Diagnosis of a Failing Medical System

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Few would dispute the assertion that the United States
health care system is in deep crisis. Health care spending
for 2001 was more than $1.4 trillion, or 14.1% of the GDP.
This comes to spending per person of $4,631, compared to
an average of $1,983 per person in other industrial
nations. Premiums for employer-sponsored health insurance
plans are currently rising more than 10% per year.
And data just released from the Census Bureau reveal that
43.6 million persons—one out of seven in the population—
were uninsured in 2002; indeed the number of
uninsured increased by 2.4 million from 2001 to 2002.
In a recent survey aired on NPR one in five Americans
thought health care was one of the two most important
issues to be addressed by the government—only the economy
and war were mentioned more frequently. Furthermore,
at least half of respondents expressed concern about
their ability to afford health care or the adequacy of their
current insurance coverage. With the 2004 presidential
campaign now getting underway, candidates will soon be
vying for public support for their various plans for health
care reform. Typically, however, such plans are characterized
by technical or vague language. In order to facilitate
public discussion, simple explanations of the various
issues at stake are badly needed.
In addition to having the most expensive health care
system in the world, the United States remains the only
major developed nation not to offer some form of universal
health coverage for all its citizens. The reasons for this
are complex and include both residual cold war fears
about “communism” and business interests. These interests
are extensive, since 56% of health care spending in the
United States is privatized. This number is approximately
twice that of most other developed nations.
The lack of health care insurance is a serious problem,
particularly for the poor. Those earning less than $28,256
for a family of three (known technically as “200% of the
federal poverty level”) make up the majority of the uninsured.
The situation is even more desperate in rural areas;
in a few states, such as Maine and Montana, over 70% of
the uninsured are from rural areas. Since the majority of
health insurance in the United States is provided through
programs offered by employers, a popular stereotype of
the poor is that they do not have insurance because they
do not work. In reality, however, only 18% of uninsured
persons do not work—in fact, 70% have at least one fulltime
worker per family.
More typically, especially in rural areas, uninsured persons
are likely to be employed by small companies that do
not offer health insurance plans. And the crisis is even
extending to those who work for companies that do provide
insurance. For instance, work-based health care premiums
rose 14% last year. This means that the average
employee is expected to contribute $2,400 per year to their
insurance premium, a number which could easily be 10 or
20% of a poor family’s annual income. As evidence of the
scope of this problem of affordability, a report released
just this month shows that the number of employees of
large companies—which have traditionally had the best
rates of insurance coverage—who lack insurance
increased by 7% in recent years.
Founded in 1965, Medicare became the second major
piece of health insurance legislation in the country after
worker’s compensation. Currently,Medicare provides limited
coverage for 35 million elderly adults over the age of
65 and 6 million permanently disabled younger adults.
Medicare has two parts. The first (“Part A”) covers
acute care, such as illnesses requiring hospitalization,
is automatic for all eligible citizens—generally
meaning those over 65 years of age—and is entirely
paid for by Social Security. The second (“Part
B”) covers non-acute care, such as office visits and
health screening procedures, and is paid for in
part by high co-payments. There are many
health care needs that are not met by either part
of Medicare, and so many individuals also purchase
some form of supplemental insurance
(known cleverly as MediGap insurance),
which may include continuing to buy into
work-based plans. Since at least 40% of those
who receive Medicare benefits subsist near
the poverty level, these co-payments and
supplemental programs often pose significant
financial difficulty. For instance, outof-
pocket health expenses for individuals
on Medicare averaged
$3,757 in 2002—a number
which may easily
represent more
than 20% of
the annual
income of
the poorest
among them.
One specific item not covered by
Medicare that has received a great deal of attention in
recent years is the cost of outpatient prescription drugs. In
1999, 40% of the elderly were unable to afford “MediGap”
insurance and, therefore, had no prescription drug coverage.
Prescription drug spending is currently the fastestgrowing
component of the health care system—for
instance, in 2001, drug costs increased 16%, compared to
an 8% increase for hospital expenses. Many factors have
contributed to the rapid growth of this problem, including
rising manufacturing costs, increasing use of expensive
patented drugs, and the complicated health problems
of the elderly which often require them to take many
drugs at the same time. The bottom line is that Medicare
recipients are under ever greater financial pressure, and
their average personal spending for drugs has increased
50% in the last three years.
Under pressure from the Bush administration, Congress
is currently attempting to draft some form of
Medicare reform legislation to improve prescription drug
coverage. Although draft measures for $400 billion in
assistance over 10 years were passed in both House and
Senate in June, significant differences exist between the
two plans, and so it remains to be seen whether this legislation
will be implemented anytime soon. However, some
general observations can be made.
First, and most importantly, both plans would not
expand current traditional Medicare coverage. Rather,
they would create an expanded role for private insurance
firms in the Medicare population. Individuals on
Medicare would be encouraged to drop their enrollment
in traditional Medicare and, with limited financial assistance
from the federal government, purchase instead a
comprehensive private plan with prescription drug coverage.
Those who chose to remain within the traditional
Medicare structure would have the option of purchasing
the drug plan as a stand-alone option. In real terms, however,
this second option means that many individuals
would be simultaneously enrolled in three plans—
Medicare, a “MediGap” program, and also a drug plan.
This is a confusing arrangement designed to encourage
a switch to a private plan. Also, the stand-alone drug
plan would be partially paid for by increased co-payments
for other traditionally affordable Medicare
services such as home care.
The likely result of such a “market-based
reform” of Medicare would be that wealthy individuals
and those with relatively good health
(who would be offered lower premiums by private
companies) would move toward private
plans. Only the sickest and poorest individuals
would be “stuck” in the traditional Medicare
program. The House version of the plan calls
for a cap on government contributions to
Medicare to take effect in 2010. This
means that the vulnerable clients still
enrolled in traditional
Medicare would face
steadily increasing
e n t s .
this reform is
being billed as a
consumer- f riendl y
option which allows patients
more flexibility, bargaining power
in the private market would really be
restricted to the wealthy and the healthy. The longterm
outcome may be to limit participation in and undermine
the viability of traditional Medicare.
In addition to these market reform provisions, both
House and Senate versions of the legislation do provide
some additional direct drug benefits for the poorest individuals.
However, both allow critical gaps in these benefits.
For instance, the House plan would provide financial
assistance for drug costs up to $2000, but no assistance for
costs between $2000 and a “catastrophic” limit of about
$5000. Because of this the financial assistance percentage
for an individual with $4000 in drug costs would be less
than for someone with $2000.Another alarming feature of
both plans is that they require individuals to submit to
asset-testing to determine poverty level in order to be eligible;
until now, the great strength of MedMEDICAID
Enacted as companion legislation to Medicare,Medicaid
is the largest public health program in the nation
with more than $200 billion in annual spending. Currently,
it finances health care for nearly 50 million individuals.
In order to qualify for Medicaid, individuals
must meet financial criteria, meaning that all individuals
on Medicaid are among the very poor. It is the only form
of health insurance available for one in four children and
also many low-income parents. Additionally, it covers the
health care needs of more than 60% of nursing home
patients.Medicaid functions as a state-administered program
that is partially funded from federal sources, and it
generally ranks after education as the second-largest state
budget item.
Medicaid and the supplementary State Children’s
Health Insurance Program (SCHIP) serve as a critical
safety-net for low income families. For instance,
although work-based insurance coverage has been
decreasing in recent years, they have been able partially to
offset this crisis. In 2002, the uninsured population grew
by 2.4 million, but this number would have been much
worse had not Medicaid maintained the coverage of children
from affected families and also added 1.6 million
poor parents to the program.
Because Medicaid is a state-administered program,
the current nation-wide state budget crises are alarming.
In 2002, average state income fell by 5.6%—the first
decrease in recent years. Consequently, although demand
for Medicaid services increased 13% over the same period,
all states have had to impose “cost-containment
strategies” such as controlling drug costs and freezing
payments to participating physicians. Additionally, over
thirty states have had to restrict eligibility, reduce benefits,
or increase co-payments.
Although the crisis and inefficiency of the United
State’s health care system is readily apparent to any critical
observer, it is difficult to pinpoint any single factor as
the primary culprit. Consequently, any solution will need
to address many issues and carefully thought out. Only
one Democratic presidential candidate, Dennis Kucinich,
has elaborated a cogent universal health care platform.
Such a universal single-payer plan—that is, an entirely
publicly-funded system which covers everyone—is often
advanced as a progressive way to solve the nation’s health
care woes.However, this type of broad reform is opposed
by the majority of Americans, and, in light of the heavy
investment of private capital in health care, it is difficult
to envision its implementation in the near future.
Historically, universal plans have emerged in other
countries only slowly or in response to financial instability
in the private sector. In Canada, for instance, the
national program began as a proof-of-concept program
in the single province of Saskatchewan in 1947; this was
followed by nationalization of hospital care in 1957 and
physician services in 1971. In Great Britain, a national
program emerged as a response to a post-war financial
crisis among private hospitals.
In our view, therefore, a national health plan in the
United States is not yet a viable option because the necessary
grass roots organizing has not occurred, nor is the
financial situation of the private health care market dire
enough. However, individuals and community groups
can still promote health care change in significant ways.
First, through letter-writing and other more cohesive
lobbying efforts, they can advocate at the state level for
pilot health care projects and incremental near-universal
coverage programs. For instance, state governments
could be prompted to expand the eligibility and reduce
the restrictiveness of financial criteria for Medicaid and
SCHIP. Additionally, nearly all states sponsor other small
health care initiatives—such as vaccination clinics, drug
assistance programs, and child and pregnancy welfare
programs—which might be expanded.
Secondly, since a critical limiting factor for reform is
the lack of public interest or awareness, groups can begin
to initiate dialogue in their communities about efficiency,
innovation, and the universal right to health care.
Such efforts should also strive to increase the dialogue
between physicians and patients and to view physicians,
nurses, hospitals, and other professionals as potential
allies in the fight to improve health care. As evidence that
such measures can have perceptible effects, initiation of
public discourse and moderate health care reform in Vermont,
under the tenure of Governor Howard Dean, succeeded
in extending health care eligibility to 99% and
enrollment to 96% of the population.
Blind optimism in the ability of the market to reform
health care spending should be treated with a healthy
dose of skepticism. Although rhetoric about the efficiency
of private insurance is regularly touted by the current
administration, the facts are to the contrary. In 2002, the
United States spent $112 billion on health administration
costs. The administrative costs of private insurers averaged
12% of total spending—on the other hand, publicly
administered programs like Medicare averaged only
4.6%.What’s more, the administrative costs of the United
States’ largely privatized health care system is 6 times
that of Canada’s nationalized system.
Another major strategic approach to health care
reform is to reduce the profitability of medical industrial
enterprises. For instance, in 2001 the average profit margin
for pharmaceutical companies was 18.5%, compared
to 3.3% for all Fortune 500 firms. At the same time,
direct-to-consumer marketing expenditures by pharmaceutical
companies has nearly doubled since 1996, indicating
that this is an expanding market. Community
groups, therefore, can lend their support to innovative
measures to reduce this profit. As just one example, Governor
Blagojevich’s recent call for the FDA to allow the
state of Illinois to purchase all their drugs from the Canadian
market—where the same drugs often sell for half
the price—is an interesting development.
Finally, it must be emphasized that the push for better
health care is not just about policy, legislation, and community
dialogue. It is also, proverbially, a matter of
“putting one’s money where one’s mouth is”. Champaign-
Urbana has many excellent community- and charity-
based organizations working hard to address the special
needs of the homeless, migrant workers, the elderly,
ethnic minorities, and other at-risk populations. These
programs include the Crisis Nursery Center, the Francis
Nelson Health Clinic, the Greater Champaign AIDS, Project,
A Woman’s Place, El Centro por los Trabajadores,
The Center for Women in Transition, and the St. Jude
Catholic Worker House, to name just a few. Nearly all of
these organizations are chronically under-staffed and
under-funded. Champaign-Urbana citizens can make an
immediate difference for the health of our community by
volunterring weekly at or donating money to these and
other like organizations.

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