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Why Are We Confused about Healthcare?

By       Message Doug Rogers     Permalink
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"The American people are too often offered two extremes - government-run health care with higher taxes or letting the insurance companies operate without rules. Barack Obama and Joe Biden believe both of these extremes are wrong"  


This is the introduction on the official Barack Obama website, to the Democratic candidate's summary of his healthcare initiative.  What does it tell us about the way the debate about healthcare reform is moving in this country?  Are Americans being offered two extremes?  Is either of these two views necessarily wrong?

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We certainly have knowledge of the second of these two propositions.  The health insurance industry is one of the most powerful special interest groups in the country.  Every year they spend tens of millions of dollars to lobby lawmakers to maintain the status quo in our healthcare system.  In the past, they have been tremendously successful at scuttling any significant reforms.  In comparison to the rest of the industrialized world, it can be said that they operate without rules.

The list of criticisms of this status quo is extensive and damning.  Forty-two percent of adults in this country are either uninsured or underinsured.  We rank at or near the bottom of every measure of health among industrialized nations.  The price of healthcare rises at about 10% a year, doubling every seven and a half years.  We spend 16% of our GDP on health costs, generally twice as much as other developed nations.  Eighteen thousand people die every year because of the lack of health insurance.  Fifty to a hundred thousand die each year because of medical errors.  Yet, $2.1 trillion is wasted each year on unnecessary tests, treatments, hospitalizations, over-priced drugs, or end of life care with no discernable purpose.

This is certainly one extreme.  But what of the other extreme?  Have we, too, often been offered government-run health care with higher taxes?  Probably not that you've heard much about.  In fact, something similar to this idea has been offered in a bill before Congress by Representative John Conyers of Michigan--though it hasn't received much attention from the mainstream media.  It's called HR 676 and it has the backing of 91 members of the House including former presidential candidate Dennis Kucinich and current candidates Ralph Nader and Cynthia McKinney.  It can be characterized as an expanded Medicare for all.  The delivery of health care would remain under the private control of doctors, hospitals and other professionals, but the financing of that healthcare would be paid by a single government-run insurance fund, or single-payer.

It is also a direct confrontation of the entrenched power of the health insurance industry.  By putting the function of these private entities into public hands, it would create significant savings in a system where at present nearly a third of each healthcare dollar goes to administrative costs, advertising, promotions, lobbying, CEO salaries and profits.  By comparison traditional Medicare spends about 3% on administrative costs.  The savings of a single payer system would be more than $350 billion annually.

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Barack Obama and Joe Biden believe that this is wrong.

Here's where the confusion comes in.  The promotional group that is pushing for HR 676, Conyers' single-payer plan, is called Healthcare Now.  This might ring a bell in some people's minds but maybe not for the reasons that it should.  Healthcare Now has been around since 2004.  They have limited funds which they have received from individuals, unions and faith-based organizations and they are up against the multi-million dollar annual lobbying budget of the healthcare industry.

Over this past summer, a new group has emerged with half a million dollars in seed money, an impressive list of backers and plenty of press that is pushing a very different plan.  They have called themselves Health Care for America Now.  So far HCAN, as it is known for short, has not returned repeated phone calls to explain who is funding them and why they decided on a name that was bound to cloud the truth about their intentions.  Thousands, if not millions, of people have now jumped on board the highly visible HCAN campaign, confusing it with Healthcare Now, believing that it is an effort to bring about a single payer system.

Instead of advocating a specific solution for healthcare reform, such as HR 676, HCAN is pushing for a general policy goal--"quality, affordable health care we all can count on."  It would appear, from its backers in the mainstream of the Democratic Party, that its purpose is to lay the groundwork for Barack Obama's push for healthcare reform early in his administration.  What, then, is this middle way and how does it affect the progressive agenda on health care?

The Obama plan has many laudable goals and there is no reason to think that there would be a lack of sincerity in its implementation.  It would offer a tax credit for individuals to pay for health insurance as well as one for small businesses.  Government would relieve business of part of the burden of catastrophic health costs.  Health coverage would continue to be at the discretion of employers but there would be a tax on companies that did not offer it.  There would be a National Health Insurance Exchange that would offer different plans and encourage competition.  All plans would be required to cover pre-existing conditions.

As well-meaning as these initiatives are, the Obama plan has one fundamental drawback.  It keeps the private health insurance companies in control of our system and facilitates the transfer of tax dollars into private hands.  There would be little savings from the one quarter to one third of total expenses now being eaten up by the insurance industry.  Instead it relies on a patchwork of cost control measures. 

It would also fail to address the fundamental component that is necessary to fix the problem--instead of creating the widest possible risk pool (every citizen in the nation), it keeps risk pools divided and vulnerable to market predation.  The cardinal rule of competitive health insurance is to keep as many rich healthy people on your roles as possible while avoiding the sick and the poor.  This dictum will not change in the new system.  By keeping the poor separate and dependent on special government funding they will always be at the mercy of conservative attacks on social spending.  Insurance coverage should also not be confused with actual healthcare.  A special fund for the poor and discount policies for the middle class will do nothing to reduce the disparity in quality of service.

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As has been widely noted, the Obama plan is nearly identical to the plan put forward by Hillary Clinton in her campaign this year.  To understand the roots of the HCAN/Obama agenda, it is perhaps most informative to trace the evolution of Hillary Clinton's perspective.  Famously, she led the effort in 1994 to develop a comprehensive revision of the United States healthcare system.  That effort failed for different reasons but significantly because of the raw power of the insurance lobby to influence public opinion.

The lessons that she came away with I'm sure are quite nuanced, but in terms of her changes in policy goals it could be summed up as:  give them what they want.  By 2006, the NY Times was reporting that Clinton was now working closely with the Health Insurance Association of America and was receiving significant financial support from them.  This support has translated over to Barack Obama and to the Democratic Party as a whole.  After years of giving twice as much to the Republicans, the health care industry, notably the insurance lobby, now favor the Democrats and their plans.

The ideological foundation for the middle way on health care comes from a close advisor from the Clinton administration and now an advisor to Obama, David Osborne.  He is a former member of the conservative Democratic Leadership Council, the author of Reinventing Government, and an advocate for streamlining government through mixed public and private solutions.  His prescription for controlling skyrocketing healthcare costs is to foster competition between private plans that utilize the model of capitation, which means paying doctors a flat fee for treating a fixed number of patients whether they are sick or well.  His criticism of single payer is that it still relies on the fee-for-service model which distorts financial incentives causing more needless services that earn more money for the provider.

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Doug Rogers is a composer and playwright and for many years designed ladies' sweaters. He is now a student again at Empire State College in Buffalo NY.

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