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Obama's health insurance reform

The issue of reforming the cruel and wasteful American healthcare system was central to Obama’s presidential campaign – perhaps, indeed, the key to his election. On March 23, 2010, he finally signed into law the long-awaited Patient Protection and Affordable Care Act. Almost 2,000 pages long, it is an extremely complicated document, with numerous provisions on all sorts of health-related topics.

And yet when the hullaballoo died down, it seemed as though nothing in the real world had changed at all. One reason is that most of the Act’s provisions and all of its main provisions (see Table 1) do not come into force until 2014. We will then be legally required to buy health insurance. If we do not, we will be fined.  

 

Table 1. Summary of main provisions of the Patient Protection and Affordable Care Act

1. Certain abusive practices by health insurance (HI) companies will be prohibited – in particular, denying coverage to people with pre-existing conditions, rescission, and imposing lifetime caps on benefits.

2. HI must cover preventive care, but not dental, visual, or reproductive services.

3. With some exceptions for people on low incomes, everyone must buy HI or else pay a fine of $695 per person per year or 2.5% of income, whichever is greater.

4. Employers with over 50 employees must provide HI or else pay a fine of $2,000 per employee per year.

5. The states will set up HI exchanges for the purchase of HI by people who are not covered by Medicare or Medicaid and who are not employed or whose employers do not provide HI.

6. Part of the cost of HI will be covered by tax credits on a sliding scale depending on income. Cost borne by consumers will not exceed 9.5% of their income.

7. Illegal immigrants will not receive any benefits.

8. Main provisions do not come into force until 2014.

What the law does not contain

1. A national HI exchange.

2. A public option as an alternative to private HI schemes.

3. Control over prices charged by HI companies (premiums, co-pays, and deductibles).

4. Lifting of the prohibition on importing prescription drugs.

5. Authorization for Medicare to negotiate lower drug prices.

Estimated cost to government  =  $940 billion over ten years

 

The reform seems to offer working people modest benefits. It promises to extend health insurance to most of those currently without coverage, the exceptions being illegal immigrants and people who defy the law and refuse to buy insurance. To make health insurance “affordable,” the government undertakes to repay part of the cost of premiums (for the poorest, the whole cost) through tax credits, on a sliding scale depending on income.        

However, there will still be several grades of health insurance, ranging from “de luxe” at the top to “standard” and “basic” for those who can afford no better. Low-grade insurance does not provide much more security than having none at all. So a few million people will be transferred from the “no coverage” to the “poor coverage” category. Put this way, it seems a less impressive achievement.

Moreover, even people with the best health insurance are endangered by the system of for-profit healthcare, though in a different way. While people with poor or no coverage are often denied vitally necessary treatment, people with good coverage are urged to undergo unnecessary operations and tests that do more harm than good (for instance, by exposing them to radiation). 

An end to abusive practices?

Obama has made much of the fact that the new law requires the insurance companies to give up certain abusive practices. No longer will they be allowed to refuse coverage to people with pre-existing conditions. For children this comes into effect immediately, for adults in 2014.

Another example is rescission, which means canceling a policy as soon as a major claim is made under it. The new law bans this practice. That certaunly sounds like a very welcome advance. But rescission was already illegal, the only problem being that government regulators failed to enforce the ban. Why should we expect that they will now start to do so?  

The real beneficiaries

The reform leaves in place the inhumane and perverse system of for-profit healthcare. Indeed, it entrenches that system even more deeply. It is a reform not of healthcare, but merely of private health insurance. The health insurance companies have made sure that they are the main beneficiaries of the new law. In exchange for a little more government regulation, they have been handed a greatly expanded captive market, subsidized and enforced by the government.

The second big winner is the pharmaceutical industry. Desperate to find a business interest that would give his reform public support, Obama struck a deal with Big Pharma. The drug companies agreed to sponsor TV ads in support of the reform, but they exacted a high price: Obama had to abandon efforts to save money at the expense of their monopoly profits. Breaking his campaign promises, Obama agreed not to allow Medicare to negotiate lower drug prices and to ban the import of cheaper drugs from Canada, Europe, and elsewhere on fraudulent safety grounds.

The public option (robust or otherwise)

Whatever happened to the much-touted “public option” that was to give us a meaningful alternative and make the private insurance companies face some real competition? Step by painful step, under unrelenting pressure from those same companies, Obama and all the congressional Democrats watered down and eventually abandoned any idea of creating new public health programs or expanding existing ones (see Table 2).

 

Table 2. Retreating from public healthcare in 5 easy stages

Obama’s starting point

Speaking to the Illinois AFL-CIO in June 2003, when he was still only a state senator and did not yet realize that he had a chance of going for the presidency, Obama declared himself “a proponent of a single-payer universal healthcare program.”

Stage One of the Retreat:  2004 – 2008

During this period, Obama hedged and qualified his support for single payer without rejecting the idea in principle. He claimed that if he were designing a healthcare system “from scratch” he would set up a single payer system, but transition from the existing system to the new one would be disruptive. In The Audacity of Hope (2006), he argued that single payer was too left-wing to be politically feasible.

Stage Two of the Retreat:  Summer 2009

Obama’s position at this time was that he did not support single payer but was committed to a robust public option – that is, one available to anyone who wanted it – in order to guarantee universal access and “keep the insurance companies honest.”

Stage Three of the Retreat:  September 2009

Under pressure from the insurance companies, which did not want to have to compete with a public option, Obama now shifted his support to a weak public option. This would be available only to the 5% of Americans currently ineligible for private health insurance and so would not compete with private insurance plans.

Stage Four of the Retreat:  October 2009

Obama now shifted his support from a near-term public option of any kind to “the trigger” – that is, a provision for introducing a public option at some future date if the private insurance companies failed to meet certain (unspecified) targets.

Stage Five of the Retreat:  December 2009

Obama finally abandoned all measures to expand access to public healthcare, including the “trigger” and a proposal to allow people aged between 55 and 64 years to “buy in” to Medicare.

 

Yes, all the congressional Democrats – including every single one of the 46 or 47 “progressives”¹ who – rightly arguing that no reform is better than an extremely bad one – had pledged to vote against a law that did not include a “robust public option.” And when the party leadership demanded their support, they all caved in.

The posse was led by the president’s chief of staff Rahm Emanuel. Not all of the rebels, however, were easy to discipline. Initially, for instance, Dennis Kucinich put up a stout resistance. So he was invited to join Obama on the presidential plane and won over by a personal appeal to help his friend Barack out of a tight spot. Kucinich had too much integrity to submit to bullying but was unable to withstand emotional manipulation.  

Could there be more eloquent testimony to the futility of working for “progressive change” through the Democratic Party? 

The farce of government regulation

What will be the practical effect of the government regulation imposed by the new law? It is too early to be sure, but here is a case study to think about.

The reform gives state governments some power over the level of insurance premiums. Premium hikes sought by a health insurance company in any state have to be approved by the state government, which can refuse to allow increases beyond a certain level. I investigated how the state in which I live (Rhode Island) is making these decisions.

What I discovered is a circular pattern. The responsible state commissioner decides on the basis of analyses commissioned from a research organization closely connected to the health insurance industry – owned, in fact, by a major health insurance company. The result is that government regulation merely enforces the norms already prevailing within the industry. A proposed hike is likely to be disapproved only if it is clearly excessive even in terms of industry norms.     

Basically, the state government serves as a formal channel through which the insurance companies regulate themselves. This farce is already familiar from our experience with government regulation in other areas – notably, the corrupt relationship between Big Pharma and the Food and Drugs Administration.

Corporate lobbyists still supreme

During his campaign, Obama created the false impression that he would greatly reduce the influence of corporate lobbyists. In particular, he claimed that he was relying mainly on small donors, when in fact only a quarter of his funds came from people giving $200 or less – about average for American politicians. He said that he was not accepting money from “Washington lobbyists” – omitting to add that he was accepting money from lobbyists at the state level (in Illinois, Florida, etc.) as well as from employees of Washington lobbying firms. He promised that he would not hire former lobbyists to work in his administration – and then did precisely that. 

One of Obama’s campaign promises dealt specifically with the procedure that he was going to adopt for negotiating healthcare reform:

I'm going to have all the negotiations around a big table. We'll have doctors and nurses and hospital administrators. Insurance companies, drug companies -- they'll get a seat at the table, they just won't be able to buy every chair. But ... we'll have the negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.

What happened? The crucial negotiations took place behind closed doors between corporate lobbyists and leading members of Congress. Insurance company representatives even exercised veto power over whose views could be presented at congressional hearings, almost completely keeping out the numerous advocates of replacing private health insurance by a national “single-payer” system.² Polls have consistently shown at least two thirds of both medical and public opinion in favor of such a system.

The context of austerity

We should not assume that the new law will actually be implemented, at least in its present form. The talk of our rulers and their hired experts has been more and more about “austerity” and, above all, the need to limit government spending and reduce deficits. Moreover, they intend to do this not by increasing taxation of the wealthy or by drastically cutting military expenditure, but at the expense of the “entitlements” of working people (social security, public pensions, etc.). At the G-20 summit in Toronto in June 2010, Obama and his fellow heads of state adopted a Declaration that stated: “The advanced economies have committed to fiscal plans that will at least halve deficits by 2013” – the year before the main provisions of the reform are supposed to come into effect.

In this context, a new expensive entitlements program in the field of healthcare seems highly anomalous. The law, if not abandoned altogether, will surely be amended with a view to large cost reductions. Especially if the route of saving money at the expense of the monopoly profits of the insurance and pharmaceutical industries remains blocked, cost reductions will have to be achieved by cutting back on the government contribution to the cost of premiums (which will have continued to rise rapidly in the meantime). Health insurance is therefore bound to remain beyond the means of many millions of working people.

If despite this people are legally required to buy health insurance, there will be massive evasion of the law. Many people may refuse even to pay the substantial fines imposed for not having health insurance. Putting all these people in jail will hardly help to limit government spending. In any case, the reform will have failed in its ostensible purpose – ensuring “affordable care.” (Its real purpose – giving Obama what can be presented as a victory – has been achieved.)

Why not a national health service?

On the “left” of the healthcare debate are advocates of “real” or radical reform – either “single-payer” insurance run by the federal government, as in Germany, or a national health service, as in Canada and Britain. These systems have various defects, mostly arising out of the capitalist environment in which they operate, but at least they guarantee working people a basic standard of healthcare.    

Despite the widespread popular and professional support for radical reform, these ideas and those who advocate them are systematically marginalized by the corporate media and business-dominated political system. Why should this be? After all, it is often argued, by socialists and others, that radical reform would be in the true interests not only of working people but of much of the American capitalist class (as opposed to sections of that class with a vested interest in the current healthcare system). The growing burden of healthcare costs on the economy would be brought under control, and companies would no longer have to contribute to employees’ insurance premiums. Companies in Britain and Canada, for instance, seem quite happy with the national health service in those countries.

So why does big business not promote real reform? This is the question that Doug Henwood explores is Issue No. 120 of his Left Business Observer.

Some analysts point to a “web of influence” – the interlocks (overlapping membership) between the boards of directors of insurance and other companies and the role of insurance companies as a source of finance for other companies. Henwood presents detailed evidence to show that these are not very significant phenomena.

Drawing on the testimony of researchers who have interviewed top executives on the issue, Henwood states that some (perhaps even many) executives support “single payer” in private but are reluctant to make their views public for two reasons.

First, they worry about the possible reaction of other firms with which they do business. Small companies especially are considered hostile to “single payer.” They do not stand to gain in terms of costs because they do not provide HI to their employees, while they would have to bear part of the additional tax burden. So they would see radical reform as an attempt to shift costs from big to small business.

Second, they are afraid of “encouraging would-be expropriators.” One informant puts it this way: “If you can take away someone else's business -- the insurance companies' business -- then you can take away mine.” Henwood adds that “employers like workers to feel insecure. Fear of losing health coverage makes workers less willing to strike or to resist pay cuts or speedups.”

So capitalists believe that a national health service would entail economic costs as well as benefits, while they view the elimination of private health insurance as a long-term political threat to their class rule. Whatever others may think they should think, they themselves do not think that a national health service would be in their interests. Otherwise we would have had one long ago.

 

Notes

1. Sources disagree on the exact number of the rebel Democrats.

2. Participants in the American debate seem to assume that a national health service would completely displace private health insurance. This is not necessarily so. For example, the British health insurance company BUPA currently has over four million members. These are moderately affluent people willing and able to pay extra for higher quality service than is often available through the NHS. The really wealthy, of course, do not need insurance because they can always “pay as they go.”      

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