Behind the White House Medicare plan
Bailout for health-care profiteers
By John
Catalinotto
In early July, President Bill Clinton announced plans to use
expected federal budget surpluses to fund Medicare, the
government program providing health insurance to 34 million
seniors and 5 million people of all ages who are permanently
disabled.
At the same time insurance companies and health maintenance
organizations announced their own plans to abandon many
Medicare patients whose coverage has proven less profitable
than expected.
To evaluate the impact of the new Clinton proposals, we
should first examine the different components of the
profit-oriented medical-industrial complex, along with the role
of the capitalist government. The working class--which makes up
the vast majority of health-care consumers and direct
providers--is on the other side of the barricades, as
usual.
The workers produced the budget surplus in the first place,
through taxes withheld from their income. The question really
is how much of the surplus will go back to the working class
under the Clinton plan.
The administration bases its budget plans on optimistic
assumptions of continued economic growth. Clinton proposes
using about $900 billion of a projected $6-trillion budget
surplus over the next 15 years to bolster the program.
Clinton's plan also includes providing $118 billion over 10
years, starting in 2002, for outpatient prescription drugs for
Medicare members. The need is desperate in this area, since
prescription drug costs rose 85 percent from 1993 to 1998 and
now can reach thousands of dollars a year for anyone with a
chronic ailment. Many people who require such medications are
unable to pay for them without depriving themselves of food,
clothing and/or shelter.
The medical-industrial complex includes the vastly
profitable pharmaceutical monopolies and the medical equipment
manufacturers, the for-profit hospital chains like
Columbia/HCA, and the health maintenance organizations and
health-insurance companies.
While these monopolies are sometimes in conflict with each
other over the loot, they are all driven to try to maximize
their profits. This drive for profit will often increase
medical costs, deprive patients of care or pressure health-care
workers to work harder or for less pay. The owners all want
health care to remain a private enterprise with no control by
workers or even by the capitalist government.
They all claim that the profit-driven capitalist system
provides the best health care. But the facts show the opposite:
that the drive to maximize profits hurts health care for
everyone, including those covered by Medicare.
U.S. pharmaceuticals make the highest reported profits of
any U.S. industry. They have withstood all the 1990s efforts to
control prices. Drug costs went up 17 percent in 1998
alone.
Drug pushers rake it in
A close look at the industry shows that it puts more energy
and genius into marketing and pricing for maximum profits than
into discovering new wonder drugs. These monopolies even charge
vastly different prices for the same drugs in different
countries, with some drugs priced three or four times higher in
the U.S. as in Canada.
The pharmaceuticals claim they need the high prices to pay
for research costs--which they estimate will be $24 million in
1999. But many public health experts believe these costs are
inflated and point out that often government-financed research
is turned over to private drug corporations, who then rake in
high profits on a patented drug.
In addition, these corporations spent $10.8 billion on
advertising alone in 1998, and another $74.8 million to lobby
the federal government. This does nothing to improve health
care. It just adds to the price of the drugs.
An article in the July 19 Nation magazine illustrates how
the profit system distorts research. It points out that drug
companies could produce--at extremely low cost--an
anti-malarial drug that could help half a billion people
worldwide battle a serious disease. But they can make vastly
higher profits researching anti-anxiety medicines for pets,
ointments like Rogaine to combat balding and Botox for face
wrinkles, and Lamisil to eliminate toenail fungus.
Meanwhile, many people cannot pay for the drugs prescribed
for them. Individuals pay more than half of all prescription
drug costs out of their own pockets. At least 19 million
seniors have no insurance for prescription drugs.
Even if Medicare paid all or most costs of prescription
drugs, other steps would be needed to stop the pharmaceuticals
from raising prices. Otherwise--given the great disparity in
income under U.S. capitalism--some people would again be unable
to buy the medications. Clinton's proposal would have Medicare
pay only about half the costs.
HMOs and insurance firms
For-profit HMOs--often merged with insurance companies--were
supposed to bring about better, cheaper health care. They were
going to eliminate unnecessary medical procedures, put more
emphasis on public health and preventive care, prevent fraud,
encourage the use of generic drugs in place of brand names, and
pressure health providers to cut costs and work more
efficiently.
For Medicare coverage the government pays the HMO a fixed
amount--dependent on location--and the HMO in turn is supposed
to provide for all Medicare-covered procedures. For example, at
first HMO executives believed that if they were paid $600 per
person per year, they would find a way to have it cost them
only $400 and make $200 a person. They then signed up as many
people as possible, so that now HMOs cover about 6 million of
the 39 million Medicare beneficiaries.
Insurance companies also provided supplementary insurance to
Medicare beneficiaries.
It turned out that while the HMOs could honestly eliminate
unneeded treatments, etc., the savings this brought about were
limited. The real cost-cutting came from cutting wages of
health-care workers, forcing doctors to spend half their time
filling out forms or arguing their decisions, and--most
important--denying medical care.
Doctors--who in the U.S. traditionally operate as small
entrepreneurs and are often very conservative and
pro-capitalist--have more and more turned into employees of
hospitals and HMOs. Some have even begun to think of themselves
as workers--albeit quite privileged--and to join unions. This
development is still in an early stage.
But then HMO beneficiaries rebelled against the denial of
benefits and demanded legal protection, like the "Patient's
Bill of Rights" now being discussed in the U.S. Senate. To
defeat such bills, in 1998 insurance companies spent $60
million in lobbying.
This July 1 HMOs and insurance companies announced plans to
withdraw coverage or to raise premiums substantially on plans
tied to the Medicare program.
Overall, the American Association of Health Plans said July
1 that "at least 250,000 Medicare beneficiaries would be forced
out of Medicare managed-care plans for the year 2000,"
according to a July 2 Reuters health report. In 1998, plan
exits led to 400,000 Medicare beneficiaries losing coverage and
looking for it elsewhere. The AAHP claims its members are doing
this "due to insufficient government funding," a statement the
government denies.
The report adds that "1.5 million beneficiaries will likely
have a premium increase next year and nearly 60 percent of
Medicare managed-care enrollees will have a reduced
prescription drug benefit."
For-profit hospital chains
Another sector trying to get rich from health care is the
for-profit hospitals. One of the worst
examples--Columbia/HCA--was being investigated in 1997 by as
many as 700 federal agents for criminal fraud, mostly in its
cost reporting and billing practices for Medicare.
The Service Employees International Union accused
Columbia/HCA of chronic understaffing and "patient dumping" at
its hundreds of hospitals and home-care centers.
Hospitals in general have tried to reduce their costs by
cutting staff, especially in the non-daytime hours; outsourcing
work that used to be done by unionized hospital employees in
departments like laundries and cafeterias; and merging with
other hospitals to try to gain efficiency and to monopolize a
geographic area.
Because HMOs and insurance companies will often put a
maximum on the number of in-hospital days for a given
condition, hospitals will push patients out as soon as it is
medically possible. And more surgery is done without admitting
the patient to the hospital at all. The result is that many
patients--even those without persisting medical problems--must
depend on friends and family for additional care while they
recover their strength.
With insurance companies and HMOs questioning and refusing
hospital bills, however, the real energy and ingenuity of
hospital management has gone not into providing care but into
creative billing. A gross example of this is a practice
insurance companies call "unbundling."
In one typical example of unbundling, a hospital ordered a
"Chem 20" blood test for a 55-year-old woman undergoing
relatively minor outpatient surgery. This test is familiar to
"ER" viewers throughout the country. Using one tube of blood,
it automatically returns 20 blood chemistry readings.
Inexpensive to administer, it is often billed at $35 to
$50.
But the hospital billed it as 20 different tests, charging
$11 to $18 for each one and $60 for a "Beta sub-unit"--a
sensitive pregnancy test. When the insurance company paid for
only about 60 percent of the $400 total costs, the hospital
tried to bill the patient for the rest. Questioned about why a
55-year-old was given a pregnancy test, the hospital
administrator quickly canceled the outstanding bill.
Role of capitalist government
The government in Washington is the central committee
organizing and protecting the interests of the capitalist
class. As such, it collects tax revenues--almost all from
workers' wages--and uses the money in defense of the
capitalists' interests.
With Clinton's Medicare plan, some of the expected surplus
in tax income would be used to provide some of the Medicare
health costs, including those for prescription drugs. Given the
structure of the U.S. capitalist health-care industry, these
funds would also bail out the HMOs and health-insurance
companies that have failed to contain health-care costs through
the capitalist market. And they will allow pharmaceutical
companies to continue raising their prices.
A real improvement in health-care accessibility requires not
only additional funds but also controlling unnecessary
costs--the billions that go for profits, princely CEO salaries,
high administrative costs.
The tug of war that goes on can only ultimately be resolved
in favor of the masses by a great struggle to remove health
care and the industries connected to it from private ownership.
In other words, real socialized medicine. As it is, health care
today is socialized in the sense that it is delivered by vast
institutions instead of little private practices, but almost
all its elements function for profit. Private ownership weighs
it down like iron chains.
Congressional Republicans counterpose to Clinton's plan a
campaign for a cut in taxes--on the rich--and even more
military spending, giving more of the national income to the
military-industrial complex.
A political problem Clinton may have with his plan is
that--like his original plan for national health insurance in
1993--it may not offer enough to spark broad popular support.
With a furious industry campaign against it, that plan failed
to pass, and now the original 40 million uninsured people have
become 43 million, with tens of millions more underinsured.
To win improvements, health-care workers will have to join
with patient groups and fight for their own demands--not rely
on the Clinton administration to take the initiative.
The writer has worked for 20 years in actuarial
departments of insurance companies. Most of the numerical data
is from a series of articles on "The American Health Care
System" in the New England Journal of Medicine in January
1999.
This article is copyright under a Creative Commons License.
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