Death Wish: The Politics of American Healthcare

Bernie wanted a single payer system: Medicare for All.  Hillary wants to tinker with Obamacare in a slow transition to God knows what.  Trump wants voters, but has no plan.  But Ryan does and his plan is to keep alive the part of Obamacare that everyone likes (no pre-existing conditions), but to separate the sick voters who want things he doesn’t think they deserve from those young healthy voters who might go Red in the future.

As for the electorate, like the American girls in the Rolling Stones song, they “want everything in the world that you can possibly imagine”.  Some for just themselves and some for everybody.

Sorry.  Nobody is going anywhere.  Bernie was right about single payer, but it’s not enough to just get elected.  One must also rule.  President Bernie would never have been able to lift that rock, for reasons I shall go into.  Hillary knows she has to rule, so in her usual cunning fashion she is setting the bar as low as possible for herself right at the start.  And Trump/Ryan are looking for a neutron bomb that will kill all the really sick people and leave a core of friendly voters and all the businesses standing.

What would we need to do to fix things and why can’t we do it?  Read below.  And weep.  I’ll try to keep this one simple.

 

 

One of the pluses of growing up in a radically dysfunctional family, as I did, is that everybody gets to blame everything on everyone else and everyone has a good point.

Each separate part of the American healthcare system is dysfunctional.  We can look at this as a series of knots in the shoelaces of a beautiful shoe; the most beautiful shoe of all the shoes in the world, except that it is encrusted with 112 pounds of shit and also happens to be on fire.  We need to take it off to clean it and put the fire out, but we need to untie each and every knot.  So I am going to lay out what the knots are and why America does not have the political will to untie them.

Knot #1

More than half of the American population is covered by insurance provided by where they work.  While co-pays and co-insurance have been going up across the board, most people are relatively satisfied with what they have.  So much so, that eliminating this for what is presented by the opposition as an experiment scares the hell out of them.

The knot here, though, are the businesses.  They would like to get out of the insurance business very badly.  One of the secrets of Obamacare was that some on the Right have been tacitly supporting it, thinking that should Obamacare work in the long run, business could transition workers to it via some sort of support or lump sum payment.

But business is torn.  While there are many businesses who don’t want to pay any direct benefits at all (as we have seen a large increase in “contract workers” and consultants), healthcare is a part of the “total compensation package” and part of the price of hiring in a country where people expect it to be provided.  Business can accept that.  What they can’t accept is paying annual premium increases as the cost of medical care rises faster than the rate of inflation in general.  They have been able to pass much of these increases to their workers so far in the form of increased co-pays, co-insurance, and deductibles, telling the workers that it is more beneficial to them to “have more skin in the game” etc.  But they are finding it very hard to keep up.  Since wages have been staying pretty flat, the health benefit is both cutting into base wages and cutting into profits.

The political problem around this knot is to figure out what would happen to premiums if the United States switched to a single payer system.  Contrary to what the panic mongers claim, there is plenty of money floating around in the healthcare system to pay for this.  But what of the premiums?  A single payer system would be by definition tax supported.  So who pays the tax?  Would businesses pay it instead of paying the premiums?  Or would businesses increase the salaries of their workers who themselves would use the increase to pay the increased taxes?  And who would absorb the annual increase in healthcare costs?  If businesses had to pay the tax and cover the annual increases, they would be in the same boat they are in right now.  But would the workers be willing to pay for the increases?  Would they demand higher wages from business to do so?  (One wonders how, since wages have been flat to begin with for so many years).   This knot cannot be untied, without some kind of control on overall medical costs, which happens to be the second knot.

Knot #2

The second knot is what we call the “providers”. A single payer system based on any sort of Medicare for All structure would put all providers on a single national fee schedule. When people talk about this, they tend to talk about the current Medicare fee schedule. This would not be a major problem to a small subset of all providers—those who are already mostly getting paid by Medicare, those who are mostly paid by Medicaid, and that small subset of that endangered species called the independent physician. But it would be a big, big problem for the hospitals, outpatient facilities, and drug companies. Especially the hospitals. First, for a number a reasons, some of them good, Medicare now only reimburses about 98 percent of charges. Second, the reimbursement rates for Medicaid, even in fat states, is even lower. Third, the reimbursement for charity care (and there is quite a bit of this) is shaky and undependable. So private insurers make up for all of this by charging commercial insurance companies whatever they can get away with, which is generally about 135 to 145 percent of costs in order to both make up the difference and (for both profits and non-profits) make a profit. (Note that I am not saying that the lower government reimbursement rates are what is responsible for this differential). As high as this markup is, the payers mark up their “retail” prices up to 1,000 percent of costs. (This is why, if you have insurance, the difference between what you are charged and what you and the insurance company pays looks so strange). This much-higher-than-costs thing actually constitutes a hidden tax on all commercial customers. But we pay it, first because most people don’t know about it, and second because we don’t call it a tax.

Of course, we would sort of like the providers to make a profit of some sort because we want them to be able to pay for brand new, cutting edge stuff. And providers want to make profits both in order to expand and to gobble up their competitors or fend off being dropped lower in the food chain themsleves. (The “not for profit” provider is a myth).

This is a very tricky knot. For one thing, no one wants to reveal what their actual costs are. (What capitalist business ever does?) For another, revelations about costs (as we have seen recently with all the heat that pharmaceutical companies have been getting) almost invariably lead to even more difficult questions like “why are costs so high” and worse, “what is the role of quality in all of these costs”? Sad to say, but we could never move to a simple Medicare fee schedule in the current structure.  Never. The entire American medical system rests on the general public not knowing anything concrete or systematic about costs and quality, so we can’t even begin to have the discussion, which is why we don’t really see any meaningful debates about cost controls (that don’t end up as a discussion about fat people). Only one group has this information in any usable form. And they are the third knot.

Knot #3

The insurance companies are hated by everyone and blamed for everything. After all, from the business/worker point of view, it is insurance companies that increase premiums. From the provider point of view, it is insurance companies that burden them with paperwork and constantly try to get them to lower the reimbursements they get. As a person working in the insurance business, I never liked having to prevaricate whenever I was asked where I worked, especially if asked by a chatty physician about to give me an injection. But over time, I have come to believe that this hatred is actually part of the business model of health insurance. Part of the job of the insurance company is to hide the fact that it is the business who purchases the health plan for their workers and to hide the cost and quality of the providers. (I’ll note here that insurance companies have been trying to make available cost and quality information to the public, or at least their public. But they have a problem, in that to really do this, they would have to reveal the provider’s own cost structure and the insurer's own discount structure for the provider, both of which are considered proprietary. The information you get is what the insurance company wants to give you while protecting these things).

Insurance companies look like they are unnecessary middlemen, tacking on a fat 20 percent to premiums for pure administration and paying ridiculous salaries to their higher-level executives. There are many who believe that we should simply eliminate them altogether and just pay our providers directly (which the providers would love, given how they bill). But they are actually one of the knots that could not be untied unless all the other knots are untied simultaneously.

Insurance companies manage thousands and thousands of separate contracts with thousands of providers, all of whom want to be paid in a way that benefits them personally, whether it is consistent with how other providers are being paid or not. While the main business of the insurance company is to sell discounted services to the providers, they do other things to try to keep down costs. For one thing, since they have all the quality, cost and utilization data, they actually use this data to try to get the providers to maintain consistent treatments and to not mark up costs in the many ways that they are prone to do. And given that providers mark up their costs and try to push the markups into the commercial market (which they actually have to do under our current dysfunctional system), it is the insurance companies that have to create a composite risk calculation from these thousands of wholesale price points to create a single base premium level. Since insurance companies have all the quality data, they also try to steer their members to the best providers. They do this for a profit reason. The best providers are probably the least expensive in the long run because they don’t screw up as much.

If this knot were to be eliminated, these things (and others) would have to be taken up by someone else. CMS does some of it, but not as well as the insurance companies, for the possibly obvious reason that greedy free market insurance companies are going to be more innovative and detailed at looking at greedy providers than the government will. I’m not arguing here that insurance companies cannot and should not be eliminated. But I am saying that this is a knot that would have to be cut at exactly the same time as all the others.

But of course, there’s a fourth knot.

Knot #4

The fourth knot is the person getting the insurance. This is the most complicated knot of all, for in order to break it, we would have to decide as a nation 1) what we want insurance to cover, 2) what would be reasonable for out-of-pocket expenses, 3) who should pay for it all, 4) what things should we eliminate tax support for if we need to and, 5) what should we do about the hundreds of thousands of workers who would be displaced if we cut the other three knots?

Knot #4 is the hardest knot of all, because each of the five things above represents a place where the electorate can be split and fragmented by politicians. For number 1, we might assume that everyone wants everything covered, but this in fact is not true. First of all, number 1 is where politicians and others try to break up the population into different buckets of need. Single payer would lump everything together, but people in fact don’t want to pay for services they won’t receive. And many of them especially don’t want to pay for services they can’t possibly receive. Men don’t want to give money to cover pregnancy (if they are single or are old). The young don’t want to pay for the elderly. People who don’t need medications don’t want to pay for medications. The current Republican plan would bracket out the sick themselves into their own pool so the well would not have to pay for them. Also, there is a great deal of controversy over whether routine or primary services should be covered by insurance at all. Which lead to number 2: Should the whole population be on the hook for annual physicals or for some kid’s earache? Why should people pay nothing at all? Even if medical care is a right, it is still also a consumer good. Some people choose to go to a doctor who actually don’t need to. Should they be covered for that? On the other hand, if the basic stuff is not covered out of the gate, if people are not encouraged to get those physicals or if price makes them put off treatments for things that should be treated early, everything that would be covered (the expensive stuff) gets more expensive. Which leads us to number 3: If we cover everything, who is going to pay for it? Right now, those people with insurance think that they are just paying for themselves. When they find out that all along they have been paying for everyone else, would they tolerate that?  Would they want their premiums converted into a tax? Would business? And if we did not do the tremendously complicated task of converting all of the different ways that we pay for healthcare now into a single tax, should that tax prove insufficient in the beginning, what would we do. This leads to number 4. Would we raise taxes? Would we eliminate things from the current budget? Cut defense? Corporate subsidies? Individual subsidies? This would feed into all kinds of current political fissures.  And finally, there is number 5. What would the country do about the sudden mass layoffs that would occur when the insurance companies, much of the clerical staffs of the providers, much of the business staffs of the HR departments, and all the insurance brokers? Because all of these knots would have to be cut at the same moment. Think about it.

I am a proponent of single payer myself. Single payer would reduce our national business costs, reduce human suffering in the United States, and, if coupled with rigorous cost and quality measures (and what true market does not measure cost and quality) would improve the quality of healthcare in this country. I have tried to argue here that “tinkering” with any of the knots will not fix anything at all. They are all bound together. I present this case, not to tell you that reform is impossible. I am trying to tell you that it would be very hard. And to even begin the discussion, we really have to not only understand each knot, but how they all fit together.

Each knot, and each part of each knot, represents a place where a politician can split the electorate. Each knot, in public, blames the other knots. Each knot, when they claim to support reform, would like every knot but themselves to change. But to really change, we would have to address them all. And I fear that we are not a mature enough society do to this.

unagidon is a contributing editor to Commonweal.

Please email comments to letters@commonwealmagazine.org and join the conversation on our Facebook page.

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