People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 15

April 11, 2010

No We Cannot!

Obama Flounders Trying to Change Health Care in the US


Amit Sen Gupta


�Yes we can�. This was the slogan that galvanised millions of Americans and voted Barack Obama into the White House in 2008. A rainbow coalition of Americans, representing the working people, people of colour, hispanics and Asians � traditionally sections that have lost out while pursuing the great �American Dream� � thought they were voting for a different America. They believed they were voting to start a process that would dismantle an apparatus that thrived on exploitation and greed.

Perhaps nowhere is the evidence of crass greed taking precedence over peoples needs more apparent than in the health care system in the US. That is why one of the major planks of President Obama�s election campaign was a reform of the health care system in the US. In the past year, the Obama Presidency has been engaged in cobbling together a package of reforms for the US healthcare system. The efforts culminated in the signing of two bills in March this year. The Patient Protection and Affordable Care Act (known as the "Senate bill"), became law on March 23, 2010 and was shortly thereafter amended by the Health Care and Education Reconciliation Act of 2010 which became law on March 30.

Is this the reform that people were looking for when millions cheered on President Obama in his victory ceremony? By all accounts, the answer would be a resounding no! Who are the people who are cheering from the sidelines? We do not see the same faces that cheered on President Obama as he swept towards victory. In fact President Obama�s approval ratings are at an unprecedented low. Instead the cheers are led by a very different kind of constituency � the American Medical Association, the pharmaceutical industry, and the Insurance Industry.

So what went wrong? Why this gap between rhetoric and delivery? To find some answers we need to first understand how much of a problem healthcare is in the United States and how it is organised.





Health care in the US is the most expensive in the world � the country spends a greater portion of its GDP on health than any other country. It is estimated that spending on health care in the US is about 16 per cent of its GDP. In 2007, an estimated $2.26 trillion was spent on health care in the United States. Further, health care costs are rising at a rate that is much higher than the inflation rate and it is projected to reach 19.5 per cent of GDP by 2017. We can look at this figure in another way � total health care costs in the US is about twice that of India�s entire GDP � which means the US Health Care Industry is twice the size of India�s entire economy! The US also spends the most on pharmaceuticals per capita in the world and the US pharmaceutical market is about 1/3rd of the entire market for medicines in the world.

Yet, this enormous expenditure on health care does not translate into secure care for millions of Americans. In 62 per cent of all personal bankruptcy in the United States, medical debt is cited as a factor -- the biggest single factor of reasons cited. Studies indicate that the number of uninsured in the US (for all or part of the years 2007-2008) was 86.7 million, i.e. about 29 per cent of the US population, or about one-in-three among those under 65 years of age. The important thing to understand is that if you are not insured in the US, you either go bankrupt or die. Only a small percent (mainly the old and disabled and those designated as poor) can legally access subsidised care provided by the government. Well known US academic and health care analyst, Vicente Navarro, estimates that between 18,000 and 100,000 deaths could be prevented in the US if people had access to health care. Moreover, in the US, being insured does not guarantee secure health care. It is estimated that one of every four Americans families have problems with paying medical bills � a majority of whom have health insurance.

The US stands 38th in life-expectancy (i..e. the average number of years a person is expected to live), behind all other G7 countries (Canada, France, Germany, Italy, Japan, UK, US) and even behind developing countries such as Cuba and Chile. In 2000, the World Health Organisation (WHO) ranked the US 72nd by overall standards of health enjoyed by its citizens.





The reason why the US health system is held out as an example of how not to organise health care lies in how it has historically been structured. As we discussed earlier, Americans are already paying enormous amounts to access health care. About 40 per cent of this expenditure is borne by the government and the rest by individuals � directly or through insurance premiums. So clearly, lack of resources is not the constraint. The real reason lies in the way private corporate interests � pharmaceutical companies, insurance companies and health management organisations (HMOs) � combine to make huge profits and undermine the health care of millions of ordinary Americans.

The current system of health care in the US is based on the 1948 Taft-Hartley Act, that gives freedom to employers to negotiate with individual insurance companies. This is very different from the �single-payer� system that exists in most other developed countries � in Europe, Canada, etc. In the latter case the government manages the insurance coverage available, ensures that the coverage is adequate (covers all conditions) and universal (covers all citizens). The US system allows individual insurance companies to negotiate different terms and conditions with employers. Further the US system leaves out a huge number of people who are not employed or whose employers find ways to dupe them and negotiate inadequate deals with insurance companies. A part of this gap is covered in the use by government run health care programmes � Medicare and Medicaid � that target the old (over 65) and the poor, respectively. However the coverage in these cases is grossly inadequate. Those under government schemes have to pay out-of-pocket when their medicines budget exceeds the cap on medicines expenditure. Such expenses are often enormous, given that medicines in the US are about the most expensive in the world.

The US system, thus, depends critically on the negotiating power of trade unions. Typically, packages available where unions are strong (viz. in the manufacturing sector) are comparatively better. This also explains the very wide variation in insurance packages that are available to Americans. Interestingly, the linking of health insurance to employment also compromises the bargaining power of workers, because workers who lose their jobs also lose the health insurance coverage. It has been argued that this phenomenon, in part, explains why the United States is the country with the fewest working days lost due to strikes

There is another side to this form of structuring of the health care system in the US. The insurance and the pharmaceutical industries are the two most profitable industry sectors in the US � in 2008 they had profits of $12 billion and $49 billion respectively. Put in another way � just the profits that the US pharma industry makes is four times the total turnover of the pharma industry in India! Clearly, US drug companies not only exploit patients in other countries, it makes a large part of its profits by consistently over-charging ordinary Americans for every single medicine that they consume.




It is easy to understand the enormous clout of vested interests that have a stake in continuing the present system of health care in the US. America's health care industry is understood to have spent hundreds of millions of dollars in 2009 alone to block the introduction of public medical insurance and stall other reforms. It is estimated that there are six registered health care lobbyists for every member of Congress in Washington.

During the 2008 US presidential elections, the Center for Responsive Politics in the US estimated that (as of February 12, 2008), the insurance industry had contributed $525,188 to Hillary Clinton, $414,863 to Barack Obama, and $274,724 to John McCain.

It is instructive to hear what the pharma industry had to say after the signing of the bill on health care reforms. The Pharmaceutical Research and Manufacturers of America (PhRMA) responded thus: �The legislation, signed into law amid much fanfare on 23 March, is 'not perfect' but represents a step in the right direction by helping to ensure that all Americans have access to high-quality and affordable healthcare�.

Clearly the lobbyists have won, and the American public has lost � once again!




Let us, in the above background, examine the reforms that President Obama has finally managed to push through. His reforms package will cover an additional 32 million Americans who are currently uninsured. Those covered by the government run medicare scheme will not have to make out-of-pocket payments to procure prescription medicines beyond a certain cap. The government run medicaid will be expanded to include families under 65 with gross income of up to 133 per cent of federal poverty level and childless adults. Insurers can no longer deny coverage to those with pre-existing conditions. The uninsured and self-employed will be able to purchase insurance through state-based exchanges and low-income individuals and families wanting to purchase own health insurance will be eligible for subsidies. Those not covered by Medicaid or Medicare must be insured or face fine. Part of the excess costs to the government will be paid for by and extra cess on high income tax payers.

What is however more important is what the reforms package has not done. It has left intact the freedom of employers to negotiate with individual insurers. Its coverage of uninsured people still falls grossly short of the real need. It has no ways to significantly curb the profitability of pharmaceutical and insurance companies. Most importantly, it does not promote a single payer system, and thereby does not curb the power of private insurance and health management companies. Whatever new money is going to be pumped into the system will go to further strengthen the triumvate of insurance companies, pharmaceutical companies and health management organisations.

Seldom has any president in the United States been endowed with so much goodwill at the start of his presidency. Most importantly, this groundswell of support came primarily from the poor working people of the United States. If the Health Care Act is any indication, Barack Obama stands in danger of losing this support faster than he acquired it. He will do well to remember the experience of his Democrat predecessor to the White House � Bill Clinton. The American electorate punished Bill Clinton for reneging on his promises to make America a more humane society � including on his promise on health care reforms. 2012 may well see the same happen to Barack Obama if he continues to remain captive to the system.