Universal Health Care – Everybody In, Nobody Out

Financing Universal Health Care

Financing Universal Health Care

QUESTION: But how can employers, especially small employers, afford to cover everyone? Wouldn’t a government mandate bankrupt small business?

Employers do not cover everyone now and would not be expected to cover everyone under a universal plan. Health care coverage is already subsidized heavily by federal, state, and local taxes. In fact, fully 64% of health care spending is already from taxes (and in any other nation that would be enough to cover everyone for all their health needs). This 64% share is calculated including subsidies and tax exemptions awarded to employers who cover their employees at present. Small businesses are likely to find relief in a universal system (unless under current system they are avoiding all responsibility and leaving employees without ANY help). Small businesses will no longer be at a disadvantage in obtaining good health coverage for their employees and thus competing for the best employees. And speaking of bankruptcy.

In state after state where professional analysts have been commissioned to study the “cost” of universal health care under a single-payer system it has been found that there would be a savings to the public, not a cost at all.

QUESTION: Under current budget constraints, though, isn’t there a need to be realistic about what we can afford?

There will always be a legitimate concern about what procedures are appropriate and necessary medically and whether some of the most expensive technologies warrant some restriction. However it is immoral to begin a discussion about those restrictions now when so many people have no protection at all. We need to remember that from 1977 to 1995 after-tax income of the top 1% increased 87% while for the bottom 40% of the population income decreased. (Much more in 2005). Yet while many low wage workers cannot afford health insurance for themselves and their families, President Bush proposed in 2001 that the top 1% receive 43% of his “tax cut package” (and nearly 200 times as much per person as the bottom 60%). Further tax cuts were being planned for 2006. And never before have so many jobs been lost from the US economy. More importantly the trend for many years has been to increase taxes on the lowest-income hardest working Americans, while giving the wealthy tax-holidays. Indeed we need to look at what we can afford from a broad perspective. Consider also comparisons to other countries and in particular per capita spending on health in the USA as of 2000.

In 2003 the US spent more than twice per capita on health care what is spend in Canada, France, Germany, Italy, Japan and the United Kingdom. This two-fold expenditure (with lower quality and only partial population coverage) in the USA has been found to be due largely to unnecessary administrative costs and profit in the insurance industry, exorbitant prices of prescription drugs and health services and, to a smaller extent, theft and fraud. *REF 1 Please see the section on ‘Overutilization of Care’ for an in depth discussion of what health care is affordable and what sort of rationing would be necessary in a UHC system. And how about what the health care related corporate sector is spending, like the $2.2 BIL from 1998 – 2007 on lobbying Congress (to keep their profits strong)? Those are our health care dollars being spent to lobby our Congress people against our interest!

Can we afford NOT to revise our system from the ground up? That’s the real question. In 2006 our projected national health expenditure is $2.2 TRIL or 16.5% of GDP, but in 2015 it’s projected to go up to 20% of GDP. What iind of a system will our kids be left with? What will they have to shell out to care for us in old age? Study of international health systems meanwhile, show that there is between $50 and $100 billion of SAVINGS in closing the coverage gaps between what we have in the USA and the solid coverage to all the society in other industrialized nations. Let’s also talk about whether health insurance corporations ought to be allowed to spend half or more of the profit on compensating one executive officer, okay? Read about how the concept of affordability for Americans has changed. What also needs to be kept in mind about “affordability”is whether we mean that the wealthiest 1% or 0.1% of Americans must consider it affordable to provide health care services to the 50 or 60% who collectively don’t have the wealth that does the 1 or 0.1%..

QUESTION: The funds to insure the uninsured still have to come from somewhere. Where could they possibly come from other than increased taxes?

Several good books can be recommended to explain financing of the present and a universal health care system. Briefly, it must be noted that we currently pay twice per capita what other industrialized countries pay AND they insure all their citizens. Also that medicare is run with ABOUT 2% OVERHEAD EXPENSE, the Canadian national health insurance for about 1%, while private US insurers take an estimated 14% for their overhead. (and then there are the brokers, workplace administrators, physician-hired insurance claims administrators etc.) Even so called “not for profit insurers” (who mimic for-profits in practices) in the USA exist in order to grow richer (and compete even better, they would say), raising their premiums tremendously even when their margin is improving without such increase. *REF 4 And with all these substantial profits we are still paying 61% of our nation’s health care costs out of the public purse (including taxes collected from uninsured and underinsured low-income and middle-income workers).

Data released in the fall of 2003 *REF 4indicated that $400 BIL out of our $1660 BIL total health care budget was spent (mostly wasted) on administration. And that’s with a major part of the care for our sickest people (with what should be the highest administrative costs) getting care with 2-3% administrative costs in Medicare and Medicaid! This study concluded that even just recovering the wasted excess from administration without other known savings from adopting a good UHC plan, there would be enough to cover all the presently uninsured in our nation. Instead though our government would prefer to lavish the excess on certain friends in the insurance and administration game (who happen to make some of the largest campaign contributions).

Another clear perspective on wasted health care dollars can be quickly seen when one considers the skyrocketing number of administrators who have entered the health care system, largely for redundant insurance checking verification at each level of the system and compares this to the low increase for health care providers. In 2006 it was shown that in California, Blue Cross led the way, towards excessive overhead and profits, spending less than 80% of revenue in patient care. And take a look at the pay and benefits of the top executives. However, there might be just as much savings in an intergrated UHC system with a strengthened public health system which this project advocates (see principles).And for the height in hypocrisy take a look at the pay of top CEOs of ‘not for profit’ hospitals in 2003. Note that studies, such as that by the Commonwealth Foundation in mid-2008 have shown that even without the vast administrative savings of Single-Payer health insurance, it would be possible to insure All Americans with only the most minor increase in national health spending. The same conclusion could be drawn by comparing the small increase in costs for Taiwan since 1995 in expanding their system to include everyone or 98% of their population.

Another large chunk of available money we are already spending on “uncompensated care” (uncompensated directly to the provider but still paid for, mostly out of public funds) is detailed in a pamphlet, report and slide show from Kaiser Foundation (click here). Briefly, in one year (2001 was studied) $30.6 BIL already in the system for “uncompensated care” with 86% of that already coming from our taxes. This money could be transferred to a new program for the presently uninsured – or could go towards the overhauled UHC system we are advocating.

We’re wondering where the funds for workers’ health care will come from, but what if workers had that easily a few years ago and it was recently taken from them? Can’t we ask that it be restored, how far back are we to be rolled backwards towards the great depression?

QUESTION: What about the huge crisis of 2005, the GW Bush grand tour through the nation and the coming bankrupcy of Social Security and Medicare?

The 2005 crisis and GW Bush’s Grand Tour was little more than a stunt to cutback vital services to American working families while assuring the richest 5% Americans of ever greater freedom from any social responsibility. The “demographic or mathematical problem” does contain a kernel of truth, since in theory is that the current work force should be paying for the current retirees in social security and for the current needy ederly in Medicare. However, these funds have never been set aside and protected. Thus, its a simple scam to cut back the least fortunate Americans, so that the most powerful and wealthy can be enriched beyond their wildest dreams. Meanwhile 3 million manufacturing jobs were lost from US during GW Bush’s first term. The US trade deficit and the accompanying loss of real jobs must be kept in mind to responsibly discuss the affordability of human necessities for working Americans.

While we are supposed to be convinced of the bankrupcy of Medicare, drug companies were given a pass, for pricing their drugs to seniors without any pesky negotiation from government agencies. This resulted in a nearly 20% increase in pharmaceuticals in 2005 – 6. Prescription spending is expected to increase to $1537 per capita by 2017, while the portion covered by private insurance will shrink from 41% to 33%. Or look at it this way, just the federal subsidies to employers and employees for buying health insurance (mostly to higher wage employees) have the value of half the yearly expenditure of Medicare. And another 3/4 of that cost (subsidies) could be gained if negotiated prices were paid for medicare prescription drugs (prices paid by the VA) -that’s nearly the whole cost of Medicare right there !

Even if there were to come about a “demographic crisis” for medicare in 2025 as economists are predicting, this imbalance between the numbers in the workforce and the US elderly may do little more than bring us into line with other industrialized nations in terms of the elderly supported in our society (and all these others assure care for all their people). Somehow these other nations manage to offer this security to their people at half the per capita US cost, maybe because they did not dramatically shift all tax burden to the lower and middle-incomed of their nations during the last 25 years (1980 – 2005) and allow their corporations to hide their taxable assets offshore leading to $100+ billion in losses from the treasury as did we.

QUESTION: How can you say there would be savings in a UHC system by strengthening our public health system? That seems like just adding more expense.

Yale economist W.D. Nordhaus suggested that “the social productivity of health care spending might be many times that of other spending” while considering increases in life expectancy.*3 Then there are untold riches in health care savings from declining rates of drug and alcohol abuse, cigarette use from encouraging better nutrition and regular excercise. All of these riches could be applied to covering everyone with high quality care. Note that Canada in 2002 began paying citizens for quitting and remaining free from cigarette use, simply because it saved them many times over what they were paying as the reward/tax break (just makes business sense). See also a 2006 report on some of the savings from just one small aspect of public health (improved childhood immunization). Currently, the US does not even realize the expected savings from not-for-profit insurers because they act exactly like for-profits (driving towards increasing their margins and capital holdings).

It’s not really fair, though, to talk about costs of public health or of every one having regular access to care since the cost of anything is normally considered alongside the value of what one is purchasing. The US while paying out twice what other nations pay is falling further behind and experiencing large increases in preventable deaths for all our excess spending. How could that be worthwhile?

QUESTION: Don’t all economists agree that adding more taxes for additional social spending will only weaken our economy and slow growth?

No all economists don’t agree. Alan Greenspan, the Federal Reserve chairman, says the nation should cut future domestic spending, including Social Security benefits, to balance the budget and that higher spending or higher taxes would deter economic growth. The committee should have asked the statistically oriented chairman for the evidence. A comprehensive analysis by the economic historian Peter H. Lindert, published in a new book, “Growing Public” (Cambridge University Press), contends that there simply is no evidence of this widely held notion.

The principal problem with such studies, Prof. Lindert writes, is that they are simulations of a highly simplified world. The economists recreate an economy where almost all incentives lead to slower growth, but that world does not exist. Why, then, have high levels of social spending proved no deterrent to growth in The real world? Mr. Lindert has several explanations, some of them surprising. First, he says, the tax systems of countries with high social spending are less antigrowth than is realized because nations in Scandinavia and Continental Europe typically derive so much tax revenue from regressive consumption taxes. In fact, these nations do not penalize profits and capital investment any more than the United States or Japan does, and possibly even less.

He finds that social programs in nations with high welfare levels usually include everyone. Because benefits are generally not cut off as incomes grow, the disincentive to get jobs or invest is reduced. But third, he finds, much of the public spending in these nations is also conducive to economic growth. Among such spending is that for education and health. Mr. Lindert argues firmly that under comprehensive public health programs, people are healthier and live longer, which also makes them more productive. He cites a study by the economist Zeynep Or for the Organization for Economic Cooperation and Development that finds that in nations where a higher proportion of all health outlays are public, life spans are significantly increased. [Maybe someone should also ask Greenspan why millions of workers should be forced to give up their retirement benefits and health care, while insurance corporation CEO's walk away with half the profit personally or more each year. Or why we shouldn't expect to get our health care expenses covered at least for the millions that have been extracted from workers by the dramatic shift in taxes and compensation since the 1970s. Not to mention the $900 BIL stolen from workers by the tax change wrought upon us in 2002.]

Based on an April 15, 2004 article in the NY Times business section, by Jeff Madrick

QUESTION: How about the added expense of increasing nurses pay and benefits now to resolve the nursing shortage, that won’t save any system money?

Good example, here’s a problem that costs American lives, raising medical errors and malpractice premiums and endangering all patients, all so that hospitals can be run for profits and to stay ahead with insufficient reimbursements from insurers (taking out their huge profits). Read more about the “nursing shortage” hoax. How much our health care CEO’s and policy leaders care about the quality being offered to most Americans is well-demonstrated by the growth of HMO bean counters to nurses in the last several years. Insurance companies are collecting up to 22% as overhead (not going to patient care) compared to 2-3% for Medicare.

QUESTION: What exactly are the estimated funds needed to take care of the health needs of all the uninsured anyway?

Let us make the simple straightforward explanation here. In 2001 14.1% of the US GDP (gross domestic product) was spent on health care (an enormous percentage of GDP compared to any other country). In 2005 it was projected that by 2015 we would be spending a whopping 19% of GDP on health care and a year later that was already increased to an estimated $4.3 TRIL annually by the year 2017. A recent Institute of Medicine (body of our National Academy of Sciences which often is commissioned to advise the government) found that an increase of merely 0.4% (to 14.5% of GDP) would be adequate to cover all health care expenses of the currently uninsured.

This estimate is based on the costs (at current prices) for the health care. It does not include huge profits, benefits and salaries that could be siphoned off by unecessary middlemen (insurers, insurance brokers, insurance adjusters, insurance marketing, claims appeal officers etc. ). We could also simply compare the GDP costs in health care in the USA to those in Canada (although unfairly to Canada since all Canadians are covered for their health needs). The excess cost in the USA which could otherwise be put into improved quality, public health programs for improved health outcomes, is close to the sum wasted on excessive administration (excess administrators, bean-counting, redundant qualification determinations and egregious salaries and profits). Or consider the excessive administration and bill collecting for just US hospitals.

Also see the preceding answer indicating possible NET SAVINGS while still insuring everyone. Years after we wrote the preceding sentence other experts have similarly predicted that we may well be confronted with having to figure out what to do with substantial savings subsequent to enacting UHC, in fact maybe $ 1.4 TRIL over the course of ten years. Of course it’s difficult to improve health care for most Americans, while the richest handful of Americans are being freed from paying their share of taxes (USA last 25 years).

QUESTION: Isn’t one of the largest impediments to affordable health care the enormous salaries that doctors are making? And that won’t improve with universal care.

First of all it strikes us a little wierd how often this kind of thinking comes up given that another main criticism of UHC is that it represents some kind of communist plot or “socialized medicine”. Nonetheless it is a legitimate question given common misconceptions displayed in forums from mainstream press to internet chat rooms.

Physician fees are, in fact, not a major factor in the cost of health care for this nation. Only 22% of the nation’s total medical bill is attributable to MD expenses and these expenses include clinical expenses such as lab, x-ray services, or equipment and also all administration inside the practice (billing,insurance claims,reception etc.). Here is the breakdown:

Hospital care, 33%

Physician and clinical expenses, 22%

Other spending (dentists, durable and non-durable equipment, public health), research and construction, 24%

Nursing homes, 7%

Prescription drugs, 6%

Government administration and and “net cost”, 6%

According to Cathy A. Cowan, et al. ,”National Health Expenditures, 1999.” HEALTH CARE FINANCING REVIEW. 2001(Summer ); 22(4):77-110.

Not only are physician salaries a modest portion of overall spending (entire physician clinical expenses are only 22% and we doubt half of that is physician salary), but as we watch our health expenditure rise to 19% of GDP in the next several years, while we are content to leave overheads of 22% in tact, it’s foolish to think that a main problem is that any of the people actually providing care are a major “unnecessary loss” to the budget.

QUESTION: Are you saying that there aren’t some physicians commanding salaries in the $500,000/ yr range?

No, we’re certain there are some and most of these are primarily working in administration of hospitals, health plans or other private commercial ventures (not primarily providing health care to patients). Others earning at this level or near this level are likely to be either working in health care of the affluent, or are truly exceptional physicians and specialists (rare in their experience and talent and therefore highly sought after by patients, drawing patients and fame to their hospital or clinic).

If health insurance CEO’s can put away tens of millions individually in compensation each year (or in some cases more than $1 Billion), why shouldn’t someone highly skilled and directly responsible for saving many lives make half a million? And if you think these millions socked away by health insurance CEO’s are tremendous, then maybe you should consider the compensation and stock options given to CEO’s of the five leading pharmaceuticals. Now where could our health care dollars be disappearing to? Even more striking is the tremendous and frightening increase in the army of health care administrators and bean counters. And for all the money which the middle layer of health insurers are siphoning away and out of the system (not providing any care or treatment with) they continually are caught cheating not paying for what they have promised to pay out on, these lapses become further public subsidies in public spencing on keeping hospitals operating and making up for “uncompensated care” at hospitals.

But these are just pennies in relation to the stacks of cash that have been getting spirited away from workers portion of the GDP since the 1970′s. If you don’t know anything about the recent and current “highway robbery” you can’t ethically discuss what the victims should be allowed for their very lives while you allow the thieves to waltz away in broad daylight.

QUESTION: Wouldn’t one simple solution to the reorganization of our health care system, just to offer the same benefits to all Americans as are offered to federal employees and add the tax support that’s needed to make it affordable to low-income Americans?

Yes, that’s one approach, but not such a good one according to some. For example, Don McCanne 2003 President of PNHP states that although FEHBP, the health care coverage that members of Congress have. has been touted as the ideal model of reform. While it is the largest and most effective of existing programs, it does use private insurers and contains wasteful administrative excesses and with inequities that are inevitable when depending on a variety of plans with variable benefits, pricing and availability. In contrast, an equitable program of social insurance would significantly reduce administrative costs thereby making affordable truly comprehensive benefits for everyone.

Why do we continue to support extreme models of reform, such as the FEHBP proposals, when our own simple program of social insurance (improved and expanded Medicare) would provide affordable, equitable and comprehensive coverage for everyone? [2% administrative overhead vs. the 10-15 % of FEHBP] Do we really have time to fool around while waiting for our national health care costs to climb to $4 TRIL or 19+ % of GDP?


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