The year 2012 was a watershed year for U.S. health care reform for a number of reasons. First, and most importantly, the re-election of Barack Obama as president and the Democrats’ retention of the Senate ensure that the landmark reform popularly (or infamously) known as Obamacare will not be overturned. It is, for better or worse, here to stay.
Second, as Obamacare’s many provisions were to be implemented in a staggered manner over the course of several years, 2012 represents the beginning of the true transition from our older, insurer-dominated system to one that has the potential to be less oppressive for those currently without quality health insurance. Consider, for instance, the popular reforms that have come into effect already:
- Insurance companies can no longer deny coverage to children with preexisting conditions
- Young adults can stay on their parents’ health plan till the age of 26
- Health services mandates for women that makes care less costly and more widely available
- Caps on profit-taking by insurance companies that prevent firms from paying out more than 20 percent of their revenue they take in from premium payments as profits
- Elimination of the so-called ‘donut hole’ for prescription drug coverage.
Looking ahead
In 2014, health reform will eliminate annual limits on the amount of care an individual can receive, which, in combination with the elimination of lifetime caps, will potentially save millions from medical bankruptcy.
Also coming in 2014, federally-mandated health care exchanges will be up and running in the 50 states, providing choice and competition among health insurers. Likewise, the employer mandate will also come into effect, forcing, for the first time, small businesses to provide decent care for millions of people currently without coverage. Individuals, too, will be herded into a plan by the federal individual mandate, and given financial assistance to put toward premiums if they cannot afford it.
By the end of next year, major planks of the decades-long struggle to provide basic health insurance coverage to all Americans will be substantively in place. By the end of Obama’s second term, we will have transitioned fully from the pre-Obamacare era to the Brave New World of near-universal health care coverage. This is a major accomplishment of which Democrats and Progressives should be proud.
However, lurking in the wings of this impressive achievement is the still spiraling cost of health insurance – something that Obamacare, for all its impressiveness, does not really address. This is a major problem that could literally pull the rug out from underneath health care reform before it is even off the ground – smothering the baby of universal coverage before it gets a chance to remake American society for the better.
That’s because America’s private, employer-paid health insurance system is dying as you read this, due to the tremendous cost pressure being imposed on it by unaccountable provider monopolies – e.g. doctors, hospitals, medical device manufacturers and pharmaceutical firms that are sucking the life out of the American economy in a fashion quite similar to the equally profligate and economically malevolent military-industrial complex.
Forget about oil tycoons and steel magnates, today’s robber barons wear surgical scrubs and disposable lab coats and work out of vast hospital complexes that rival the wealth and political might of 19-century industrial centers.
Corporate “maneuvering”
Take, for example, the recent news out of America’s coal country regarding the fate of 10,000 or more mining union retirees and their promised health care benefits – hard fought for over many decades of union activism in some of the poorest parts of the country.
It seems Peabody Energy – a coal-mining giant that environmentalists have deemed the dirtiest coal company in America – spun off all of its union mines to a newly-formed company – Patriot Coal – in an effort shuck off the miners’ expensive health care and pension costs.
Patriot Coal, say critics, was seemingly designed to fail. As a result of this corporate maneuvering by Peabody, Patriot found itself saddled with three times as many retirees as workers – 90 percent of whom had never worked for Patriot. Given this burden, it comes as no surprise that Patriot quickly foundered on the rocks of a treacherous global economy and volatile commodity markets. It is now in bankruptcy court, where it is attempting to get legal permission to dump its retiree legacy costs as part of its restructuring plan. If that were to occur, Peabody will no doubt stand ready to buy back Patriot and its assets, sans all those obligations to retirees, of course.
A plainer case of corporate evil probably can’t be found. Coal mining is one of the most dangerous jobs in America, and miners eventually suffer from a plethora of long-term health problems as a result of their work that includes the dreaded black lung disease. To so coldly and callously rescind ones promises to people who have worked and suffered for you for their entire lives when they are at their most vulnerable simply goes beyond the pale of common human decency.
What is so unusual in the case of Peabody/Patriot is just how open the energy giant was in articulating the economic logic of its actions. According to Peabody’s CEO at the time of the 2007 divesture of its union mines to Patriot, the company could save itself “roughly a billion dollars” in legacy costs.
From an accounting standard, if not a human one, the deal was a no-brainer for Peabody. In one fell stroke it could eliminate costs and, if Patriot fails, likely pick up its former unionized assets for a song. Win-win as far as Peabody is concerned.
Cutting these legacy health care costs, however, is not limited merely to coal companies so evil they could be comic-book villains straight out of central casting. U.S. companies, for the last two decades, have squarely targeted retiree health and pension benefits as the combination of rising global competition and exploding health care costs make promises made during past fat years increasingly untenable.
GM, Ford and Chrysler, lest we should forget, spun off responsibility for their retiree health benefits to the United Auto Workers as a result of the restructuring forced upon the industry by the 2007-2011 economic downturn.
Status quo is not an option
While conservatives use the excuse that Obamacare will force companies to drop their employee coverage from their benefits packages as a result of the Affordable Care Act’s presumed upward pressure on costs, the reality is that health care has been such a huge albatross around the neck of America’s businesses that they have been looking to constrain, cut, or dump employee health benefits well before President Obama was even a glimmer in the voters’ eyes.
Indeed, as any worker in today’s America can tell you, raises are often foregone or radically reduced due to the rising cost of health care, and there is an argument to be made that the flattening out of wage growth over the last 20 years has in no small part been related to the increasing unaffordability of even moderate insurance coverage.
Moreover, this effect is not limited to the private sector. State and local governments brought to the brink of insolvency by the Great Recession have also taken a hard look at public-sector employment benefits, including health insurance for both current and retired employees. While public sector unions have fought to keep union-busting conservatives at bay, spiraling costs in even deep blue states like Illinois has forced a fundamental reassessment of the affordability of public-sector retiree health benefits to the detriment of both unionized and non-unionized workers.
Every sector of the economy, then, private and public, small business and large, has come under tremendous pressure by the insatiable beast that is the health care economy. Wherever budgets have to be balanced (or creatively fudged) health care spending looms large as a major, sometimes the largest, component of that balance sheet. Why is this happening? What is occurring in the health care industry that is transforming it into a parasite everyone fears as opposed to a service that everyone is grateful for?
As answer for this, one could do no better than read two damning journalistic accounts of how the health care industry operates as a business and thus how consumers – you and me and those who purchase health care for us – actually encounter it.
The first, written in 2009 during the long debate over health reform after President Obama’s election in 2008, appeared in The Atlantic and examines the various structural incentives that healthcare actors, from consumers to providers to purchases, face. The second, appearing recently in Time, examines the horrendous bills consistently doled out by providers that seem to defy rhyme, reason or explanation.
Both, taken together, paint a picture of an industry facing such perverse incentives that Soviet central planning looks efficient and humane in comparison – which is precisely why government-run, funded or heavily-regulated systems in other countries are so much more efficient and popular than ours.
The issue that both pieces point to is that providers and purchasers have for long been engaged in an intricate game wherein providers – hospitals, doctors, pharmaceutical firms and medical device manufacturers – inflate their bills while insurance companies attempt to pass the buck by denying coverage, delaying benefits, and, in the end, raising premiums to astronomical heights.
At heart, though, health insurers – the part of the health care industry most affected by the Affordable Care Act – are merely reacting to prices given to them by health care providers. Like Peabody Energy, the health insurers are merely trying to eliminate costs to their admittedly fat bottom lines that are passed on to them by health providers – which is where America’s spiraling health care costs ultimately come from.
Trickle-down costs
To understand why, it is enough to understand that health care providers simply do not operate in competitive markets like ones for cars or corn. In markets for regular consumer items of the type you might buy at the local department store, consumers can compare costs, shop around to get the best deal and generally spend their dollar at a time of their own choosing in an objectionably rational manner at the stores of reputable suppliers.
Almost none of that applies in the health care market, meaning that provider competition and cost-cutting innovation as a result is practically nonexistent in an economic sense. At best, providers compete for patients via service and availability – not on actual cost. America’s health care providers are, for all intents and purposes, lazy, exploitative monopolies.
This is because patients, for better or worse, do not rationally shop around for medical services. Instead, they desperately grab onto whatever treatment or cure presents itself when they are most emotionally desperate, no matter the cost. This is why consumers will balk at paying $1.99 per Tylenol pill at the local drugstore, but think nothing of it when presented with the same price at the hospital. It is also why all attempts by HMOs and insurers to control costs by denying coverage have been so vehemently opposed. When patients are desperate, in pain, or facing death, money is no object.
The monopoly power that health care providers enjoy as a result of this fact means they can and do pass on whatever costs they want no matter the actual price. This, in turn, requires even the most self-reliant amongst us to purchase insurance because the cost to the individual or family that gets passed on to us by providers is so high and so beyond the reach of most people that without insurance, penury – or worse – is the sure result.
Even large companies, states and municipalities lack the economic leverage to negotiate on an equal basis with monopolistic health care providers. Only the federal government has the power to do that.
Like common robbers, then, America’s health care providers offer us a simple choice – your money or your life. This is not to say that there aren’t many caring, decent people truly concerned with providing the best possible care that they can throughout America’s medical professions.
The problem is that as employees they are trapped in a profit-driven system that guarantees that the people they most wish to see cured and healed will be taken to the cleaners largely because, as consumers, they have no alternative.
In the end, this fact will fatally undermine both the American economy and Obamacare if it is not dealt with. At present, nearly 20 percent of our country’s economy, one dollar out of every five, is spent on the health care sector.
While this spending does much to alleviate suffering and create miracle cures right out of the world of science fiction, much of it is nonetheless also driven by greed, unaccountable power, and fear. Which if you think about it is pretty much what also perpetually drives the growth of that other great financial sinkhole also threatening our collective economic future – the Pentagon.
In the past, a sitting president once warned us about the dangers of an unconstrained military-industrial complex. Wouldn’t it be nice if the current one had courage enough to warn us about the dangers of the medical-industrial complex that has become its civilian counterpart? Unfortunately, since doctors are hard to demonize politically, are trusted by the public, and have loads of cash to spend on elections, it is doubtful courage like that will appear any time soon.