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International Socialist Review Issue 38, November—December 2004

An Interview with Dr. David Himmelstein

The Simmering Health Care Crisis

THE UNITED States stands alone among forty industrialized nations in not providing universal health coverage to its people. Last year the ranks of the uninsured in the United States rose to forty-five million, while those with coverage saw premiums increase as much as 18 percent. NANCY WELCH spoke with DR. DAVID HIMMELSTEIN of Harvard Medical School and Physicians for a National Health Program about what’s driving the crisis in U.S. health care and why neither the Republicans nor the Democrats have the solution.

Nancy Welch is associate professor of English at the University of Vermont and writes frequently on women’s and labor issues for Socialist Worker.

WE’RE OFTEN told that health care in the United States is so expensive because Americans overuse their benefits or insist on the very best when it comes to care. Is it true that American consumers are the ones driving up the cost of health care?

AMERICANS DON’T actually get very much care by world standards. We don’t stay in the hospital more often or longer. In fact, on average, we have shorter stays than people in most other developed countries. We don’t visit the doctor more often than people in most other countries to which we compare ourselves. We don’t even get more of most kinds of high-technology care. The Japanese get many more MRI scans and CT scans and the same is true for many European nations as well. I’m not sure if more scans are a good thing or a bad thing, but it’s clear that you can’t explain our extraordinarily high health costs based on the amount of care that Americans get, because Japanese spend about half as much per capita as we do and they get quite comparable levels of high technology care—and the same is true for most European nations and, in fact, Canada.

We do have some overinvestment in high-technology facilities. That drives our costs up a little bit. So, for instance, we almost certainly do more MRI scans than are ideal for our population. We almost certainly do more surgical procedures, at least for some parts of our population—for wealthy people—than are good for them. But that’s almost certainly not what’s driving the cost.

WHAT’S DRIVING up the cost of health care?

THE FUNDAMENTAL cause of the high cost of health care in the U.S. is the deranged structure of the health care system, which is driven by the need to realize profit by a narrow range of corporate interests. It’s the bureaucracy to enforce inequality and extract profits that drives up costs the most, and then to a lesser extent the profits themselves. There’s something like $50 billion a year in profit extracted by the health care industry, and that’s only about one-sixth as much as the bureaucratic costs of actually extracting that profit. In fact, we spend each year about $320 billion or $340 billion on useless bureaucratic paperwork in order to apportion the right to health care according to ability to pay, enforce inequality in care, and enforce the collection of profit by insurance companies, for-profit hospitals, the drug industry—a whole panoply of players. The system serves corporate interests more broadly, too. If you’re unemployed, you have less right to health care. If you’re on strike, you have less right to health care. So the for-profit system serves the narrowest interests—"yes, we have to make a profit selling drugs or devices or operating this hospital or operating this HMO"—and it also serves a broader agenda of controlling the workforce.

IN THE early 1990s Bill Clinton ran on a promise of expanding health care and lowering costs. We wound up with rationed care and skyrocketing costs. What happened?

CLINTON ACTUALLY rejected a straightforward national health insurance system in favor of a system that would have virtually required every American, except for very upper-class people, to enroll in corporate-dominated HMOs. He didn’t think he could take on the HMO industry. I say that not only on speculation, but based on meeting with Mrs. Clinton. When I presented the case for national health insurance to her, she said to me, "Can you name any force capable of taking on the $300 billion a year HMO and insurance industry? You make a convincing case but where’s the power to do that?" When I said, "How about the president of the United States leading a crusade of the American people?" she asked me for something real.

So I think it was clear that Clinton made a political calculation in not championing national health insurance and in trying to strike a deal with the private insurance industry. The end result of the deal was two things: One is that the Democrats abandoned their four-decade-long commitment to national health insurance, so that by the time Al Gore ran for president, national health insurance was struck from the Democratic Party platform for the first time since the 1940s.

The second is that the Democrats endorsed "managed care" as a strategy for health care, which said to investors that investment in managed care was safe. It’s a very problematic field for investment because investors don’t own anything except a relationship between the patient and the health care system. They own nothing tangible—no useful buildings, very little in the way of useful equipment—so it’s potentially a very dangerous investment because the government could confiscate it and not have to pay anything for it—as opposed to a hospital which, under our constitution, the state would have to pay for.

So the Democrats guaranteed the safety of managed care investments. At that point the corporate interests as a whole delegated to the HMO industry the right to control the health care system. That constellation of factors stimulated what we saw during the mid— and late—1990s—an enormous growth of power of the HMOs and a reconfiguring of the health care system from a system dominated by small dispersed producers with local roots and local relationships to a highly centralized system dominated by corporate giants. Individual practitioners and lone local hospitals had virtually no place in the system and no place to go. Clinton, maybe inadvertently, gave the go-ahead for the corporate transformation of the health care system.

WHAT’S THE longer history of health care in the U.S.? Has it always been a big for-profit industry?

IN THE long sweep of things until relatively recently—let’s say until the 1970s—corporate interests mainly viewed health care as important for the maintenance of the working population and of social peace. Health care was not viewed in itself as an important profit-making opportunity. President Eliot at Harvard in the late nineteenth or early twentieth century made a statement that medical school was important for minimizing losses to diseases in farm animals and in industrial workers. So in the idea of health benefits for working people, there’s some element of needing to keep people fit for work and also some element of social pacification. Unions were organizing, and health care was seen as one way to deal with that social threat.

By the early 1960s, though, there were a couple of new developments. One development was you had for the first time, as longevity increased, a very large number of retirees from the industrial workforce who previously had health care and were now being denied it. They no longer had coverage from their jobs, and yet they had the greatest need for health care.

A second development was that for the first time health care had a substantial impact on outcomes. Until the mid—twentieth century we didn’t actually have much we could do other than provide someone with morphine and reassurance. But in the mid—twentieth century there was the development of antibiotics and a number of effective treatments resulting in a push for health care, particularly for the elderly.

From the Roosevelt period there’s also a push from the Left for national health insurance, which had become a right in other countries, starting with Germany in the late nineteenth century, and then Britain in the postwar period, and Canada. Medicare was passed as part of the expansion of social programs of the 1960s, really part and parcel of the anti-poverty program—with Medicaid tacked on as a way to prevent national health insurance from coming down the pike. Wilbur Mills, who was the chairman of the House Ways and Means Committee, was very explicit about this. He considered Medicare the opening wedge to national health insurance. While he was willing to go for retiree coverage—socially you can’t not do it and there’s too much power in retirees’ votes plus in the votes of working people who see where they’re headed—he didn’t want this expansion to turn into national health insurance.

IF NATIONAL health insurance wasn’t threatening a for-profit health industry because that industry didn’t yet exist, why the fear of a national health program?

IT WAS seen as important not to capitulate and go against that broader agenda of maintaining control over the workforce—through a lower standard for the unemployed, for the lowest income workers, for strikers. Wilbur Cohen at the Department of Health, Education and Welfare (HEW) wrote that Medicaid was born of the idea that you could address some of the most acute problems in a program that both segregates the poor and serves as a long-term block to national health insurance. In his memoirs he wrote that Wilbur Mills accepted this way of blocking national health insurance and was the powerbroker in the Congress to get it through. So the result was a tremendous expansion of health care coverage in the mid—1960s.

But one program, Medicare, took the form of a social insurance program for an entire population across the range of classes and income, while the other program, Medicaid, segregated the poor and set up a system of separate health care which has always been of lower quality, poorly paid, often not accepted by many physicians, and discouraged by many hospitals.

WHAT IMPACT did the new Medicaid program have on public hospitals already serving the poor?

WHERE TRADITIONALLY city hospitals hadn’t bothered with insurance and had taken care of low-income people, now, all of a sudden they began operating much like other hospitals, shifting the cost from the city to the state and federal governments. Some of their patients could go elsewhere as well, so you also find the public sector of hospital care being chipped away. You start to see the downsizing of public hospitals around the country, and the closing of some major public hospitals.

The only public hospital in Philadelphia closes. The public hospital in Oakland, California, goes from 600 beds to 200 beds. Cook County Hospital in Chicago goes from, I think, 1,800 beds to 700 beds, and Charity Hospital in New Orleans undergoes similar downsizing. Some of those patients go elsewhere but the most oppressed remain in the public sector, and from the 1960s onward both the Medicaid budget and public hospital subsidies have faced continuing assaults, with funding at any moment determined by how much mobilization there is to defend poor people versus how mobilized the Right is to attack the minimal rights that poor people have.

WHEN DO we start to see the rise of for-profit health care?

WITH MEDICARE particularly, and to a lesser extent Medicaid, you had a blank check written for the first time to very substantial elements of the health care system. Medicare adopted the Blue Cross model of payment, which was essentially—you bill it, we pay it. Hospital administrators from that era tell me they no longer kept a wish list of things they wanted to do because they could do them all, essentially at the public purse. So corporate interests began to see that there was considerable bonanza in equipment, supplies, and building hospitals. So initially, in the supplying of the health sector, we see the rise of profit interests—but later in two additional areas as well. First, there’s the direct provision of care, the emergence in the 1970s of for-profit hospitals and dialysis facilities. This movement was initially led in the hospital sector by—you know Senate Majority Leader Bill Frist, right?—the Frist family, whose model was Holiday Inn. One of the elder Frists had an army buddy who was a founder of the Holiday Inn chain, and he got some of the early ideas from there.

Second, there’s the concept that the insurance industry can make money in health care. Previously, Blue Cross was founded by the hospitals and Blue Shield by the surgeons to collect their payments more reliably, and both really acted in the interest of hospitals and surgeons for a generation. But in the 1960s into the 1970s, you have the emergence of insurance companies realizing that there’s considerable flow of money through the health insurance industry, and that it’s potentially a profitable industry as well. So you have for-profits beginning to go into insurance and also segmenting the market.

Segmenting is when a new insurer comes into an area and says, "We’re going to go to the University of Vermont faculty, which is a healthier than average group of people in the Burlington community, and offer them a lower rate than Blue Cross which is charging the average rate for the community as a whole." So through segmenting, insurance companies pick off low-cost segments, undercut existing insurers, and make a profit. That’s a practice that very quickly drove the market to emulate that behavior in order to stay in business and so we see the emergence of profit making throughout the system. As insurers began to say we’re going to exert power on our behalf and on behalf of our clients to control the system in our interests and their interests, the original creators of the insurance system in health care—the doctors and hospitals—began to see that their interests were actually being challenged. In order to counterattack, they began to form up into large corporate organizational structures themselves.

This brings us to the current picture, where you’ve got large groups of doctors in corporate organized forms battling with HMOs and insurance companies in large corporate forms, plus hospitals in chains and regional groups, whether they’re nominally nonprofit or for-profit. Each is a corporate actor trying to battle the other corporate actors—with the patients in the mix as the objects rather than the subjects of the system.

WON’T THE growth and entrenchment of those corporate powers make it more difficult for the U.S. to replace for-profit health care with a national insurance plan—more difficult than it was for Canada to shift to national health care in the early 1970s?

I THINK it’s true that we have a more difficult task than Canada has. The resistance will be stronger. On the other hand, our system is far more broken down than Canada’s was at the point where they instituted theirs, so the pressures here are far greater for change than was the case in Canada. I think it’s also true that corporate America has considerable divisions of interest in the health care system, and those divisions create some opportunities. For much of corporate America, health care is a cost of production and at this point a very high cost of production, so rationalizing that cost is a very strong interest. But to some extent that cost can be rationalized in the interest of control of the workforce and maintaining the traditional company doctor, who can collect a lot of information about workers. Employers are now screening for genetic problems in their workers. So control of the workforce is an important element of corporate interests.

THERE WAS a lot of controversy surrounding the Bush Medicare reform. Whose interests did that legislation serve?

THE DRUG industry is a huge beneficiary. They won big in getting through a structure that forbids the government from negotiating prices with them, minimizing price pressure. They also won big because there’s a huge infusion of new money for drugs under the program. The insurance industry won big because the new benefits will virtually all flow through the insurance companies. For them this is a huge new revenue source that’s collected by the government but out of which they’ll get their cut. HMOs got some $45 or $50 billion in new subsidies outside of the drug benefit, just to sweeten the pot for them. So those are the winners.

The program provides a tiny bit for seniors with very high drug costs, though it’s designed so that they could really get screwed as well. You have to choose a plan, and if you sign up with a plan in large part because it’s covering a particular drug you need, the plan at its discretion can stop covering that drug. For most seniors the plan does little or nothing. Also, the drug prices are going up at such a rate that if you say the program roughly would cover 25 percent of seniors’ drug costs, that 25 percent will already be eaten up by drug cost inflation by the time the program is implemented.

JOHN KERRY seems to be promising even less when it comes to health care than Bill Clinton did. Is that an accurate assessment, and, given that he’s also promising big military spending and a balanced budget, can he deliver any improvements in health care?

CLINTON PROMISED universal coverage. He obviously didn’t deliver it. Kerry has promised to cover two-thirds of the uninsured—that leaves seventeen million uninsured and tens of millions more with inadequate coverage—so the promise is clearly less than what Clinton ran on. Kerry is also offering nothing for those who currently have insurance—nothing to slow premium increases, nothing to address rising drug prices.

The biggest piece of the Kerry plan is a partial subsidy for low-income individuals to help them buy private insurance. What he’s saying is: We will use federal money to dump into the private insurance industry to pay part of your premium. So it’s a direct subsidy to the private insurance industry and an indirect subsidy to individuals. Kerry’s plan would actually boost bureaucracy, funneling hundreds of billions of additional public dollars into wasteful private plans—wasteful because for every dollar you spend on private insurance, you get 85 cents of care while for every dollar spent on Medicaid, you get 97 cents of care.

But it’s also speculative that the federal money would even be available for his plan, given his war budget. Massachusetts passed a universal coverage bill in 1988 with the idea of expanding private coverage through raising taxes. It’s never been implemented but each time they move to raise taxes, powerful interests say no. It’s speculative too how many low-income people could actually afford to take up the offer of the Kerry subsidy. Look at the subsidy plan that’s already in place for workers who lose their job because of foreign imports. Of half a million workers eligible for the program, only eight or nine thousand have signed on because with private coverage costing around $10,000 for a family, the government subsidy still doesn’t make coverage affordable—not if you’re low-income or out of work.

YOUR RESEARCH with Dr. Steffie Woolhandler consistently shows that a government-administered, single-payer universal health plan would cover everyone in the U.S. for much less money than is being spent now. And national polls show that more than 60 percent of people in the U.S. want to see such a plan. But with for-profit hospitals, drug companies, and HMOs formed into mega-corporations and politicians serving those corporate interests, what can happen to make national health insurance a reality?

WE NEED a real uprising of the American people. Going up against a $300 billion a year industry is no easy matter. Corporate interests themselves may play a role. For employers, rising health care costs are a cost of production they may be motivated to address—even against their interest in being able to deny health care to striking workers, low-wage workers, and so on. But that’s only one small piece of what’s needed. It’s also possible that a politician will discover the populist appeal of the health care issue and lead that national crusade or that we’ll have a breakthrough in one state, showing the others that it can be done and then spreading universal coverage state by state. But as Henry Sigerist, known as America’s greatest medical historian, put it when he appeared on the cover of Time magazine back in 1939, only when the U.S. has a party of labor will we have a national health program. A party representing the interests of the working class was the precondition for universal health care in Germany, in Britain, in Canada. Maybe we can win national health insurance even before we get such a third party, but it’s going to take a broad strengthening of the Left.

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