improved coverage at a reduced cost. This would pointlessly postpone repair of what we already know is a failed private health care system.

• Creation of one entity, operated by the federal government, that sets policies and bears the risk for paying medical claims to keep administrative costs low and provide a higher standard of care.

Some have proposed that the public option be farmed out to states to run on an individual basis. This would result in greater administrative costs and subject the development of individual state programs to the lobbying prowess of the insurance industry operating against the institutionally weak structures of state legislatures and bureaucracy.

• Availability to all individuals and employers across the nation without limitation.

Efforts to weaken the public option also include a proposed rule that it be available only if a private option is not available.

• Ability to structure the provider rates to promote quality care, primary care, prevention, chronic care management, and good public health.

Recognizing the failure of private insurance reimbursement practices to promote the provision of more cost-effective primary care, this is an allusion to the need for such measures in a public option.

• Use of the existing infrastructure of successful public programs such as Medicare in order to maintain transparency and consumer protections for administering processes including payment systems, claims, and appeals.

Operating within the efficient existing structure of Medicare would help ensure both that administrative practices of the public option remain equally lean (Medicare's administrative overhead runs at 3 percent vs. private insurers' 16-45 percent) and would provide a framework for scaling up a public option into a single-payer program, should the continued failure of the private insurance system seem evident.

• Establishment or negotiation of rates with pharmaceutical companies, durable medical equipment providers, and other providers to achieve the lowest prices for consumers.

A fundamental strength of a single-payer or of a major public option is that it could develop monopsony power -- the power to control the prices it pays for the services it requires.

• Assurance of a level of subsidy and support that is no less than that received by private plans.

Describing their amendments as "a level playing field," or as "self-sustaining," many opponents of real reform have tried to kneecap public option proposals by arguing that the program should be required to operate without public subsidies. What this really means is that such an option would be "pre-crippled" to avoid real competition with the private, for-profit insurance industry.

By allowing private insurance companies to take tax deductions for advertising and marketing, for example, and by allowing employers to deduct the expense of providing health insurance, the government provides a huge subsidy for the private insurance industry. It is ludicrous to argue that a public plan should be required to compete without a similar level of subsidy. (More on this below, where I discuss the employer tax deduction for health insurance expenses.)

• Guarantee that premiums must be priced at the lowest levels possible, not tied to the rates of private insurance plans.

Competition should be competition.

The Employer Tax Deduction

In his campaign for the presidency, candidate Obama clashed with Sen. John McCain over the question of the employer deduction for health insurance expenses. This deduction, the largest single deduction in terms of revenue loss to the government ($246 billion annually!), was fought for by organized labor as a way of easing negotiations for employer-provided health benefits. Unfortunately, this benefit is counterproductive. It is terribly regressive, with the benefits accruing more to taxpayers in higher brackets than to those in lower brackets. Those who buy insurance as individuals, who are without insurance, or who depend upon a government program for their health benefits get nothing from this deduction, yet their taxes help support it. Were even a small portion of this deduction eliminated, perhaps phasing it out progressively beginning with employees who earn more than $100,000 annually, it would go a long way toward supporting a meaningful public option.

The political lesson here is clear. Progressives might find votes for a real public option if they were to abandon slavish devotion to the employer tax deduction and instead focus on providing a real public option in the health care reform legislation.

The Bottom Line for Progressives

The case for a single-payer health program is abundantly clear to anyone who is paying attention to the issue. President Obama himself has on several occasions said, "If I were designing a system from scratch, I would probably go ahead with a single-payer system." In private conversations that I have had with congressional representatives who are not on record as supporting single-payer reform, with leaders of the health care industry, and even with executives in the health insurance business, I have heard Obama's sentiment echoed time and again.

Nevertheless, as the lack of co-sponsors for Senator Sanders's S 703 so clearly illustrates, we aren't going to get a single-payer plan passed any time soon. So what do we do?

First, we need to make sure that all reform options, including a single-payer option (see how the confusion between "single-payer" and "public option" has arisen?) get a fair hearing. Single-payer advocates and academics in health care finance and research must be included in all hearings from now on. And there must be a complete, honest, side-by-side comparison of all major proposals, including HR 676, the most prominent single-payer bill, by the Congressional Budget Office. The side-by-side comparison must include projected costs now and into the future, not only to the federal government, but also to state governments, employers, and individuals and households of different income levels.

As the conservative economist Milton Friedman wrote:

It is worth discussing radical changes, not in the expectation that they will be adopted promptly but for two other reasons. One is to construct an ideal goal, so that incremental changes can be judged by whether they move the institutional structure toward or away from that ideal. The other reason is very different. It is so that if a crisis requiring or facilitating radical change does arise, alternatives will be available that have been carefully developed and fully explored.

Next, failing to get single-payer reform enacted, we need to ensure that any legislation includes a strong, robust public option, one which is designed in such a way that it can fairly compete, not as just another insurance company, but as a public option, with the private insurance industry.

Finally, we need to make it clear that we do not view even the watered-down "minimums" of the House Progressive Caucus as representative of what we believe is truly needed in health care finance reform. We need to make sure that when a health reform bill is passed, Americans know what they are getting and what they are not getting. We need to ensure that the likely failure of the Obama/Baucus/Kennedy plan five or ten years from now, a failure occasioned by continued dependence on a deeply inadequate private heath insurance system, can't be misrepresented as a failure of the progressive transformation of the health care system.

Throughout this process we need to remember that we are in a battle to ensure that all Americans -- like my patient, Mr. Tukuafu -- are able to get the health care they need in a manner that they can afford. Universal coverage, affordability, incorporation of "best practice" models of heath care delivery, evidence -- based medicine, enhanced primary care, and transparency in its operation must be at the center of any reform.

Moving from Yale Law School and legislative politics to a career as a family physician, Dr. Roland's twenty years on the front lines of medicine has led him back to political advocacy. Follow him on Twitter @doctoraaron.