A Medical Mount St. Helens Health care in the U.S.

Despite Managed Care, health care costs since 1999 have consistently risen on average more than 10 percent each year. Premiums paid to health insurers have been rising even faster since Bush took office, in the double digit range every year, and in the last 3 years between 13-14 percent each year on average. 

Shifting the Costs 

T he vice-president of the Health Research Education Trust, Jon Gabel, pointed out, “Insurers are now adding to their profitability. In fact, I believe profitability is as high as it’s been since the mid-1990s.” One of the largest health insurers, Blue Cross-Blue Shield, which covers one of every three people with health insurance in the U.S., doubled its profits in 2003 with premium increases ranging from 10 percent to 16 percent, in the process increasing its surplus by $8 billion and reserves on hand another $32 billion. 

Premium increases of 13-14 percent a year are, of course, at the low end, charged to the largest companies with some leverage to negotiate with insurance giants like Blue Cross-Blue Shield, Aetna, Cigna, and others. Smaller companies with 100 or even 200 employees often experience premium increases of 20-25 percent a year. The forecast for 2005 is for the largest companies to pass on yet another 13.7 percent increase in premiums. 

The annual 10 percent health care costs and the 13-14 percent for health insurance premiums dwarf the rate of inflation or the gains in workers’ earnings—both of which have been averaging barely 1-3 percent the past 4 years. But despite these minimal pay gains, the policy of many companies during the Bush years has been to shift the costs of the record double-digit increases in health insurance premiums to their workers. 

As reported by the Kaiser Family Health Foundation, premiums for workers with families increased by 49 percent from 2001 through 2003, and for single workers by 52 percent. Translated into real dollars, a married worker with a family paid premiums amounting to $2,512 on average in 1988; a single worker $872 on average. By 2000 the cost of the family premium had risen to $6,438 and by 2003 to $9,068. For the single worker it was $2,471 and $3,383 respectively. 

A recent survey by Fortis Health, a company that sells health savings plans, showed that an average employee’s share of rising premium costs has risen by more than $1,000 a year since 2000. 

Companies who forego shifting health care costs directly to workers in the form of higher premiums often use a more indirect approach to pass on the rise in costs to their employees. The favorite means are increasing co-pays, raising deductibles, hiking co-insurance charges for spouses and children, reducing ceilings on payments, or otherwise placing restrictions and limits on certain frequently used procedures. All examples of what experts call targeting “first dollar” health costs. 

The preferred approach with regard to co-pays is to raise the employee’s share of a doctor or hospital visit from what was typically 10 percent or 20 percent in the past, to 25 percent or 50 percent today. Or raising the dollar ceiling of out of pocket expenses before major medical coverage kicks in, from the typical $5,000 in the past to $10,000 before co-pays are no longer required. Or, in another typical example, instead of paying a $10 co-pay for a drug prescription written by a doctor for a 6 month period, making the employee come in every month and pay the $10 for a month’s supply at a time over the 6 month period. 

Among deductibles the trend of late has been to raise what was once a $100 per year deductible for employees and $150 or $250 deductible per year for dependents, to the now more typical $250 for employees and $500 for dependents. 

The ceilings and limits game often involves putting a money cap—or lowering the ceiling on a maximum annual payment—for a frequently used medical procedure. Typical are limits on payments for MRIs, CT scans, and blood tests. One-third of working age adults (57 million) in the U.S., have some kind of long term illness such as heart disease, diabetes, asthma, or other chronic condition requiring repeated medical procedures. Thousands die each year when employers agree to ceilings, or lower those payment ceilings for such procedures. 

An increasingly favorite use of ceilings is the case of retirees’ health benefits. Ceilings on retirees benefits first became popular in the early 1990s. Where ceilings on payments did not exist they are now being applied; where they did exist previously they are being lowered. Ceilings for retirees are particularly attractive for companies. They allow a company not only to reduce spending but also the amount saved (because of certain allowable corporate accounting practices) becomes instant income added directly to the company’s bottom line.

Any combination of the above—higher premium payments, co-pays, deductibles, limits on procedures, ceilings—can quickly add up to a significant total shift of health care costs from employers to workers. Any one of the devices for shifting costs easily more than negate the annual average 2 percent increase in hourly earnings workers have been getting the past 4 years.  

Deteriorating Quality of Health Care 

I n 2004 the total bill for health care is estimated to cost $1.79 trillion. The United States spends more than 15 percent of its Gross Domestic Product (GDP) on health care, more than any other industrialized country. Switzerland and Germany spend less than 11 percent. Canada and France less than 10 percent. The average is 8 percent. 

A study in the Journal o f the American Medical Association in the summer of 2000 reported, “Of thirteen countries in a recent comparison, the U.S. ranks on average 12th out of 13 for 16 available health indicators.” Among some of the indicators, the U.S. was 13th in years of potential life lost; 11th in life expectancy for females; 12th in life expectancy for males; and 13th in infant mortality. According to the study’s author, Dr. Barbara Starfield of Johns Hopkins School of Medicine, by 2004 “It’s getting worse” and, as she put it, “The findings are so robust that I think they’re probably incontrovertible.” 

A more recent study in October 2004 ranked the U.S. tied for 36 out of 52 countries in the category of infant mortality, with Cuba and Slovakia, and below Malaysia. Another study done in 2003, based on data from a survey of 513 health care plans covering 71 million Americans by the National Committee for Quality Assurance, found, “More than 57,000 Americans die each year due to lack of health care.” Still other studies estimate as many as 98,000 die each year due to medical errors. 

Companies not willing to absorb the cost of accelerating health care premiums—or unwilling to bother to play the shell game of raising co-pays, deductibles, lowering ceilings, etc.—are choosing to stop providing coverage as a way to cut costs. 

More workers, for example, are being required in recent years to pick up the entire cost of their dependents’ coverage. Or in cases where there is no union contract, companies are choosing to give the employee a lump sum monthly payment equivalent to the health insurance premium it once paid and then let the employee go and find his or her own health insurance. The cost in terms of health premium payments is thus frozen for the company at that last level. The worker assumes all future premium cost increases. 

Another significant area of declining health care coverage involves retirees again. This particular trend is taking place predominantly within larger corporations, those with more than 200 employees. In 1988, roughly 66 percent of large companies provided health coverage to retirees; by 1996 only 46 percent; by 2000, 39 percent; and in 2002 the percentage declined to only 34 percent. In smaller companies with fewer than 200 workers, the coverage for retires fell by 2002 to only 5 percent. 

Where employer-provided retiree coverage still remains, companies are drastically reducing or even eliminating coverage for retirees, such as recently announced in September by the telecom equipment giant, Lucent Corp, and by major airlines like United, Delta, and US Airways, by IBM, and soon by other major corporations like AT&T. 

The number of retirees and their dependents thus losing, or about to lose, coverage is likely in the tens of thousands. Moreover, the pace of lost coverage for retirees is likely to quicken. Hidden in the nearly 700-page corporate tax cut bill, recently passed by Congress this past October 2004, are provisions for incentives that encourage large corporations like Lucent and others to cut retirees benefits and coverage even more. 

The declining coverage problem is no less dramatic for workers still on the job, not yet retired. From 1993 to 2003 the percentage of full-time workers in the U.S. covered by an employer provided medical care plan declined by 17 percentage points, from 73 percent to 56 percent. Only 36 percent of full time workers in companies of less than 100 employees had any medical coverage by 2003. And only 9 percent of the more than 30 million part time workers in the U.S. had any medical coverage. 

Expressed in non-percentage terms, for the period since George Bush took office, between five and six million workers lost their employer provided health insurance. Of this total, approximately three to four million still had jobs and either lost health coverage due to employer initiated action, or else they dropped it themselves because of the inability to afford the rapidly rising costs being shifted to them. 

Following the 2004 elections the situation for active employees also promises to worsen. Since the last decade there has been a rule in effect, which allowed corporations to arbitrarily and unilaterally transfer funds from their employee pension plans and use those funds to pay for health care, in effect partially absorbing their rising health care costs. While these transfers often served to undermine the financial stability of employees’ pension plans, they were successful in softening for a time the impact of rising health care costs for many companies. However, the rule has limits. Companies can only transfer funds to cover up to 20 percent of rising health care costs and, once a transfer is made, they have to wait five years before making another transfer. Many companies thus exhausted this 20 percent transfer rule during Bush’s first term, 2001-04. 

According to Hewitt Associates, a leading health care and human resources consultant group, employee contributions to their health insurance plans are projected to increase by 15 percent across all plans, HMO or PPO. As even the Wall St. Journal recently admitted, for 2005, “employers concede that they are shifting more health care costs to workers and there is little letup in sight.” 

The Bush & Centrist Solutions 

G eorge Bush’s answer to rising health care costs is that “frivolous lawsuits” by consumers of health care services are the primary culprit behind rising health care costs. His solution, therefore, is to reduce medical malpractice suits. The implied, erroneous assumption is that health insurance companies, hospitals, and pharmaceuticals will then pass on their cost savings in lower prices to consumers and not continue raising prices and pocketing the profits—which will likely be the case.

In addition, Bush wants people to set up individual Medical Savings Accounts (MSAs) with which to buy health care services—in effect allowing another big middleperson, in this case the banks, the opportunity to swill at the health care trough. MSAs are one of many recent Bush initiatives designed to divert workers’ pay to banks, Wall St., and other financial institutions that manage such accounts, skimming lucrative fees and other charges off the top for their services. MSAs are the forerunner to recent Bush initiatives to set up similar Retirement Savings Accounts (RSAs) to siphon off Social Security payroll taxes to the benefit of those same financial institutions. Both MSAs and RSAs represent the on-going Bush-corporate offensive to privatize both Medicare and Social Security. 

For the Bush team the problem is not the price-gouging insurance companies, greedy pharmaceutical companies with expensive bloated lobbies, or the often corrupt for-profit hospital chains like Tenet Healthcare or Health South, whose senior executives and ex-CEOs are currently facing charges of kickbacks and fraud. The problem is the worker, the consumer of health care services, who still has it too good, who has too much health care and is still not paying high enough premiums. 

The story is similar in the related case of prescription drugs from Canada. Bush continues to “study” the problem of ensuring safety for the consumer—as he has done for four years now—when in reality these are drugs manufactured in the U.S., already proven safe, then exported to Canada where they are sold for half the cost across the border compared to their price here in the U.S. While not all the drugs imported from abroad are originally manufactured in the U.S., in terms of their overall dollar value the majority are from north of the border. Those products could, and should, be available for purchase in the U.S. 

Bush’s Economic Report to the Congress declared that the problem of rising health care costs and premiums in the U.S. is that workers “have too much insurance,” not too little, and that they “should be encouraged to enroll in personal health care savings accounts” with even higher deductibles that would promote less unnecessary use of the healthcare system. 

The centrist solution, unlike Bush’s, addresses the problem—but only at the periphery. Centrists—i.e., DLC-type Democrats—propose that the government assume some of the costs of catastrophic care, a move that would provide immediate windfall profits for health care insurers who would be left with the least costly subscribers with the more minimal claims. Catastrophic coverage will also likely encourage health care insurers and providers to actually raise prices if there are no adequate price controls, which centrist’s adamantly refuse to consider. 

Centrists would also subsidize the problem, not resolve the crisis, by including subsidized health care coverage for children, thus rewarding price-gouging insurers, providers, and manufacturers with underwriting and government guarantees at the taxpayer expense for their continued excessive pricing practices. Like Bush, Centrists also take the position that malpractice is a major contributor to the crisis, although they admit at the same time that malpractice accounts for only one-half of one percent of the annual cost increases for health care. 

To their credit, and unlike Bush, centrists generally agree to allow consumers access to Canada’s lower cost brand drugs. But neither the centrist nor the Bush proposals address the fundamental problem of the health care crisis in the U.S. 

Financing a Real Solution to the Crisis 

I f the U.S. today spends $1.79 trillion a year, or 15 percent of its GDP, on health care, but countries like Canada, Germany, and others with single payer universal health care systems spend only 8-11 percent, the U.S. should be able to reduce its current $1.79 trillion cost by at least a third, from 15 percent to 10 percent, by moving to a single payer system as well. That’s $600 billion a year from eliminating the layers of unnecessary administrative costs and profit gouging now plaguing the system. 

The remaining $1.2 trillion a year could be raised in other ways. First we could restore the stolen Social Security surplus. Twenty years ago working people in the U.S. were burdened with the 12.4 percent payroll tax on their incomes, plus the prospect that the income base on which that 12.4 percent applies would rise annually to some indeterminate level. Today that base is nearly $90,000 a year and still rising. The promise at the time was that this tax, earmarked to save Social Security, would guarantee Social Security until at least mid-next century for them and their children. 

In 1992 politicians promised once again, as revenues and huge surpluses began to appear from the payroll tax, that there would be a lock box on these revenues to ensure their use only for Social Security and not for other uses by the federal government. Once again, in 2000, presidential candidates Bush and Gore swore to the U.S. public the surplus generated by the payroll tax would be locked away solely for uses related to Social Security. But as they spoke, both candidates knew, as had members of Congress since the early 1990s when they first promised the lock box, that the surplus from the payroll tax was being permanently “borrowed” every year and that the $1.4 trillion surplus was being spent annually to pay for a growing defense budget and tax cuts for corporations and high income individuals.

Were the $1.4 trillion restored to the Social Security fund, as originally intended by law, roughly $100 billion a year of earned interest could be earmarked for financing single payer health care for everybody in the U.S. All that is required is for the U.S. government to issue bonds in the amount of the $1.4 trillion and place that amount in a special fund within Social Security dedicated to universal health care services. 

An additional $350 billion a year in revenue could be raised by requiring the wealthiest 10 percent of taxpayers, the 11.3 million who now earn more than $103,000 a year, and the millions more earning between $90,000 and $103,000, to pay the same 12.4 percent payroll tax on all their gross income—just like the more than 100 million taxpaying household now earning less than $90,000 a year pay on virtually all their incomes. If more than 100 million working people in the U.S. who earn virtually all their income from wages and salaries now pay a 12.4 percent payroll tax on all their incomes, why shouldn’t the top 10 percent income bracket, who earn more than $384,000 on average, also pay the same? If all people in the U.S. paid 12.4 percent, another $350 billion a year could be raised and dedicated to a special universal health services fund within Social Security. 

If  those with earnings over $90,000 were also required to pay the Medicare tax on all their gross incomes, the 12.4 percent payroll tax figure would increase to 15.3 percent, and provide an additional $75 billion a year in dedicated revenue. 

In addition to the above $525 billion a year that could be raised by reforming the payroll tax system by making everyone pay the same percent of their income, and from restoring the $1.4 trillion Social Security surplus, another $275 billion a year could be raised by closing corporate tax loopholes, restoring historical rates on corporate and wealth taxes, eliminating current corporate and individual tax shelters, and for the first time strictly enforcing the foreign profits tax that U.S. companies are required by law to pay, but do not, on earnings from offshore operations. 

Various independent sources estimate changes in these areas would conservatively generate another $275 billion a year. 

Single payer, universal health care should not necessarily mean government payments for any and all services without reasonable controls. There is thus a role for reasonable deductibles, co-pays, and similar cost control measures in a universal single payer plan.  The problem is that such measures are not being employed primarily for cost control, but as means to shift costs and subsidize corporate profits performance at the expense of employees. 

Another $400 billion a year could therefore be raised by maintaining, at much reduced levels, reasonable deductibles, co-pays, and other cost control measures to ensure unnecessary wasteful use of the system’s services did not occur. 

Health care in the U.S. is a landscape of devastation and barrenness not dissimilar to that gray, desolate, ashen-covered mountainside laid bare by the eruption of Mount St. Helens in Washington State 24 years ago. Except now it is not millions of trees that have been torn up, flattened, and scattered. It is the lives of tens of millions of workers and their families. The magma rises. The mountain groans and shakes, awaiting the next inevitable eruption.