Clinton's Failing Health Plan
— Milton Fisk
THE DEBATE ON health care reform presents an opportunity that shouldn't be squandered. With much at stake, it is vital to use the opportunity to mobilize for a single payer alternative to Clinton' managed competition. Not only would managed competition have expensive corporate medicine as its legacy. But also it is of a piece with Clinton's neoliberal agenda for deficit reduction, labor law reform and NAFTA. The common threat is competition, privatization and cuts.
Defeating Clinton's health plan in favor of a single payer plan would be setback for this neoliberal offensive against working people. The opportunity can easily be missed. The press and the White House are trying hard to get us to miss it. They are billing the debate as one between a variety of special interests versus the courageous Clinton team, with it insistence on financing employee's health care by an employer mandate and on putting a cap on the rate at which health insurance premiums can rise.
Financially imperiled small busines is concerned that the employer mandate, even as reduced to make it more palatable, will mean bankruptcy. Insurers large and small complain that the premium cap will squeeze profits, making it harder for them to—get this!—raise capital to invest in innovations in health care.
But these are sideshows, intended tc distract us from the opportunity the debate creates of moving toward genuine reform. The beefs against the Clinton plan raised by small business, private insurers, drug companies and doctors get full coverage. Yet it is considered dangerous to mention single payer as an alternafive, since it would win hands down on all points in a debate with Clinton's managed competition.
The issue should not be the balance sheets of thousands of businesses or the drug manufacturers' fears that Washington would put a cap on drug prices, but the health needs of 250 million people in this country. Are these needs best served by Clinton's pro-corporate health reform plan, or by a single payer plan that does away with private health insurers?
His program would accelerate the creation of large health care corporations that, like many Health Maintenance Organizations (HMOs) today, combine the roles of providers and insurers. Forty-two percent of all HMOs are already owned by insurers. The large health care corporations created as a result of Clinton's plan would be topheavy with administrators, would skimp on providing services and would have the power to resist efforts to hold in check what they charge consumers. All this collides with serving peoples' health needs.
Behind Clinton's Plan
Why does Clinton favor competition and corporations? In health care, both have a disastrous track record. Competition between HMOs has shown no tendency to slow the pace of health car inflation. Despite the high percentage of people in Minnesota enrolled in HMOs health care spending there rose 10.5% annually between 1980-91, roughly the national average. In California, with a even greater percent in HMOs, spending has risen much faster than the national average. (Yet around the nation in the past year the scare of imminent government regulation has led HMOs to marginally moderate their greed.)
The growth in the number of HMOs has produced, as a palpable side effect, an administrative cancer on the health care system. In the 1970s and 1980s, the number of health administrators grew sixfold while the number of physicians anc other clinical personnel doubled.
To counteract this poor record, there's got to be a strong underlying force driving the Clinton hype about competition and corporate medicine. There is such a force, and it is the neoliberal economy. It has two components, each having implications for the health care sector.
On the one hand, in the neoliberal economy there's a tendency toward greater market competition and a political commitment of the most powerful interests to promote it. A basis is sought for economic recovery through privatization, through financial barriers to welfare snd through avoiding increases in broad based taxes.
Thus the health care system is seen as needing reshaping to fit into the neoiberal economy. Specifically, continued hyperinflation in healthcare is diagnosed as due to structures that promote imperfect competition. The Clinton team wants to improve competition with large health care corporations that use cost conscious managers to pressure their providers to limit services. A business would then buy employees' insurance from the health care corporations charging the least while still claiming quality services.
On the other hand, there is a tendency in the neoliberal economy toward rapid concentration. Only big corporations can win out in a global economy. But even domestic corporations find themselves competing with the multinationals for capital and have to be large enough to expand markets and realize economies of scale.
Thus in health care the large corporate provider/insurers don't exist only in the dreams of the Clinton team. The neoliberal economy, with its tendency toward rapid concentration, has already made them a part of the health care economy. The prospect of Clinton's reform has recently accelerated this tendency of group practices, clinics and hospitals to dive under the broad blankets of corporate health care networks.
The major danger of the Clinton reform is that it will hasten the entrenchment of a system of large provider/insurers. It can't, then, be viewed as a first step to an eventual single payer system. Private insurers will be more difficult to eliminate once they have become integrated into national and regional health corporations.
The government estimates that if the Clinton plan is passed it will increase the amount of the GNP going to health care from the present 14% to 17.2% by 1997. A few large corporations controlling this much of the GNP would have enormous power with which to defend private health insurance, continuing to be a major factor in inflation and maldngclinical decisions.
The idea of managed competition is not completely new. It was proposed during the Nixon presidency, when neoliberalism was in its infancy. This was a way of countering a move by Senator Edward Kennedy, backed by the labor novement, to pass a single payer reform.
It was at the urging of physician Paul Ellwood, who much later was an oranizer of the Jackson Hole Group, that Nixon decided to promote the formation of HMOs. In addition, Nixon recommended an employer mandate for funding a scheme for universal coverage. Two decades later, with neoliberalism at full strength, a Democratic president is behind this Republican proposal.
The roots of single payer are different. They lie not in the imperative to save the private insurers but in the hardship and suffering of the greater part of the population. Since the Depression years, there has been an unanswered demand for reform to alleviate the economic burden of expensive health care and the misery due to its poor distribution.
People are afraid of losing their coverage if they change jobs, and people are denied costly care even when it is supposed to be covered by private plans or Medicaid. The outrage of employees, the disabled, the unemployed, and the retired provides the basic incentive for single payer proposals.
This was as true for the single payer proposals of Senator Wagner in 1943, President Truman in 1945, and Senator Kennedy in 1970 as it is for those of Senator Wellstone (S491) and Representative McDermott (HRI200) in 1993. The half-century effort to get single payer has been a battle over both control and distribution of health care. These proposals wouldn't have existed without political nourishment from working people.
With the advent of neoliberalism, today's battle for control is no longer mainly with the doctors, as it was in 1945, but with corporate provider/insurers. The best way to take control away from corporate medicine is to have it financed through broad-based progressive taxes and paid for by the government out of those taxes.
Of course, each of these single payer proposals has contained serious flaws. After all, each reflects pressures not only from below but also from the board rooms. McDermott's proposal in particular contains a concession that countenances for-profit HMOs. By controlling either global budgets of HMOs or their capitation fees the single payer should, in principle, be able to control the amount of profit. But once introduced, the profit motive would lead the HMOs to illicitly select only low-risk enrollees.
Single payer advocates need to urge the elimination of such concessions as incompatible with their goal of putting health costs under public control.
Managed competition puts hurdles in the path of the health care consumer. The net effect is the creation of a multi-tier system. Having the hurdles there is what Clinton means by everyone having to take some responsibility for their health care. Sadly, those with the least income have the heaviest responsibility, pushing them into the system's lowest tier. Under Clinton's plan:
• Twenty percent copayments, capped at $3000 for a family, are everyone's responsibility. Even the poor must pay them, without benefit of government subsidy. How is someone raising a family on $20,000 going to come up with the $2000 copayment for a $10,000 treatment for a sick child?
• If one sticks with a physician in private practice, there will be a $400 family deductible. This disincentive might lead one tojoin an HMO, for which there is no deductible but where there will be long waits and rushed services.
• There is also 20% coinsurance, but with subsidies available for the poor to help cover it. Still an employee earning $20,000 would have to pay $480 to get family coverage. The government subside would add another $360 in order to come up with the full amount of the employee's share of the premium.
• The employer is mandated to pay the remaining 80% of the premium. But there are two things to be kept in mind here. One is that it is not the employer but the insured who pays, through lowered wages or salary. The other is that the total premium for the poorly paid wage earner is the same as that for the highly paid salaried employee.
• Finally, to go beyond the basic package of health benefits calls for supplemental insurance. Fine; but the catch is that there would be no cap on premiums for this insurance, which would increase rapidly to make up for the cap on premiums for the basic package. In addition, benefits received under supplemental insurance would be taxed. What employers might pay toward the premiums would then be treated as taxable income.
High premiums and taxation are a barrier to low-income people getting this medigap insurance.
The aggregate effect of these five factors on those with low income is less healthcare. They will have less access due to prohibitive copayments; less choice due to deductibles for fee for service; less to pay for normal health needs with due directly to coinsurance and in directly to wage reductions brought on by the employer's mandate; and finally, less ability to buy expensive supplemental insurance.
A single payer system would, in contrast, be a system without the tiers implied by these five features.
Managed competition advocates have failed to convince the number crunchers that it leads to cost control. It doesn't take an expert to see why.
Large insurance purchasing alliances are the key to Clinton's plan for cost control. The states will set up these insurance purchasing alliances on a regional basis. People from a region will join its alliance through employers or individually. The goal is to have purchasing alliances sufficiently large to drive a hard bargain with providers of health care.
A purchasing alliance shops among providers for the cheapest of the various kinds of plans it will offer its members. A free-standing hospital together with a physicians' group practice won't be able to offer the volume or range of services that something the size of a regional purchasing alliance will need. So mergers and buyouts will take place, leading to the formation of large corporate health networks to service regional purchasing alliances.
The competition of these networks among themselves for the business of the purchasing alliances will drive costs down. Or so we are told! There are in fact a number of major factors here working against cost control.
(1) In sparsely populated areas the provider/insurers will have monopoly status, and in large urban areas they will constitute an oligopoly. In the absence of full competition among them, they have an economic advantage. Bargaining over premiums between them and the purchasing alliances will go in their favor.
(2) The very size of these provider/insurers will enhance their political clout as well. They will be able to stave off efforts by the government to set maximum premiums at levels that would control health care inflation. There will be premium creep. National and state health boards will function like regulatory agencies for these health corporations. But as with other regulatory agencies, they will not be neutral to the big corporations they supposedly regulate.
(3) Large administrative staffs will be employed by these corporations, both to expand their market shares and to keep their profits high by restricting the delivery of services. Further, a corporation will employ a large staff to do the work of showing it needs higher premiums in view of the allegedly higher health risk of its clients. Administrative growth will continue to outpace that of health professionals. Money that could serve health will go to chasing profits.
(4) Lastly, Clinton's plan separates the payer and the regulator. This is a grave mistake: We've known for some time that the traditional U.S. health care system can't control costs, due to having a third party payer. If the government needs to regulate the system, it can do this most effectively if it holds the purse strings. But in the Clinton plan, it is the insurance purchasing alliances that hold the purse strings, not the government.
It is worth elaborating on this last impediment to cost control. An alliance gets its funds from the employer mandate, from employee coinsurance payments, and from government subsidies for the indigent. It negotiates the premiums its members will pay through it for benefit packages offered by possibly a number of health care corporations.
The government's oversight function kicks in when it reviews these premiurns to see if they fall within the limits it has set for that health alliance. The weakness here is that what is being "reviewed" has the legitimacy of an accomplished fact—the premiums for the plans in an alliance's menu of plans are the outcome Of bargaining between the alliance and the health corporations.
Suppose the government says some of the premiums are excessive. Each of the bargaining parties will already have time and effort invested in coming to agree on those premiums. They will then insist to the government that the premiums are reasonable. Their case will be bolstered by their claims about risk assessment and other factors.
The government, as regulator but not payer, either accepts the reality on the ground, not requiring a return of funds from the provider/insurers with excessive premiums. Or for the next year, it accepts the higher premium, while requiring a return of funds for the current year. Costs will continue to rise.
Participation and Accountability
Accountability should be turned from slogan to a reality as a result of the reform debate. But it won't advance beyond a slogan under managed competition. There's no way a health care corporation, a national or a state health board, or an insurance purchasing alliance can be accountable without meaningful participation by consumers. There is no indication, though, that they will have more than token participation.
In contrast, single payer plans call for an increase in consumer participation in HMOs. More importantly, by emphasizing needs rather than profits, the single payer idea doesn't force consumers to abide by ground rules of profitability in order to function on health care boards at community, state, or federal levels.
Managed competition reverses the direction of such initiatives and blatantly charts a course of bureaucratic and corporate control of health care.
An insurance purchasing alliance, for example, will be made up of a heterogeneous collection of individuals and employers of a region in a state. (The employers will purchase health care for their employees through a purchasing alliance, though an employer with at least 5000 employees can, with negative consequences for its regional alliance, opt out and constitute itself as an alliance.)
The alliance could be organized by consumers to insure accountability to them. But one can predict that, as set up by a state government, it will easily be dominated by employers and by staff insurance experts, transplanted there from jobs they have lost due to the shakedown in private insurance.
Under this kind of leadership, the bargaining position of the alliance will put stress on getting the lowest possible premium rather than on quality of service. The lowest premium may well signal that the health corporation offering it is most adept in cutting corners. It avoids the right clinical decisions to save the expense of treatment. Hard bargaining for quality will be the exception, unless a consumer union organizes within the alliance to demand from its board the right to bargain with provider/insurers.
One might be tempted to support managed competition, as the AFL-CIO national leadership does, because it provides universal coverage. All the criticisms of managed competition might be granted. Still, as Clinton supporters point out, the number of the uninsured is swelling and the insecurity felt even by the insured is intensifying. What's the single payer advocates' response?
Rhetorically, it is that we single payer advocates have not been the spoilers. Clinton could have built a massive popular alliance for single payer, winning not just universality but cost control too. Instead he chose to back the corporate side of the health care industry. This led him to take the route of blackmail: either accept the neoliberal corporate plan for health care, or get nothing.
Furthermore, the labor unions could have strengthened the movement for single payer enough to win over those who have been swayed by this Clinton blackmail. With the exception of the leaders of a few valiant pro-single payer unions, like the Oil Chemical and Atomic Workers (OCAW), the union leadership must accept responsibility for the disaster that will result if managed competition passes. We will then have a health care system with the compassion of hotel magnet Leona Helmsley and the efficiency of the S&Ls.
Rhetoric aside, the balance sheet on Clinton's plan is negative. Under his plan, health care will continue to hog more of the GNP--3.2% more by 1997. This rise will deprive everyone: It will reduce production, strap education, let our cities continue to rot and neglect the public health infrastructure.
These deprivations will affect those with low income the most, continuing the neoliberal trend toward greater inequality. Ironically, the increment of inequality added by Clinton's health care reform will contribute to poor health. For it is well documented that those with the fewest material and cultural resources are the least healthy, whether they are covered by insurance or not.
There's an additional consideration: Defeating Clinton's plan now with a strong single payer movement may not even delay universal coverage. For if his plan passes, it would be years before there could be universal coverage!
Without a broad-based tax, there won't be enough coming from things like the sin tax and cuts in Medicare to fund universal coverage. And it is a fantasy to expect oligopolistic competition to provide enough savings to fund it.
Working for a single payer movement, instead of a corporate health care system, could get us universal coverage sooner and without all the sacrifices.
November-December 1993, ATC 47