Universal Healthcare

Chellyse · Jul 11, 2001

HEALTH CARE REFORM: THE GOOD, THE BAD, AND THE UGLY

by Michael Tanner

Michael Tanner is director of research at the Georgia Public Policy Foundation.

While Congress has actually taken little action on

health care reform, there has been no shortage of discussion

on Capitol Hill. This year alone Congress has considered

more than 100 bills on health care that range from two pages

to more than 200 pages. In addition, the Bush administration

released a 94-page outline of its health care reform program.

President-elect Bill Clinton also has a health care plan.

And nearly every think tank with a word processor has con-

tributed a proposal as well.

Those proposals run the gamut--from good to bad to ugly.

The ideas receiving the most discussion in the media are

those that would increase the involvement of government in

health care. That first group of proposals is focused on

methods of financing expanded access to health insurance.

They generally take one of two approaches: (1) a universal,

single-payer, government-operated, tax-funded system or (2) a

"play or pay" system, built around a mandate on employers.

The second set of proposals attempts to accomplish the same

goals without spending more money. Those proposals often

focus on regulatory manipulation of the insurance industry.

Most other proposals would change the behavior of health care

consumers, generally through some form of tax incentive.

Single-Payer Systems

One of the most dangerous health care reform proposals

currently being considered is the call for a single-payer,

government-operated, tax-funded system--the type of system,

generally referred to as national health care, currently

operated in Canada, Europe, Australia, New Zealand, and else-

where.

The legislation generally cited as the classic example

of a single-payer health care plan is sponsored by Rep.

Marty Russo (D-Ill.) and Sen. Paul Wellstone (D-Minn.).

That legislation specifically establishes health care as an

entitlement for every American citizen. Every person would

be issued a national health card. Payment for all medically

necessary services would be provided through a government-

operated program, which would be funded by taxes. Benefits

would include a plethora of medical services, including

long-term care. The federal government would establish a

national budget and individual state budgets for operating

expenses, capital outlays, and medical training. Individual

hospitals would operate on preset yearly budgets. Physi-

cians would be reimbursed on the basis of fees determined by

the government. The national plan would replace all current

government programs, including Medicare and Medicaid.(1)

A single-payer national health care system would come

at enormous cost to American taxpayers. For example, Russo-

Wellstone would require employers and the self-employed to

pay a tax equal to 7.5 percent of wages. The top individual

tax rate would rise from 31 to 38 percent. Corporate income

taxes would increase from 34 to 38 percent. Social Security

benefits would be taxed at 85 percent rather than the cur-

rent 50 percent. And the elderly would be assessed a $55

per month fee for long-term care.(2) Even those levies may

not be enough to pay for national health care. Some econo-

mists put the cost as high as $339 billion per year in addi-

tional taxes.(3)

For all that tax money, we would buy surprisingly lit-

tle health care. The one common characteristic of all na-

tional health care systems is a shortage of services. For

example, in Great Britain, a country with a population of

only 55 million, more than 800,000 patients are waiting for

surgery.(4) In New Zealand, a country with a population of

just 3 million, the surgery waiting list now exceeds

50,000.(5) In Sweden the wait for heart x-rays is more than

11 months. Heart surgery can take an additional 8 months.(6)

In Canada the wait for hip replacement surgery is nearly 10

months; for a mammogram, 2.5 months; for a pap smear, 5

months.(7) Surgeons in Canada report that, for heart

patients, the danger of dying on the waiting list now ex-

ceeds the danger of dying on the operating table.(8) Accord-

ing to Alice Baumgart, president of the Canadian Nurses As-

sociation, emergency rooms are so overcrowded that patients

awaiting treatment frequently line the corridors.(9) Table 1

gives the average wait for various types of physicians' ser-

vices in five Canadian provinces.

Table 1

Canadian Survey of Physicians: Average Weeks Waited by

Patients (by Specialty)

__________________________________________________________________

B.C. N.B. Nfl. Man. N.S.

______________________________________________________

Plastic surgery 13.2 36.2 37.0 11.0 26.3

Gynecology 8.4 10.9 5.3 9.0 9.6

Ophthalmology 11.6 5.2 2.9 12.8 10.7

Otolaryngology 12.2 7.2 N/A 7.0 14.7

General surgery 4.0 2.5 8.0 8.2 4.0

Neurosurgery 4.2 8.3 9.0 10.5 5.8

Orthopedic 15.8 14.6 18.5 20.6 19.7

Cardiology 14.0 10.0 42.6 14.7 26.0

Urology 8.3 13.2 5.0 6.7 7.1

Internal medicine 5.5 4.5 2.2 3.3 2.0

_______________________________________________________________

Source: Fraser Institute, cited in Reason, March 1992.

Sometimes the rationing of care is even more explicit:

care is denied the elderly or patients whose prognosis is

poor. In Britain kidney dialysis is generally denied pa-

tients over the age of 55. At least 1,500 Britons die each

year because of lack of dialysis.(10)

Countries with national health care systems also lag

far behind the United States in the availability of modern

medical technology. It is well documented that in Canada,

high-technology medicine is so rare as to be virtually un-

available.(11) That comparison holds for other countries as

well. Advanced medical technology is far more available in

the United States than in any other nation.(12) In addition

to being biased against new medical technologies, national

health care systems generally discriminate against nontradi-

tional practitioners, such as naturopaths and chiroprac-

tors.(13) Figure 1 shows the availability of some high-tech

medical technologies in the United States, Canada, and Ger-

many.

Furthermore, national health care systems do not con-

trol the rising cost of health care. Proponents of national

health care make much of reported differences in the propor-

tion of gross domestic product spent on health care by Cana-

da and the United States. It is true that Canada spends

only about 9 percent of its GDP on health care, while U.S.

costs have skyrocketed to more than 14 percent of GDP.(14)

However, such comparisons are seriously misleading.

Figure 1

Availability of Medical Technologies

[Graph omitted.]

Sources: Rublee, "Medical Technology in Canada, Germany and the

United States, Health Affairs, Fall 1989; John Goodman, "National

Health Insurance and Rural Health care, "American Farm Bureau

Research Foundation; and Eli Lilly Company.

Between 1967 and 1987 the Canadian GDP grew at nearly

twice the rate of the U.S. GDP. Therefore, any comparison

of health spending should be adjusted to compensate for the

different rates of economic growth. Additional adjustments

should be made for such factors as population growth; gener-

al inflation; currency exchange rates; the larger U.S. el-

derly population (the elderly require more, more expensive,

health care); higher U.S. rates of violent crime, poverty,

AIDS, and teen pregnancy; and greater U.S. investment in

research and development. When all such factors are taken

into account, Canadian health spending is virtually identi-

cal to that of the United States and has actually been ris-

ing faster over the last several years.(15) Indeed, Canadian

public policy experts warn that health care costs are rising

so rapidly that "they are crowding out every other public

spending priority--social services, the environment, educa-

tion. All are being shortchanged to feed an inefficiently

organized health care system."(16)

Chellyse · Jul 11, 2001

Play or Pay

The second most commonly discussed proposals for health

care reform are called "play or pay." Under a play-or-pay

plan, employers would be required either to provide health

insurance for all workers or to pay a tax that would fund

health insurance for those who remain uninsured.

However, attempts to mandate that business shoulder the

burden of health care costs run into the wall of simple

economics. The amount of compensation each worker receives

is directly related to that worker's productivity. Mandat-

ing an increase in compensation by requiring the employer to

provide health insurance does nothing to increase productiv-

ity. Thus, one of two things happens: either consumers must

pay higher prices for products or, more likely in a competi-

tive economy, employers are forced to reduce their payroll

costs to offset the new and increased costs of health bene-

fits. Payroll reductions may take several forms. One is a

reduction in cash compensation, which in practice is unlike-

ly. More probable is a reduction in the number of employ-

ees: either workers would be laid off, or the hiring of new

employees would be postponed. In either case, unemployment

would increase, especially among low-skilled workers for

whom mandated health benefits would constitute a relatively

large increase in compensation.(17)

The National Federation of Independent Business, which

represents more than 500,000 small businesses in all 50

states, surveyed its members and found that 23 percent would

be forced to lay off employees if a play-or-pay system im-

posed an additional cost of only $100 per employee per

month. Nearly 22 percent indicated that they might be

forced out of business altogether.(18) Overall, economists

have placed the estimate of jobs lost under play or pay at

between 630,000 and 3.5 million.(19)

There is a particular unfairness to play or pay. Al-

though most individuals without health insurance are the

working poor, studies show that 25 percent of the uninsured

have incomes of more than 300 percent of the poverty lev-

el.(20) Those people are frequently young, healthy individu-

als who, preferring to spend their discretionary income

elsewhere, have chosen not to purchase health insurance.

Under a play-or-pay system, low-skilled poor people would

lose their jobs to provide those relatively affluent indi-

viduals with government-funded health insurance.

Like single-payer plans, a play-or-pay program would

have enormous costs for American taxpayers and businesses.

The Urban Institute, in a study commissioned by the U.S.

Department of Labor, estimated that play or pay would cost

taxpayers at least $36 billion per year in higher taxes and

would cost businesses an additional $30 billion in higher

health care costs.(21) Other economists warn that play or pay

would increase the budget deficit by $46.5 billion and would

reduce the U.S. gross national product by $27 billion.(22)

Perhaps most important, play-or-pay systems are sure to

degenerate into a national health care system, with all its

attendant problems. Again, the reason is simple economics.

The average business currently pays nearly $4,500 per em-

ployee for health care benefits.(23) That is 22.5 percent of

the salary of an employee making $20,000. If the payroll

tax were 7 percent, as envisioned under current proposals,(24)

the obvious choice for the employer would be to pay the tax

and turn the employee's insurance over to the government.(25)

That scenario is even more likely for big businesses, such

as the automobile industry, that provide very extensive, and

expensive, health benefits.(26) One reason certain big busi-

nesses, such as Chrysler and AT&T, are so supportive of such

a plan is that they would be only too happy to foist their

health care costs onto others. Figure 2 shows the gap be-

tween "playing" and "paying."

As the government assumed responsibility for providing

health care to more and more workers, the play-or-pay system

would transform itself into a Canadian-style national health

Figure 2

The "Play or Pay" Gap

(Graph Omitted)

care system. Indeed, Katherine Swartz of the Urban Insti-

tute has said, "The strongest argument for enacting a 'play

or pay' proposal is that it will enable the country to move

from our current patchwork quilt structure to a single,

national system with time for creating and implementing an

efficiently run public program."(27)

Chellyse · Jul 11, 2001

Insurance Regulation

The third commonly discussed reform of our health care

system is changing insurance laws. The goal is to reduce

insurance costs or make insurance more available to more

people. The most common target for those reforms is the

small-group market. According to the Employee Benefits

Research Institute, nearly 85 percent of Americans without

health insurance are either employed or are the dependents

of employees. Nearly half of the uninsured workers are

employed by companies with 25 or fewer employees (see

Figure 3).(28)

Some of the proposed insurance market reforms, such as

eliminating mandated benefits, are sensible.(29) However,

there are increasing efforts to manipulate insurance laws to

Figure 3

Working Uninsured by Size of Employer

[Graph omitted. Data presented below.]

Employees Percentage

1-24 47.6

25-29 14.6

100-499 12.2

500+ 25.6

Source: Employee Benefits Research Institute

require insurers to provide coverage for groups or individu-

als that they would not normally cover. The following are

among the most commonly proposed reforms.(30)

* Renewability: Insurers would be prohibited from

canceling policies for groups or individuals within a

group because of deteriorating health of the group or

one of its members.

* Continuity: Insurers would be prohibited from

imposing new restrictions on a previously insured indi-

vidual when he or she changes jobs. Some variations

would go further by making an employee's insurance

package "portable," enabling it to be carried from job

to job.

* Premium Limits: Limits would be imposed on how

much an insurer could vary rates between similar

groups. Limits would also be imposed on how much an

insurer could raise rates from year to year.

* Guaranteed Issue: Insurers would be prohibited

from denying coverage to any small group or excluding

any employee within a group.

* Community Rating: All insured individuals within

a designated category would pay the same rate regard-

less of individual risk.

Most of those insurance reforms have the worthy intent

of expanding access to insurance to small employers that

have been unable to purchase insurance under current prac-

tices. But the reforms may have unintended consequences

that will increase the cost of insurance and actually leave

more people without insurance.(31)

Insurance is a business of risk allocation in which the

insurer receives payment in exchange for agreeing to cover

the expense of the event insured against. The cost and

scope of coverage are determined by morbidity-mortality

statistical analysis. To the degree that insurers are pre-

vented from basing their contracts on actuarial values,

other policyholders will be forced to absorb the additional

costs. Indeed, studies estimate that, while employers with

high-risk employees would certainly notice improved access

to coverage under proposed insurance reforms, premiums could

increase overall by as much as 20 to 25 percent.(32) In some

cases, premiums could rise by as much as 35 percent.(33)

The net result would be to force many small businesses

to drop their present insurance coverage. Some currently

uninsured workers would move into the insurance market, but

others who now have insurance would move out. Thus, insur-

ance reforms would defeat their own purpose.

It should also be noted that most insurance reform pro-

posals would benefit large insurers, whose cash reserves and

larger profit margin give them more flexibility to meet the

new demands, at the expense of smaller companies. For those

large insurers, the specter of national health care is of

more concern than are the problems of insurance reform. If

the small-group market must be sacrificed to prevent nation-

al health care, so be it. That reasoning may explain the

support accorded many reform proposals by the Health Insur-

ance Association of America (HIAA) and Blue Cross-Blue

Shield.

As insurance expert Arthur Ferrara has noted:

Equitable distribution of this burden was not a

high priority of [HIAA]. The larger companies ex-

ercise a commanding position on HIAA committees

and its Board. Concerned over the specter of

national health insurance, they convinced the

Board to adopt a poorly conceived plan. . . . The

cost of the proposal will not affect those large

companies and their policyholders. They are not

significantly involved in the small employer group

market, and are apparently not involved in the

cost of the solution proposed.(34)

Chellyse · Jul 11, 2001

Managed Competition

The latest buzzword in health care reform is "managed

competition." Managed competition proposals are being pre-

sented as a compromise that would preserve many free-market

aspects of health care but make the market more accountable

to government control. The concept is generally considered

the brain child of the Jackson Hole Group, an ad hoc coali-

tion of health care executives and academic experts led by

Dr. Paul Ellwood.(35) In Congress it is supported by the Con-

servative Democratic Forum.(36) It has also received consis-

tent and enthusiastic support from the New York Times.(37)

As envisioned under the most common managed-competition

proposals, there would be established a national system of

Health Insurance Purchasing Cooperatives (HIPCs), which

would act as collective purchasing agents on behalf of em-

ployers and individuals.(38) All Americans would be enrolled

in an HIPC, either through their employer or individually.(39)

The HIPC would negotiate with Accountable Health Partner-

ships (AHPs) for a benefits package for its members, much

the way German sickness funds do.(40) AHPs would be private

insurance organizations approved by the government on the

basis of their ability to (1) provide a full array of desig-

nated health benefits, (2) "produce a high level of patient-

oriented results," and (3) control costs.(41) The government

would establish a Uniform Effective Health Benefits package

as a minimum standard benefits requirement, which would

replace current state-mandated benefits. AHPs would be

required to charge all members of the HIPC the same premium

regardless of risk (community rating) and to guarantee cov-

erage to all HIPC members.(42)

Employers would be required to provide coverage for all

full-time employees. Employers would have to pay at least

half the cost of coverage, but to discourage excessive bene-

fits, the employer's tax deduction would be limited to the

amount of the lowest cost plan offered by an AHP. Unlike

the situation under play or pay, employers would not have

the option of paying rather than providing coverage. How-

ever, employers would be required to pay a payroll tax for

noncovered part-time workers. Unemployed people with in-

comes and the self-employed would also have to pay a tax.

Those taxes would be collected by the federal government,

then returned to the states on an "equalized" basis that

took into account the number of uninsured workers in each

state. States with high rates of uninsured would receive

the most funding.(43) States would use that federal money,

plus current money from uncompensated-care and indigent-care

funds, to subsidize insurance purchased by those not covered

through an employer and unable to pay the full insurance

cost themselves.(44) Public programs, such as Medicare and

Medicaid, would have the option of purchasing care through

an HIPC.(45)

The program would be overseen by a new, independent

federal agency, the National Health Board, that would be

removed from day-to-day oversight by Congress or the execu-

tive branch, as is the Securities and Exchange Commission.

The program also envisions three additional agencies estab-

lished by legislation but controlled by a combination of

employers, consumer groups, health care providers, and in-

surers. Those would be the Health Standards Board, to re-

view medical efficacy and assess benefits; the Health Insur-

ance Standards Board, to oversee insurance organization and

market issues; and the Outcomes Management Standards Board,

to oversee a new program for providing increased information

to health care consumers.(46) Figure 4 is an organizational

chart of the managed-competition system.

Figure 4

Managed Competition

Source: Conservative Democratic Forum

(Chart Omitted)

As proposed, managed competition appears to offer a

great deal of management and very little competition. Often

discussed as a compromise between various health care reform

proposals, managed competition incorporates many of the

worst elements of other proposals.

First, as was mentioned earlier, the mandate that em-

ployers provide health benefits for all full-time employees

will cost jobs. Even the Jackson Hole Group admits that

"employer mandates are a form of employment tax."(47) They

claim, however, that explicit taxes would be "fairer" than

the current system of allocating costs.

At the same time, the revenues generated from a combi-

nation of payroll taxes on part-time workers, taxes on the

self-employed and unemployed, and savings from uncompensated

care are likely to fall well short of the cost of providing

extended Medicaid benefits and subsidies for the uninsured.

Those costs are estimated to be least $29.7 billion per

year.(48) Further, the proposal to "equalize" the return of

tax revenue will penalize states with policies that encour-

age economic growth and benefit those states whose high

taxes and business regulations cause slower economic growth.

Second, the proposal creates not just one but four new

government bureaucracies. While no real estimate of the

cost of those agencies has been made, it can be assumed to

be substantial. Even more worrisome is the proposal to

exempt the agencies from legislative or executive oversight.

The history of "independent" agencies, such as the Food and

Drug Administration, the Federal Trade Commission, the Fed-

eral Communications Commission, and the SEC, has been one of

continued expansion, resistance to marketplace innovation,

and frequent episodes of corruption and abuse.

Third, the call for uniform effective health benefits

simply moves the problems of mandated insurance benefits

from the state to the federal level. The inclusion of a

given benefits package in the mandate is much more likely to

be based on the relative lobbying strength of various pro-

vider groups than on a rational view of medical necessity.

Whatever benefits are mandated will increase the cost of

insurance, and consumers will be deprived of the ability to

make individual choices about the types of benefits they

wish to purchase. And fourth, as was mentioned earlier,

requirements for guaranteed issue and community rating will

increase the cost of insurance.

Finally, the proposal is vague about how it will con-

trol overall health costs. The Conservative Democratic

Forum claims that cost controls will result from (1) capping

the tax deductibility for employers who provide insurance in

excess of the lowest cost plan, (2) increased government

spending for preventive health care programs, (3) tort re-

form, (4) paperwork reduction, and (5) holding providers and

insurers "accountable for costs and medical outcomes."(49)

However, the ability of the first four of those cost-control

measures to hold down costs is unproven, and the fifth

sounds suspiciously like price controls.

Chellyse · Jul 11, 2001

Tax Incentives

Current federal and state tax laws exclude from taxable

wages the cost of health insurance provided by an employer.

Therefore, the vast majority of Americans, who receive

health insurance through their employers, do not pay feder-

al, state, or Social Security taxes on the value of their

policies. Moreover, the employer can deduct the full premi-

um cost as a business expense. Employers do not even pay

Social Security payroll taxes on health care benefits. In

short, the entire cost of employer-provided insurance is

paid with before-tax dollars.

However, those Americans not fortunate enough to re-

ceive employer-provided health insurance face entirely dif-

ferent tax laws. For example, self-employed individuals and

their families may deduct only 25 percent of the cost of

health insurance. In addition, self-employed individuals

must pay Social Security taxes on money used to purchase

health insurance.

Part-time workers, students, the unemployed, and every-

one else not receiving employer-provided health insurance--

including most employees of small businesses(50)--are unable

to deduct any of the cost of health insurance. (Individuals

may only deduct out-of-pocket medical expenses if they item-

ize deductions and the expenses exceed 7.5 percent of ad-

justed gross income. Fewer than 5 percent of taxpayers are

eligible for that deduction.)(51)

The difference in tax treatment creates a disparity

that effectively doubles the cost of health insurance for

people who must purchase their own. For example, the family

of a self-employed person who earns $35,000 a year and pays

federal and state taxes with only a 25 percent deduction and

Social Security taxes must earn $7,075 to buy a $4,000

health insurance policy. A person who works for a small

business that offers no health insurance would have to earn

$8,214 to pay for a $4,000 policy. Table 2 gives the effec-

tive cost of acquiring a $4,000 policy for each of the em-

ployment groups.

Table 2

Effective Cost of a $4,000 Health Insurance Policy

for Family with Adjusted Gross Income of $35,000

__________________________________________________________________

100%

100% 25% Taxed

Tax-Free Tax Deductible Individually

Covered Self-Employed Purchased

Policya Policyb Policyc

($) ($) ($)

______________________________________________________________

Additional earnings

needed to purchase

a $4,000 health

insurance policy 3,716d 7,075 8,214

Less 28% marginal

federal tax rate 0 -1,701e -2,300

Less 8% marginal

state income tax 0 -486e -657

Less payroll taxesf +284 -888g -1,257

________________________________________________________________

aFunds used by an employer to purchase health insurance are

exempt from federal, state, and local income taxes as well as

Social Security taxes.

bSelf-employed workers can deduct 25 percent of their health

insurance costs from federal and state taxable income.

cEmployees who purchase health insurance on their own must pay

for their health insurance with after-tax dollars.

dThough paid for by the employer, the policy is part of an

employee's total compensation package. If employers had to pay

federal, state, and payroll taxes on the value of health insurance

purchased, workers' take-home pay would be reduced by a

corresponding amount.

eThe self-employed may deduct 25 percent of the cost of their

health insurance premiums from their earnings for calculating

federal and state taxes.

fEconomists generally agree that both the employee and

employer shares of payroll taxes represent a tax on a worker's

wages.

gWhile income needed to purchase health insurance by the

self-employed is not exempt from taxes, the self-employed were

able to deduct from their taxable income one-half of their Social

Security taxes, or 7.65 percent, in 1991.

Figure 5

Health Insurance by Tax Status

Status Insured (%) Uninsured (%)

100% Tax-Free

Employer Provided

Coverage 97.2 2.8

25% Tax-Deduction

Self-Employed

Coverage 71.4 26.6

0% Tax-Deduction for

Individuals Purchasing

Insurance on Their Own 32.5 67.5

Source: Employee Benefits Research Institute

The results of the inequity can be clearly seen. Those

workers who must use after-tax dollars to purchase health

insurance are 24 times more likely to be uninsured than are

those who are eligible for tax-free employer-provided cover-

age (Figure 5).(52) Significantly, the poor and minorities,

who are less likely to have employer-provided insurance, are

the most likely to be left without access to health insur-

ance.(53) Thus, the perverse impact of our tax policies is to

give a tax break on the purchase of health insurance to the

most affluent in society and penalize those less well off.(54)

In addition to limiting access to health insurance, our

tax policies also have an adverse impact on health care

prices. By encouraging employer-provided coverage to the

detriment of individually purchased coverage or out-of-pock-

et payment, or both, our tax policy increases the trend to-

ward divorcing the health care consumer from health care

payment. Most health care consumers do not pay for their

health care. On average, for every dollar of health care

services purchased, 76 cents is paid by someone other than

the consumer who purchased it.(55) As a result, consumers

have little incentive to question costs and every incentive

to demand more services.

Some critics argue that health care is not a commodity

that a consumer can shop for like a car or a refrigerator.

Certainly, an individual suffering a heart attack or in-

volved in an automobile accident is not going to comparison

shop for the best price. But less than 15 percent of health

care is emergency in nature.(56) It is possible for consumers

to shop for and compare prices of nonemergency services.

For example, one study found that the cost of cataract sur-

gery in Illinois ranged from $650 to $5,674 depending on the

hospital; the cost of hernia surgery ranged from $404 to

$4,329; and mammograms ranged from $35 to $178.(57) Studies

in Georgia have shown similar variances in price. One study

by the Georgia Department of Human Resources found that the

cost of delivering a baby in different Atlanta hospitals

varied from $1,177 to $3,100.(58)

Currently, most people are not cost conscious about

health care purchases. However, there are numerous studies

that show that health care consumers do make cost-conscious

decisions when given a financial incentive to do so. For

example, the RAND Corporation conducted a study of 5,809

people to determine whether the size of consumers'

copayments had any effect on their health care decision-

making. The study found that an individual with a 50 per-

cent copayment spent 25 percent less on health care than an

individual with no copayment.(59) Studies also show that,

contrary to the assertions of some critics, reduced expendi-

tures are not caused by individuals' forgoing truly neces-

sary health care. Rather, the savings result from reduced

utilization of optional services and cost-based selection

among competing providers.(60)

Tax equity--treating individually purchased insurance

and out-of-pocket health care expenditures the same as em-

ployee-provided benefits--will encourage health care consum-

ers to become more involved in the health care system.

Individuals who purchase their own insurance are more likely

to shop around for the best deal. And individuals who buy

health care out-of-pocket are much more likely to make cost-

conscious health care decisions.

Chellyse · Jul 11, 2001

All of the following were taken from the same article and I utilized this to begin the debate. Lastly touched upon were The Heritage Foundation Plan and Medical IRA's I did not open that box because it widen the breadth of the debate. Again I would appreciate each persons input and willingness to share in this debate.

Thanks,

Michele

Cdn_Psych · Jul 12, 2001

Hi Chellyse66,

Thank you for posting this interesting item.

>HEALTH CARE REFORM: THE GOOD, THE BAD, AND THE UGLY

>by Michael Tanner

>

>Michael Tanner is director of research at the Georgia Public Policy Foundation.

I'd like to address some of the comments in the paper, particularly the single payer section.

>Single-Payer Systems

>

>One of the most dangerous health care reform proposals

>currently being considered is the call for a single-payer,

>government-operated, tax-funded system--the type of system,

>generally referred to as national health care, currently

>operated in Canada, Europe, Australia, New Zealand, and else-

>where.

Dangerous? To whom? To the HMO corporations enriching themselves

by denying care to the ill, that's who!

>The legislation generally cited as the classic example

>of a single-payer health care plan is sponsored by Rep.

>Marty Russo (D-Ill.) and Sen. Paul Wellstone (D-Minn.).

>That legislation specifically establishes health care as an

>entitlement for every American citizen. Every person would

>be issued a national health card. Payment for all medically

>necessary services would be provided through a government-

>operated program, which would be funded by taxes. Benefits

>would include a plethora of medical services, including

>long-term care. The federal government would establish a

>national budget and individual state budgets for operating

>expenses, capital outlays, and medical training. Individual

>hospitals would operate on preset yearly budgets. Physicians

>would be reimbursed on the basis of fees determined by

>the government. The national plan would replace all current

>government programs, including Medicare and Medicaid.

>

>A single-payer national health care system would come

>at enormous cost to American taxpayers. For example, Russo-

>Wellstone would require employers and the self-employed to

>pay a tax equal to 7.5 percent of wages. The top individual

>tax rate would rise from 31 to 38 percent. Corporate income

>taxes would increase from 34 to 38 percent. Social Security

>benefits would be taxed at 85 percent rather than the cur-

>rent 50 percent. And the elderly would be assessed a $55

>per month fee for long-term care.(2) Even those levies may

>not be enough to pay for national health care. Some

>economists put the cost as high as $339 billion per year in

>additional taxes.(3)

>

>For all that tax money, we would buy surprisingly little

>health care.

Sounds alarming. But what does it cost to provide those

same services now in premiums to the HMOs? For some

not-so-hard-to-understand reason, that question is ignored

here.

A casual reader might easily conclude that the $339 billion

estimate given (assuming that figure is realistic, which is

debatable) represents money beyond that currently being

spent. That is misleading at best.

A single-payer system would have the money currently being

paid to corporations (to deny care to the ill) redirected to

taxes to pay for health care. The savings in administration

costs alone would be enormous.

>The one common characteristic of all national

>health care systems is a shortage of services. For

>example, in Great Britain, a country with a population of

>only 55 million, more than 800,000 patients are waiting for

>surgery.(4) In New Zealand, a country with a population of

>just 3 million, the surgery waiting list now exceeds

>50,000.(5) In Sweden the wait for heart x-rays is more than

>11 months. Heart surgery can take an additional 8 months.(6)

I can't speak to these countries and their situations.

However, I note that the original source for much of the

information provided is given as the Fraser Institute.

The Fraser Institute is a "research" group which

continually pushes the corporate agenda. It is not

an unbiased source of information and if you think of it

as a propaganda arm of the corporations, you will understand

why its "research" should not be uncritically accepted.

>In Canada the wait for hip replacement surgery is nearly 10

>months; for a mammogram, 2.5 months; for a pap smear, 5

>months.(7) Surgeons in Canada report that, for heart

>patients, the danger of dying on the waiting list now

>exceeds the danger of dying on the operating table.(8)

>According to Alice Baumgart, president of the Canadian Nurses

>Association, emergency rooms are so overcrowded that patients

>awaiting treatment frequently line the corridors.(9) Table 1

>gives the average wait for various types of physicians'

>services in five Canadian provinces.

Waiting lists here in Canada do exist and they are a serious

problem. However, the suggestion that these are inherently

the result of having a single-payer, tax-funded system is false.

These problems in the Canadian system are the direct result of

massive budget cuts by governments seeking to implement tax cuts

demanded by the right wing and the growth of corporate power.

This has resulted in the elimination of hospital beds and the

layoff of nurses following hospital amalgamations and

"re-engineering" by American consulting companies such as American

Practice Management (APM) and others like it.

The problems in the system which have resulted from the corporate

driven health-care budget cuts are now held out as being the result

of having a publicly funded universal system. The "solution"

offered is privatization of health care.

Here in Ontario, Emergency rooms are crowded because acute care

beds are blocked by patients needing long term care. But the

needed care is not available because hospital downsizing took place

without bothering to open the community based services and long

term care beds needed. And needed surgeries cannot go ahead because

of a severe nursing shortage largely due to nursing layoffs resulting

from "re-engineering".

For an excellent analysis of the situation in Canada, see

http://www.revolutionmag.com/newrev2/canadart.html

>Table 1

>

>Canadian Survey of Physicians: Average Weeks Waited by

>Patients (by Specialty)

>__________________________________________________

>________________

>B.C. N.B. Nfl. Man. N.S.

>__________________________________________________

>____

>

>Plastic surgery 13.2 36.2 37.0 11.0 26.3

>Gynecology 8.4 10.9 5.3 9.0 9.6

>Ophthalmology 11.6 5.2 2.9 12.8 10.7

>Otolaryngology 12.2 7.2 N/A 7.0 14.7

>General surgery 4.0 2.5 8.0 8.2 4.0

>Neurosurgery 4.2 8.3 9.0 10.5 5.8

>Orthopedic 15.8 14.6 18.5 20.6 19.7

>Cardiology 14.0 10.0 42.6 14.7 26.0

>Urology 8.3 13.2 5.0 6.7 7.1

>Internal medicine 5.5 4.5 2.2 3.3 2.0

>

>__________________________________________________

>_____________

>

>Source: Fraser Institute, cited in Reason, March 1992.

^^^^^^^^^^^^^^^^^^^^^^^^

Note the source.

>Sometimes the rationing of care is even more explicit:

>care is denied the elderly or patients whose prognosis is

>poor.

And the HMO doesn't ration care? Who is he trying to kid?

>In Britain kidney dialysis is generally denied patients

>over the age of 55. At least 1,500 Britons die each

>year because of lack of dialysis.(10)

Again, I can't speak to the British situation, but if this

is true, I'd be interested to know what the situation was

prior to the market-driven health care "reforms" that were

instituted by Margaret Thatcher. I wouldn't be at all

surprised to discover that budget cutting played a large

part in this situation.

>Countries with national health care systems also lag

>far behind the United States in the availability of modern

>medical technology. It is well documented that in Canada,

>high-technology medicine is so rare as to be virtually

>unavailable.(11)That comparison holds for other countries as

>well. Advanced medical technology is far more available in

>the United States than in any other nation.(12)

It is true that we do not have as many expensive high-tech

devices in Canada as are in the USA. But do we really need

artificial hearts? Perhaps that money might be better

spent in prevention. Perhaps if our government had not

foolishly extended patent protections for 20 years to the

big drug companies, thereby dramatically driving up drug

costs, we might have more funds available for other things.

I'm not at all certain that spending bazillions on high tech

gadgets is a wise use of health dollars. Better nursing

homes and more long term beds might have a much bigger bang

for the buck. Here in Ontario, the obtuse bully who

declared a few years ago that "Nurses are as obsolete as

hula-hoops" and who is the Premier of the Province, eliminated

the legal requirement that nursing homes had to have at least

one RN on duty at all times. That was just plain stupid

and counterproductive.

>Furthermore, national health care systems do not control

>the rising cost of health care. Proponents of national

>health care make much of reported differences in the

>proportion of gross domestic product spent on health care

>by Canada and the United States. It is true that Canada

>spends only about 9 percent of its GDP on health care,

>while U.S. costs have skyrocketed to more than 14 percent

>of GDP.(14)

>However, such comparisons are seriously misleading.

>

>Between 1967 and 1987 the Canadian GDP grew at nearly

>twice the rate of the U.S. GDP. Therefore, any comparison

>of health spending should be adjusted to compensate for the

>different rates of economic growth. Additional adjustments

>should be made for such factors as population growth;

>general inflation; currency exchange rates; the larger U.S.

>elderly population (the elderly require more, more expensive,

>health care); higher U.S. rates of violent crime, poverty,

>AIDS, and teen pregnancy; and greater U.S. investment in

>research and development. When all such factors are taken

>into account, Canadian health spending is virtually

>identical to that of the United States and has actually been

>rising faster over the last several years.(15) Indeed, Canadian

>public policy experts warn that health care costs are rising

>so rapidly that "they are crowding out every other public

>spending priority--social services, the environment, education.

>All are being shortchanged to feed an inefficiently

>organized health care system."(16)

Ah, the Big Lie of affordability! Here is how the figures

get massaged - see

http://www.rnao.org/Ontario-2001.budget.backgrounder.Final.pdf

for the full document from which this is excerpted:

The Ontario government is calling for greater transparency in

the operation of public institutions. Yet, that transparency

is not evident in the governmentÆs depiction of its own

spending. Consider the announcements made regarding health-care

spending:

- Health care spending has indeed increased at a dramatic pace:

27% in just five years; 19% in the past two years alone. However,

double-digit increases in health care spending are no longer

sustainable.

- To increase spending without improving quality is unwise. To

increase spending well in excess of economic growth is

unsustainable. At the current rate of increase, within five years

health care spending would consume 60% of the Ontario government's

operating budget -- up from 44% today and 38% since our government

was first elected.

- Tony Clement, Ontario Minister of Health and Long-Term Care,

April 24, 2001, House debates, Hansard.

These striking numbers are creative and misleading:

- Intervals are chosen that exaggerate spending trends:

- The 2-year interval chosen picks the catch-up period

following years of severe real per capita cuts.

- In going back 5 years instead of 6 back to the beginning of

its mandate, a low point in health care spending is used,

making the apparent rise sharper.

- Interest payments are omitted from the operating budget,

which inflates health careÆs share.

- Capital spending is ignored (has suffered badly in the past 6 years).

- Ignored above all, is that the total government budget

has plummeted in real per capita terms by 10.6%. Health will loom

larger, if other ministries are squeezed more.

The above points take the official figures at face value.

But when we look more closely, we note that the government also

changed the method of accounting from the cash to the accrual method.

This allows them to claim expenditures when they are announced,

rather than when they are actually made, giving the appearance of

accelerated expenditures. Other creativity with expenditures is

evident in claiming credit for expenditures downloaded to

municipalities (under the Local Services Realignment initiative).

This includes inflation of the health care budget by $94 million

in 1999-2000 and $57 million in 2000-01 for land ambulances;

the province clawed back this money back from municipalities.

Of particular note: the health care budget was inflated

by RESTRUCTURING COSTS that include large expenses to lay off

and then rehire thousands of nurses.

fergus51 · Jul 12, 2001

I have lived in the States and could not go back to that system. I had a terrible personal experience with my insurace company, and a terrible one before that when I was too poor to afford good medical coverage. I personally view health care as a right in a developped country like Canada or the US. With the fabulous economy you have going and the wasted money spent on other things, I think a bigger investment into health care is waranted.

Another reason we have longer waitlists in Canada (other than the RIDICULOUSLY STUPID budget cuts) is that everyone here accesses those services (often too much). I would argue that the uninsured in the US don't go to doctors or hospitals for fear of being unable to pay for the services, thus waitlists are not as long. I know I never did unless it was absolutely mandatory. My grandfather finally had to sell his house when his wife needed care. Seeing something like this happen has made me very aware of the reasons to put off medical treatment.

Yes, the technology and medical professionals in the US are top notch, but I would ask: for whom? For me and my family when we lived in Washington? The answer to that is a resounding no. We weren't worthy of such advanced care.

I don't know what the answer is, but I just don't understand how any country as rich as the US can justify not ensuring that their citizens can go to a doctor when they need to.

I nursed in the US for a few years before moving back to Canada, and while I know there are some serious flaws here but, a lot of them can be adressed. For starters, putting money into prevention would help. Using nurse practitionners as primary care givers is another strategy. Not allowing the elective surgeries that could be treated medically would save a lot of money as well (like the optional hyseterectomies women come in for without even trying to deal with the problem with medication, diet and exercise). Patients here also need to learn not to go to the doctor every time they have the sniffles. Not making more budget cuts to health care is another priority. Our newly elected gov't says it has no more money for nurses, but it has enough to cut provincial taxes.

Any way you look at it citizens aill be paying for health care, either through taxes, to insurance companies or to a conglomerate that will buy insurance for them, and it isn't cheap. I happen to think it is worth it.

Chellyse · Jul 12, 2001

That was a good article you quoted out of Revolution magazine

"Underfunded and Under Fire", extremely informative perspective. What I clung to from the onset:

"The storm clouds over Medicare began brewing amid the fiscal crisis in the mid-'70s. In response to inflation, a number of governments and central banks raised interest rates dramatically, forcing recessions and joblessness in many countries.

In Canada, interest rates were set high and inflationary targets were set low, resulting in weak and negative economic growth, and increased budgetary deficits. Joblessness put substantial pressure on social safety nets, draining Ottawa of tax revenue and increasing costs."

In economic terms there are no guarantees, the inflationary targets and joblessness rate wax and wane in the U.S., who is to say that we do not go straight down the indentical path. If a single payor system is initialized that our government does not look to the same solution to the problem and the end result becomes similar.

Now I also found very interesting the reference to NAFTA because this is closer to the truth. For those unaware of NAFTA and FTAA, a brief synopsis; "The Free Trade Area of the Americas (FTAA) is the formal name given to an expansion of NAFTA (the North American Free Trade Agreement) that would include nearly all of the countries in the western hemisphere. This massive NAFTA expansion is currently being negotiated in secret by trade ministers from a total of 34 nations in North, Central and South America and the Caribbean. The goal of the FTAA is to impose the failed NAFTA model of increased privatization and deregulation hemisphere-wide. "

There are many sites on the net to find more information about NAFTA and FTAA. Recently in April 2001 the Summit of the Americas concluded with a declaration which can be found here:

http://www.americascanada.org/eventsummit/declarations/declara-e.asp

Lastly information about the Health collaboratives and iniatives from the summit can be found here:

"Health policies at both the national and international levels are mainly designed to improve medical care, social and environmental conditions, and health education. More recently, they have also begun to focus on issues of equitable and affordable access to healthcare, as well as on the reduction of barriers to healthcare services. "

http://www.americascanada.org/politics/health/health-e.asp

This is important as was pointed out in the previous article, allowing for a international standard for physicians to practice globally opens up the market :

"Douglas, national spokesperson for the Canadian Health Coalition, warns that NAFTA will allow companies based in the United States and Mexico to walk in the door, underbid for services and further erode the system.

She cites the example in Ontario, where a U.S.-based home health company won the contract for home health services. "The moment the Americans got the bid, the nurses were out the door and all the new employees were brought in at minimum wage."

As Ralph Nader said of NAFTA's effects during a 1996 nurses union-sponsored tour of British Columbia, "It may start with doctor-run clinics. It's not where it stops. U.S. corporations would like doctors to start these clinics, then buy them out."

Nader warned that U.S. health care corporations are hungry for a chance to get a piece of Canada's health care pie that has been largely off-limits thanks to Medicare.

"The corporate system," said Nader, "can only grow by debilitating Medicare, because it needs more customers, so it disparages your system. It has an endless capital draw, it can bid away doctors from your system, it can undermine political support as it sucks away low-risk, high-income patients until the public system is left as a system for the poor."

Ok now I have slanted the debate so next thread I will again concentrate on a single payor system or universal health care.The FTAA topic could have a thread of it's own. Thank you for the information. I am also glad that you clarified the source of some of the stats in Micheal's article. I hope we can continue this debate and learn more from each other.

Michele Jansen RN

RNed · Jul 12, 2001

Chellyse66, good choice for debate, I was somewhat active in a similar debate previously on this BB.

I do note that three options have been presented. The question I would pose is the narrow mindedness of those options. I ask about a fourth option.

Can we return to the Healthcare provider and patient relationship without third party intervention. Should and can "insurance" return to a patient, insurer relationship where no relationship between insurance and physican exists.

First, it appears all options speak of "insurance" or "coverage". As I suggested in prior posts, we are failing to recognise "insurance" is not healthcare.

The question of how insurance is treated, funded or regulated does not answer the question about access or quality of care in this nation.

We cloud the picture when we assume the number insured equals the number receiving healthcare or having access to healthcare and vice-a-versa the number not insured is the number not receiving healthcare. An example is, denied healthcare by our insurer is no healthcare and certainly should not be equated with having healthcare. And the fact that one does not have insurance does not mean that one did not recieve healthcare. I certainly received healthcare on a private pay system with no difficulty.

Second, it appears that our "think tanks, and "legislators" are more interested in "FUNDING" rather than healthcare. Anytime I see the word insurance, I think of funding rather than healthcare service.

All three options speak of funding. We should be clear in defining "insurance as funding" and healthcare as delivery of service. We should clearly have a debate about funding.

However, I do not believe we can adequately discuss funding until we know what level of healthcare this nation wishes to provide to its citizens. Until we decide what our national healthcare needs are and what we wish to provide - the funding issue seems to be mute.

I believe, we are somewhat approaching the problem backward when first we decide, "How much money we have to spend or how much money the citizens can tolerate in taxes and then determine the healthcare provided." I believe this approach is "doomed" for failure.

To actually comment on the text presented. I have but one only. When read, how many times does the text refer or imply "money", "taxes", "funding", levies, "% of taxes", "assessments", "GNP" etc. verses healthcare as defined.

Clearly, these are economic presentations. It presents little related to improving healthcare in this nation.

The true debate is not "how" we fund healthcare, it is "what" healthcare should be provided?

Chellyse · Jul 12, 2001

I believe you have brought up an important point in debating Universal Health Care, we do need to define what "services" we would recieve and what "criteria" will be utilized to determine the services. I do agree that the article was reflective of speaking in terms of economics. This debate opened up in hopes that others will bring forth additional information and sources.

I read through the other posts "grassroots for Universal Health Care" and I have some of the same questions to the system as you. The post defining individual "freedoms" and individual "rights" was aptly presented.Part of that debate is the core of the issue for some. A good article entitled "Health Care Is Not A Right" by Leonard Peikoff, Ph.D. can be found here:

http://www.capitalismmagazine.com/1998/jan/jan98_hcnoright_lp.htm

So if you are game lets define the ground rules for this debate and proceed, I am always up to learning by listening to others viewpoints. As always for those joining in try to present facts and views but not belittle each other. We are entitled to our own opinions and if you chose to share them respect each other's too.

Michele

Universal Healthcare

Do you think the USA should switch to government run universal healthcare?