Progress Now Action

The U.S. spends on average twice as much on health care as other industrialized nations, and has overall worse outcomes. Paul Krugman’s & Robin Wells’ commentary ("The Health Care Crisis and What to Do About It," The New York Review of Books, 3/23/06) attributes the U.S. health care crisis to high dependence on fragmented, for–profit private insurances, hospitals and numerous middlemen that add health costs without adding value. Noting "the strange persistence, in the teeth of all available evidence, of the belief that the private sector can provide health insurance more efficiently than the government," Krugman and Wells remark that free-market ideology is "wholly inappropriate to health care issues." As many observe, health is not a commodity, like a car or house.

Factors of declining U.S. health care:

•      -Washington and the Bush administration are in thrall to insurance and drug industry lobbyists.
•      -The privatization-for-profit increases the fragmentation of U.S. health care, swelling the ranks of the uninsured.
•      -Commercial insurance has abandoned the principle of shared risk, shifting more risk to consumers, and has adopted the principle of adverse selection to guarantee profits for shareholders.
•      -Private insurances continue to skim over 20 percent of costs for profit and CEO salaries.

Employer-provided health coverage is unraveling, as U.S. health costs rise twice as high as inflation and 4 times faster than wages, prompting more employers to reduce/eliminate health coverage.

Medicaid rolls grow, as Medicaid picks up the slack from the unraveling system of employer-based insurance.

•      -Medicaid is particularly vulnerable as a means-tested program – its consituency is not politically powerful.
•      -Authors: "Funding for Medicaid depends on politicians' sense of decency, always a fragile foundation for policy."
•      -States fund an average 40 percent of Medicaid – unable to operate at a deficit, states are squeezed by growing Medicaid costs.
•      -Attempts to privatize Medicaid for profit – states like South Carolina are seeking federal waivers to offer recipients vouchers for purchase of private insurance – certain to be inadequate for many.

So-called ‘consumer-directed’ health plans requiring higher out-of-pocket medical expenses are not a cure.

•      -Health Savings Accounts (HSAs) serve as a tax break for the rich, but do nothing for the lower income.
•      -HSAs undermine employment-based health care, encouraging adverse selection – HSAs are attractive to healthier individuals, tempting them to opt out of company plans, leaving them less healthy individuals.

The authors cite a large body of evidence indicating that public insurance of the kind in many European countries achieves equal or better results at much lower cost.

Unfortunately, political will is lacking. Krugman and Wells call it "politically smarter" and "economically superior" to educate voters about the huge advantages of a single payer system, than to merely attempt to coopt the drug and insurance lobbies by writing them into compromise plans that they will likely oppose anyway. Alternatively, say the authors,"things will have to get much worse before reality can break through the combination of powerful interest groups and free-market ideology."

Everything speaks to the need to grow a grassroots movement in order to overcome the powerful insurance and pharmaceutical lobbies that write policy, as they did Medicare prescription drug reform, with billions of dollars of subsidies and inflated profits to enhance their bottom lines.