By Dave Lindorff
When it comes to reforming America’s disastrous health care “system,” there are two issues that need to be considered: access and cost.
The so-called reform proposals being offered by the Obama White House, the House and the Senate, are failing on both counts, and deserve to die.
No progressives should allow themselves to be suckered into promoting one or the other.
Here’s the problem. As long as the health insurance industry is permitted to be the primary paymaster, the cost of medical care will continue to soar, not least because the insurance industry is so concerned about minimizing its own outlays that it is forcing the system to devote nearly 30% of every health care dollar spent to administrative costs (compared to 3-4 percent for Medicare, and even less for single-payer systems like Canada’s). That’s true whether there is a so-called “public option” government-run health insurance plan or not. Note that 30 percent of America’s $2.5-trillion health care bill per year is $750 billion a year, a sum which does absolutely nothing to make a single person more healthy or less ill. Even if one were to assume that the lion’s share of those administrative expenses were only for the private funded portion of America’s health care system, and for Medicare, the state-run but partly federally-funded portion that is famous for its paperwork mess, and the uninsured, who also consume a lot of paperwork when they do get treated at hospitals under mandated free-care provisions of at the expense of local governments, we’d be talking about 30% of $1.5 trillion, or about $450 billion going to administrative costs every year—still a staggering sum.
Medicare, the health program for the elderly and the disabled, and Medicaid, the federally and state-funded program that funds medical care for the poor, together cost some $850 billion a year. Add to that the $150 billion that hospitals and local governments spend annually to cover the uninsured poor who don’t qualify for Medicaid, and the $50 billion the federal government spends for veterans’ care. That’s just over $1 trillion in government spending to cover the health care of roughly half the population of the United States.
The rest of us—working people and our families—rely on private insurance, some of it paid for by employers, some by us, either as our share of the cost of company plans (growing every year), or as the deductible and co-pay portions of our medical bills. That privately funded medical care costs us about $1.5 trillion a year—50% more than the government spends on the medical care for a roughly equal number of people. If you do the math, it turns out that we who rely on the private sector are spending about $10,000 per person per year on health care, either directly out of our own pockets, or in the form of money our employers are paying into insurance plans for us—money that could otherwise be coming to us in the form of higher wages or lower-priced goods.
What this means is that right off the bat, if the politicians in Washington were to simply thumb their noses at the insurance industry, and at the greedy docs and drug companies who are paying millions in legal bribes to protect their stake in the lucrative medical game, and if they were to extended Medicare to all of us, we could immediately eliminate $500 billion from the nation’s collective medical bill, because that’s how much more cheaply Medicare, Medicaid and the VA are able to treat patients than the private sector. But the savings would be far more than that. The cost of treating the uninsured--$150 billion a year—would be dramatically reduced, because it is currently almost entirely for emergency care at hospitals, the most expensive possible way to deliver medical care. My guess is that at least $100 billion would be saved simply by switching all those people over to Medicare, so they could walk into a doctor’s office for treatment instead of into an ER. The VA, with its separate government-owned hospital system, would become largely redundant if all veterans were simply treatable under Medicare, which would probably save a considerable portion of that $50 billion-per-year expense. Furthermore, by switching private-pay patients over to Medicare, most of the $450 billion a year currently wasted on administrative costs would be eliminated—a savings of perhaps $3-400 billion a year. While some of that would be reflected in the cost differential between privately financed and Medicare financed care, most is not. The main reason Medicare’s per-patient cost for care is much lower than for private pay patients (who, remember, are younger and healthier on average than Medicare patients, and so should be cheaper to treat, not more expensive), is that Medicare sets out payment schedules for doctors and hospitals, and negotiates payments for medicines—all at much lower levels than do private insurers, who often just set reimbursement rates, and let their insured patients cover the difference out of pocket.
Taking all these savings together, it’s a good guess, I would say, that by simply expanding Medicare to cover all Americans without exception, the nation as a whole could save upwards of $900 billion on its current $2.5 trillion annual medical bill.
Now that’s not to say such a change wouldn’t involve a tax increase. The current publicly funded share of that $2.5 trillion bill is about $1 trillion, when you add together federal, state and local outlays, all funded by the taxpayer. An expanded Medicare that covered everyone would, by my reckoning, cost about $1.4 trillion, once all the costs were added, and the savings implemented, including lowered payments to doctors, hospitals and drug companies. So we’d have to cover an extra $400 billion a year through tax increases.
But remember, there would be no more local revenues going to pay for uninsured care at local hospitals, no more state taxes going to pay for Medicaid for medical care for the poor, no more out-of-pocket payments by families for co-pays and deductibles, or for employee share of insurance premiums. And companies would no longer be paying anything for employee health insurance. The net gain to the average person would be enormous.
That’s the point that the medical industry lobby conveniently ignores. It’s a point also conveniently ignored by the politicians they’ve bought in Washington and the White House, who only talk about the increased taxes that a single-payer government takeover of health care finance would entail.
And, to get back to the beginning of this article, there would no longer be an issue of Americans going without access to medical care. Everyone would be on Medicare. And not one of the costly “reform” proposals being pushed through Congress today can say that. Every proposed “reform” plan leaves millions uninsured.
Note too that, under basic Medicare (as long as you don’t get suckered into one of those HMO rip-offs like Humana and other insurance firms advertise), everyone gets to choose his or her own doctor and hospital. There is no gatekeeper system—another bugaboo raised by the health industry lobbyists.
With a universalization of Medicare, at one fell swoop, America would have a single-payer system—one that its elderly citizens already have, and by all accounts are very satisfied with—and one that would be substantially cheaper than what we have now.