News & Opinion

The Moral-Hazard Myth

The bad idea behind our failed health-care system.

by Malcolm Gladwell
The New Yorker - Issue of 2005_08_29

Tooth decay begins, typically, when debris becomes trapped between the teeth and along the ridges and in the grooves of the molars. The food rots. It becomes colonized with bacteria. The bacteria feeds off sugars in the mouth and forms an acid that begins to eat away at the enamel of the teeth. Slowly, the bacteria works its way through to the dentin, the inner structure, and from there the cavity begins to blossom three-dimensionally, spreading inward and sideways. When the decay reaches the pulp tissue, the blood vessels, and the nerves that serve the tooth, the pain starts—an insistent throbbing. The tooth turns brown. It begins to lose its hard structure, to the point where a dentist can reach into a cavity with a hand instrument and scoop out the decay. At the base of the tooth, the bacteria mineralizes into tartar, which begins to irritate the gums. They become puffy and bright red and start to recede, leaving more and more of the tooth’s root exposed. When the infection works its way down to the bone, the structure holding the tooth in begins to collapse altogether.
Several years ago, two Harvard researchers, Susan Starr Sered and Rushika Fernandopulle, set out to interview people without health-care coverage for a book they were writing, “Uninsured in America.” They talked to as many kinds of people as they could find, collecting stories of untreated depression and struggling single mothers and chronically injured laborers—and the most common complaint they heard was about teeth. Gina, a hairdresser in Idaho, whose husband worked as a freight manager at a chain store, had “a peculiar mannerism of keeping her mouth closed even when speaking.” It turned out that she hadn’t been able to afford dental care for three years, and one of her front teeth was rotting. Daniel, a construction worker, pulled out his bad teeth with pliers. Then, there was Loretta, who worked nights at a university research center in Mississippi, and was missing most of her teeth. “They’ll break off after a while, and then you just grab a hold of them, and they work their way out,” she explained to Sered and Fernandopulle. “It hurts so bad, because the tooth aches. Then it’s a relief just to get it out of there. The hole closes up itself anyway. So it’s so much better.”

 

People without health insurance have bad teeth because, if you’re paying for everything out of your own pocket, going to the dentist for a checkup seems like a luxury. It isn’t, of course. The loss of teeth makes eating fresh fruits and vegetables difficult, and a diet heavy in soft, processed foods exacerbates more serious health problems, like diabetes. The pain of tooth decay leads many people to use alcohol as a salve. And those struggling to get ahead in the job market quickly find that the unsightliness of bad teeth, and the self-consciousness that results, can become a major barrier. If your teeth are bad, you’re not going to get a job as a receptionist, say, or a cashier. You’re going to be put in the back somewhere, far from the public eye. What Loretta, Gina, and Daniel understand, the two authors tell us, is that bad teeth have come to be seen as a marker of “poor parenting, low educational achievement and slow or faulty intellectual development.” They are an outward marker of caste. “Almost every time we asked interviewees what their first priority would be if the president established universal health coverage tomorrow,” Sered and Fernandopulle write, “the immediate answer was ‘my teeth.’ ”

 

The U. S. health-care system, according to “Uninsured in America,” has created a group of people who increasingly look different from others and suffer in ways that others do not. The leading cause of personal bankruptcy in the United States is unpaid medical bills. Half of the uninsured owe money to hospitals, and a third are being pursued by collection agencies. Children without health insurance are less likely to receive medical attention for serious injuries, for recurrent ear infections, or for asthma. Lung-cancer patients without insurance are less likely to receive surgery, chemotherapy, or radiation treatment. Heart-attack victims without health insurance are less likely to receive angioplasty. People with pneumonia who don’t have health insurance are less likely to receive X rays or consultations. The death rate in any given year for someone without health insurance is twenty-five per cent higher than for someone with insur-ance. Because the uninsured are sicker than the rest of us, they can’t get better jobs, and because they can’t get better jobs they can’t afford health insurance, and because they can’t afford health insurance they get even sicker. John, the manager of a bar in Idaho, tells Sered and Fernandopulle that as a result of various workplace injuries over the years he takes eight ibuprofen, waits two hours, then takes eight more—and tries to cadge as much prescription pain medication as he can from friends. “There are times when I should’ve gone to the doctor, but I couldn’t afford to go because I don’t have insurance,” he says. “Like when my back messed up, I should’ve gone. If I had insurance, I would’ve went, because I know I could get treatment, but when you can’t afford it you don’t go. Because the harder the hole you get into in terms of bills, then you’ll never get out. So you just say, ‘I can deal with the pain.’ ”


One of the great mysteries of political life in the United States is why Americans are so devoted to their health-care system. Six times in the past century—during the First World War, during the Depression, during the Truman and Johnson Administrations, in the Senate in the nineteen-seventies, and during the Clinton years—efforts have been made to introduce some kind of universal health insurance, and each time the efforts have been rejected. Instead, the United States has opted for a makeshift system of increasing complexity and dysfunction. Americans spend $5,267 per capita on health care every year, almost two and half times the industrialized world’s median of $2,193; the extra spending comes to hundreds of billions of dollars a year. What does that extra spending buy us? Americans have fewer doctors per capita than most Western countries. We go to the doctor less than people in other Western countries. We get admitted to the hospital less frequently than people in other Western countries. We are less satisfied with our health care than our counterparts in other countries. American life expectancy is lower than the Western average. Childhood-immunization rates in the United States are lower than average. Infant-mortality rates are in the nineteenth percentile of industrialized nations. Doctors here perform more high-end medical procedures, such as coronary angioplasties, than in other countries, but most of the wealthier Western countries have more CT scanners than the United States does, and Switzerland, Japan, Austria, and Finland all have more MRI machines per capita. Nor is our system more efficient. The United States spends more than a thousand dollars per capita per year—or close to four hundred billion dollars—on health-care-related paperwork and administration, whereas Canada, for example, spends only about three hundred dollars per capita. And, of course, every other country in the industrialized world insures all its citizens; despite those extra hundreds of billions of dollars we spend each year, we leave forty-five million people without any insurance. A country that displays an almost ruthless commitment to efficiency and performance in every aspect of its economy—a country that switched to Japanese cars the moment they were more reliable, and to Chinese T-shirts the moment they were five cents cheaper—has loyally stuck with a health-care system that leaves its citizenry pulling out their teeth with pliers.

 

America’s health-care mess is, in part, simply an accident of history. The fact that there have been six attempts at universal health coverage in the last century suggests that there has long been support for the idea. But politics has always got in the way. In both Europe and the United States, for example, the push for health insurance was led, in large part, by organized labor. But in Europe the unions worked through the political system, fighting for coverage for all citizens. From the start, health insurance in Europe was public and universal, and that created powerful political support for any attempt to expand benefits. In the United States, by contrast, the unions worked through the collective-bargaining system and, as a result, could win health benefits only for their own members. Health insurance here has always been private and selective, and every attempt to expand benefits has resulted in a paralyzing political battle over who would be added to insurance rolls and who ought to pay for those additions.

 

Policy is driven by more than politics, however. It is equally driven by ideas, and in the past few decades a particular idea has taken hold among prominent American economists which has also been a powerful impediment to the expansion of health insurance. The idea is known as “moral hazard.” Health economists in other Western nations do not share this obsession. Nor do most Americans. But moral hazard has profoundly shaped the way think tanks formulate policy and the way experts argue and the way health insurers structure their plans and the way legislation and regulations have been written. The health-care mess isn’t merely the unintentional result of political dysfunction, in other words. It is also the deliberate consequence of the way in which American policymakers have come to think about insurance.

 

“Moral hazard” is the term economists use to describe the fact that insurance can change the behavior of the person being insured. If your office gives you and your co-workers all the free Pepsi you want—if your employer, in effect, offers universal Pepsi insurance—you’ll drink more Pepsi than you would have otherwise. If you have a no-deductible fire-insurance policy, you may be a little less diligent in clearing the brush away from your house. The savings-and-loan crisis of the nineteen-eighties was created, in large part, by the fact that the federal government insured savings deposits of up to a hundred thousand dollars, and so the newly deregulated S. & L.s made far riskier investments than they would have otherwise. Insurance can have the paradoxical effect of producing risky and wasteful behavior. Economists spend a great deal of time thinking about such moral hazard for good reason. Insurance is an attempt to make human life safer and more secure. But, if those efforts can backfire and produce riskier behavior, providing insurance becomes a much more complicated and problematic endeavor.

 

In 1968, the economist Mark Pauly argued that moral hazard played an enormous role in medicine, and, as John Nyman writes in his book “The Theory of the Demand for Health Insurance,” Pauly’s paper has become the “single most influential article in the health economics literature.” Nyman, an economist at the University of Minnesota, says that the fear of moral hazard lies behind the thicket of co-payments and deductibles and utilization reviews which characterizes the American health-insurance system. Fear of moral hazard, Nyman writes, also explains “the general lack of enthusiasm by U.S. health economists for the expansion of health insurance coverage (for example, national health insurance or expanded Medicare benefits) in the U.S.”

 

What Nyman is saying is that when your insurance company requires that you make a twenty-dollar co-payment for a visit to the doctor, or when your plan includes an annual five-hundred-dollar or thousand-dollar deductible, it’s not simply an attempt to get you to pick up a larger share of your health costs. It is an attempt to make your use of the health-care system more efficient. Making you responsible for a share of the costs, the argument runs, will reduce moral hazard: you’ll no longer grab one of those free Pepsis when you aren’t really thirsty. That’s also why Nyman says that the notion of moral hazard is behind the “lack of enthusiasm” for expansion of health insurance. If you think of insurance as producing wasteful consumption of medical services, then the fact that there are forty-five million Americans without health insurance is no longer an immediate cause for alarm. After all, it’s not as if the uninsured never go to the doctor. They spend, on average, $934 a year on medical care. A moral-hazard theorist would say that they go to the doctor when they really have to. Those of us with private insurance, by contrast, consume $2,347 worth of health care a year. If a lot of that extra $1,413 is waste, then maybe the uninsured person is the truly efficient consumer of health care.

 

The moral-hazard argument makes sense, however, only if we consume health care in the same way that we consume other consumer goods, and to economists like Nyman this assumption is plainly absurd. We go to the doctor grudgingly, only because we’re sick. “Moral hazard is overblown,” the Princeton economist Uwe Reinhardt says. “You always hear that the demand for health care is unlimited. This is just not true. People who are very well insured, who are very rich, do you see them check into the hospital because it’s free? Do people really like to go to the doctor? Do they check into the hospital instead of playing golf?”

 

For that matter, when you have to pay for your own health care, does your consumption really become more efficient? In the late nineteen-seventies, the rand Corporation did an extensive study on the question, randomly assigning families to health plans with co-payment levels at zero per cent, twenty-five per cent, fifty per cent, or ninety-five per cent, up to six thousand dollars. As you might expect, the more that people were asked to chip in for their health care the less care they used. The problem was that they cut back equally on both frivolous care and useful care. Poor people in the high-deductible group with hypertension, for instance, didn’t do nearly as good a job of controlling their blood pressure as those in other groups, resulting in a ten-per-cent increase in the likelihood of death. As a recent Commonwealth Fund study concluded, cost sharing is “a blunt instrument.” Of course it is: how should the average consumer be expected to know beforehand what care is frivolous and what care is useful? I just went to the dermatologist to get moles checked for skin cancer. If I had had to pay a hundred per cent, or even fifty per cent, of the cost of the visit, I might not have gone. Would that have been a wise decision? I have no idea. But if one of those moles really is cancerous, that simple, inexpensive visit could save the health-care system tens of thousands of dollars (not to mention saving me a great deal of heartbreak). The focus on moral hazard suggests that the changes we make in our behavior when we have insurance are nearly always wasteful. Yet, when it comes to health care, many of the things we do only because we have insurance—like getting our moles checked, or getting our teeth cleaned regularly, or getting a mammogram or engaging in other routine preventive care—are anything but wasteful and inefficient. In fact, they are behaviors that could end up saving the health-care system a good deal of money.

 

Sered and Fernandopulle tell the story of Steve, a factory worker from northern Idaho, with a “grotesquelooking left hand—what looks like a bone sticks out the side.” When he was younger, he broke his hand. “The doctor wanted to operate on it,” he recalls. “And because I didn’t have insurance, well, I was like ‘I ain’t gonna have it operated on.’ The doctor said, ‘Well, I can wrap it for you with an Ace bandage.’ I said, ‘Ahh, let’s do that, then.’ ” Steve uses less health care than he would if he had insurance, but that’s not because he has defeated the scourge of moral hazard. It’s because instead of getting a broken bone fixed he put a bandage on it.


At the center of the Bush Administration’s plan to address the health-insurance mess are Health Savings Accounts, and Health Savings Accounts are exactly what you would come up with if you were concerned, above all else, with minimizing moral hazard. The logic behind them was laid out in the 2004 Economic Report of the President. Americans, the report argues, have too much health insurance: typical plans cover things that they shouldn’t, creating the problem of overconsumption. Several paragraphs are then devoted to explaining the theory of moral hazard. The report turns to the subject of the uninsured, concluding that they fall into several groups. Some are foreigners who may be covered by their countries of origin. Some are people who could be covered by Medicaid but aren’t or aren’t admitting that they are. Finally, a large number “remain uninsured as a matter of choice.” The report continues, “Researchers believe that as many as one-quarter of those without health insurance had coverage available through an employer but declined the coverage. . . . Still others may remain uninsured because they are young and healthy and do not see the need for insurance.” In other words, those with health insurance are overinsured and their behavior is distorted by moral hazard. Those without health insurance use their own money to make decisions about insurance based on an assessment of their needs. The insured are wasteful. The uninsured are prudent. So what’s the solution? Make the insured a little bit more like the uninsured.

 

Under the Health Savings Accounts system, consumers are asked to pay for routine health care with their own money—several thousand dollars of which can be put into a tax-free account. To handle their catastrophic expenses, they then purchase a basic health-insurance package with, say, a thousand-dollar annual deductible. As President Bush explained recently, “Health Savings Accounts all aim at empowering people to make decisions for themselves, owning their own health-care plan, and at the same time bringing some demand control into the cost of health care.”

 

The country described in the President’s report is a very different place from the country described in “Uninsured in America.” Sered and Fernandopulle look at the billions we spend on medical care and wonder why Americans have so little insurance. The President’s report considers the same situation and worries that we have too much. Sered and Fernandopulle see the lack of insurance as a problem of poverty; a third of the uninsured, after all, have incomes below the federal poverty line. In the section on the uninsured in the President’s report, the word “poverty” is never used. In the Administration’s view, people are offered insurance but “decline the coverage” as “a matter of choice.” The uninsured in Sered and Fernandopulle’s book decline coverage, but only because they can’t afford it. Gina, for instance, works for a beauty salon that offers her a bare-bones health-insurance plan with a thousand-dollar deductible for two hundred dollars a month. What’s her total income? Nine hundred dollars a month. She could “choose” to accept health insurance, but only if she chose to stop buying food or paying the rent.

 

The biggest difference between the two accounts, though, has to do with how each views the function of insurance. Gina, Steve, and Loretta are ill, and need insurance to cover the costs of getting better. In their eyes, insurance is meant to help equalize financial risk between the healthy and the sick. In the insurance business, this model of coverage is known as “social insurance,” and historically it was the way health coverage was conceived. If you were sixty and had heart disease and diabetes, you didn’t pay substantially more for coverage than a perfectly healthy twenty-five-year-old. Under social insurance, the twenty-five-year-old agrees to pay thousands of dollars in premiums even though he didn’t go to the doctor at all in the previous year, because he wants to make sure that someone else will subsidize his health care if he ever comes down with heart disease or diabetes. Canada and Germany and Japan and all the other industrialized nations with universal health care follow the social-insurance model. Medicare, too, is based on the social-insurance model, and, when Americans with Medicare report themselves to be happier with virtually every aspect of their insurance coverage than people with private insurance (as they do, repeatedly and overwhelmingly), they are referring to the social aspect of their insurance. They aren’t getting better care. But they are getting something just as valuable: the security of being insulated against the financial shock of serious illness.

 

There is another way to organize insurance, however, and that is to make it actuarial. Car insurance, for instance, is actuarial. How much you pay is in large part a function of your individual situation and history: someone who drives a sports car and has received twenty speeding tickets in the past two years pays a much higher annual premium than a soccer mom with a minivan. In recent years, the private insurance industry in the United States has been moving toward the actuarial model, with profound consequences. The triumph of the actuarial model over the social-insurance model is the reason that companies unlucky enough to employ older, high-cost employees—like United Airlines—have run into such financial difficulty. It’s the reason that automakers are increasingly moving their operations to Canada. It’s the reason that small businesses that have one or two employees with serious illnesses suddenly face unmanageably high health-insurance premiums, and it’s the reason that, in many states, people suffering from a potentially high-cost medical condition can’t get anyone to insure them at all.

 

Health Savings Accounts represent the final, irrevocable step in the actuarial direction. If you are preoccupied with moral hazard, then you want people to pay for care with their own money, and, when you do that, the sick inevitably end up paying more than the healthy. And when you make people choose an insurance plan that fits their individual needs, those with significant medical problems will choose expensive health plans that cover lots of things, while those with few health problems will choose cheaper, bare-bones plans. The more expensive the comprehensive plans become, and the less expensive the bare-bones plans become, the more the very sick will cluster together at one end of the insurance spectrum, and the more the well will cluster together at the low-cost end. The days when the healthy twenty-five-year-old subsidizes the sixty-year-old with heart disease or diabetes are coming to an end. “The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance,” the Stanford economist Victor Fuchs says. Health Savings Accounts are not a variant of universal health care. In their governing assumptions, they are the antithesis of universal health care.

 

The issue about what to do with the health-care system is sometimes presented as a technical argument about the merits of one kind of coverage over another or as an ideological argument about socialized versus private medicine. It is, instead, about a few very simple questions. Do you think that this kind of redistribution of risk is a good idea? Do you think that people whose genes predispose them to depression or cancer, or whose poverty complicates asthma or diabetes, or who get hit by a drunk driver, or who have to keep their mouths closed because their teeth are rotting ought to bear a greater share of the costs of their health care than those of us who are lucky enough to escape such misfortunes? In the rest of the industrialized world, it is assumed that the more equally and widely the burdens of illness are shared, the better off the population as a whole is likely to be. The reason the United States has forty-five million people without coverage is that its health-care policy is in the hands of people who disagree, and who regard health insurance not as the solution but as the problem.

 

Mandated private insurance just helps insurers

By Milton Fisk
The Journal Gazette
03/26/2007

 

Suddenly, the most unlikely bunch has turned altruistic. Conservative businesses and politicians want health coverage for the uninsured. Schemes are multiplying about how to do it. Why the change of heart? Beware of those bearing gifts — this altruism is but poorly disguised self-interest.

Look at some apostles of this new altruism. Wal-Mart is an easy case; it hopes to use it to avoid paying any more for health benefits. Why Gov. Arnold Schwarzenegger? He hopes to garner more dollars for powerful private insurers he needs.

 

What are these schemes?

 

Common to all of them is the use of public subsidies so the uninsured can buy private insurance. However, spreading private insurance worsens the problems it creates.

 

The idea came from President Bush’s 2003 Medicare Plan D drug program, by which private insurers get public subsidies. It’s unadulterated corporate welfare. The drug companies get $40 billion a year more because Medicare can’t bargain over what it charges. The insurers’ ads and profits cost the government $5 billion a year.

 

With Medicare Plan D as inspiration, don’t expect much from our new altruists. Covering more people is an admirable goal. Getting it through private insurance will push inflation in health care through the roof. To modulate this inflation, we’d need public insurance — Medicare (A and B) is an example — extended to all.

 

In 2005, CEOs at five big insurers received together a total of $14 million plus stock options and grants for over 2 million shares. The aggregate profits in 2006 of these insurers were $12 billion. Still, their premiums have nearly doubled in the past decade. A public insurer seeks no profits, and its chieftains don’t become plutocrats.

 

Don’t stop here — there’s more to being an expensive parasite. Premiums for private insurance go to marketing as well as health care: the TV ads, junk mail, public relations accounts to burnish a bad image and hucksters signing on employers and hospitals. There’s little of this waste with public insurance.

 

Then there’s the cost of underwriting — trying to find whose poor health warrants a bigger premium, whose pre-existing conditions will deny them coverage and who to dump from the rolls. This cherry-picking is absent with public insurance; there’s no extra charge or denial for bad luck or poor genes.

 

Schwarzenegger wants insurers in his state to devote at least 85 percent of premiums to health care. WellPoint says it devotes only 81 percent; as a California giant, its screams will get Arnold back on track. This bickering is juvenile when Medicare has overhead of 3 percent.

 

Hang on for more — add to private insurers’ overhead a ripple effect on providers. Doctors and hospitals must send bills to multiple insurers. With a single public payer, this inefficiency disappears. Hospitals won’t have to bill insurers; they will operate under annual budgets negotiated with that single payer.

 

Shouldn’t the competition between multiple insurers save money?

Free enterprise versus big government? That’s not the fight. It’s rather: Pay more or pay less?

 

When a new altruist says he or she wants more people covered, ask, “Do you want to expand business for private insurers or do you want to reduce inflation in health care costs by having a single public insurer?”

 

Milton Fisk, a Bloomington resident, is a member of Hoosiers for a Commonsense Health Plan. He wrote this for Indiana newspapers.

Time for Health Care for All on Medicare's 40th Anniversary

Published on Monday, August 1, 2005
Distributed by Knight Ridder/Tribune Information Services

by Holly Sklar
When Medicare and Medicaid were signed into law on July 30, 1965, former President Harry Truman received the first Medicare card. He would be shocked that 40 years later, more than 45 million Americans have no health coverage, half of all personal bankruptcies are health-related, and lack of universal insurance is increasingly hurting our economy as well as our health.

Truman proposed national health insurance for all Americans in 1945. He said, "By preventing illness, by assuring access to needed community and personal health services...and by protecting our people against the loss caused by sickness, we shall strengthen our national health, our national defense and our productivity."

If Americans without health insurance were a nation, the population would be bigger than Canada -- plus Michigan, Montana, New Hampshire and Vermont. Canada, like other industrialized nations besides ours, provides universal health coverage.

Contrary to myth, the United States does not have the world's best health care. It has the costliest.

In the words of Dr. Christopher Murray of the World Health Organization (WHO), "Basically, you die earlier and spend more time disabled if you're an American rather than a member of most other advanced countries."

The United States is just No. 29 in the WHO healthy life expectancy ranking. We lag Canada by nearly three years and Japan by nearly six.

The United States does worse than 36 countries in child mortality under age five -- well behind South Korea and Singapore.

The United States is No. 1 in spending. The Organization for Economic Cooperation and Development (OECD) reports the United States spent 15 percent of its Gross Domestic Product on health in 2003 compared to an average 8.6 percent in 30 OECD countries.

The United States has fewer physicians, nurses and hospital beds per person, and fewer MRI and CT scanners than the OECD average. Health Affairs reports that Americans had more difficulty making appointments with physicians quickly than people in Canada, the U.K., Australia and New Zealand, and were more likely to delay or forgo treatment because of cost.

Lack of health insurance is killing many more Americans than terrorism. As the Institute of Medicine documents, uninsured Americans get about half the medical care of those with insurance. They receive too little care, too late, get sicker and die sooner. For example, uninsured women with breast cancer have a 30 percent to 50 percent higher risk of dying than insured women. Uninsured car crash victims receive less care in the hospital and have a 37 percent higher mortality rate than privately insured patients.

One out of three Americans below age 65 -- 85 million people -- lacked private or public health insurance for all or part of 2003-2004. Millions more are underinsured.

Average family health insurance premiums will reach a projected $14,545 in 2006, more than double the 2001 average.

Much health spending is squandered on the mountainous red tape, profits and executive pay of private insurance and drug companies. As Dr. Marcia Angell explains in "The Truth About the Drug Companies," the highly profitable pharmaceutical industry relies heavily on taxpayer-funded research.

The National Coalition on Health Care, an alliance of about 100 corporations, pension funds, medical associations, insurers, unions, consumer and religious organizations, says, "Comprehensive health care reform is long overdue. Every year that reform is delayed, tens of millions of Americans live in peril, without health insurance; millions are harmed, and hundreds of thousands die needlessly, because of sub-standard care."

"The crisis in health care is the central economic problem facing America -- adversely affecting living standards, job creation and retention, wage growth, the adequacy and viability of pension benefits" and the global competitiveness of American business, says Coalition president Henry Simmons.

The Coalition calls for "health care coverage for all." It offers four different scenarios for universal coverage: employer and individual mandates and subsidies; expanding Medicare and other public health insurance; creating a new public program modeled on the Federal Employee Health Benefits Plan; and establishing a universal single payer, publicly financed program.

The first three scenarios would net $320 billion to $370 billion in savings over the first ten years; the fourth scenario would save $1.1 trillion.

 

Like untreated cancer, the health care crisis is spreading throughout our families and economy. It's time for health care for all.

Holly Sklar is co-author of "Raise the Floor: Wages and Policies That Work for All Of Us" (www.raisethefloor.org).

Healthcare in Ohio

Special Section: Good Health

 

2005-08-01
By David Laber
Athens NEWS Writer

A statewide group is circulating petitions to get a state-sponsored healthcare initiative onto the Ohio ballot for the 2006 November general election, and southeastern Ohio counties are playing an integral role in filling petition requirements.

 

The Single-Payer Action Network Ohio (SPAN Ohio) has been collecting signatures to overhaul the state's healthcare system, and Southeastern Ohio SPAN has been leading the charge locally.

On Sunday, Warren Haydon and Arlene Sheak, both of Athens, said under the proposed plan, all Ohioans would receive healthcare coverage by cutting back on administrative paperwork that hospitals and insurance companies use and by increasing taxes on the wealthiest Ohioans.

Highlighting some of the points in the proposal, Haydon said all Ohioans will receive hospital care, mental health, vision, hearing, prescription drugs dental, emergency services and more.

Currently, about 1.3 million Ohioans do not have any healthcare insurance for one year, Sheak said, and that number doubles when talking about families that only have healthcare insurance part of the time. About 18,000 Americans will die this year as a result of not having health coverage, she said.

And this is happening locally as well. Haydon said he has increasingly seen fliers about benefits being held for people who need to raise money for health coverage.

And according to a February study, which included research done by an Ohio University professor, about half of the bankrupted families in the country are in their situation as a result of a health problem. "All of us are one accident away from being bankrupted," Sheak said.

Injuries and poor health are not just an economic burden on the uninsured, she said, but it also poses a threat to those with insurance because sometimes the injury is such that the person can no longer work or the spouse has to quit work to care for the other, she said.

"More and more, people are considering providing healthcare for everyone as a moral issue," Haydon said.

The proposal also provides better access for those living in rural areas to procedures and equipment, he said.

A statewide board consisting of 14 members from the seven Ohio health districts (Athens County's district includes a total of 21 counties with Muskingum County being the most populated) would distribute the equipment to make everyone available to that type of equipment within a 20-minute drive "as opposed to giving people in Cleveland three different choices," he said.

Each hospital would receive a monthly check from the state board to cover operating costs, according to the plan.

The plan also would cut back on administrative spending (about $11.6 billion) necessary to bill the hundreds of insurance companies, Sheak said.

According to the plan, statewide healthcare would be paid for by raising taxes on the wealthiest Ohioans (6.2 percent for those who earn more than $90,000 per year and 11.2 percent for those who earn more than $200,000 per year).

Businesses also will be asked to contribute to the plan as well, Haydon said.

Employers will pay up to a 3.85 percent payroll tax and up to 3 percent gross receipts tax; however, Haydon said the plan may have to reduce or abandon the receipt tax because it is not likely to be popular with businesses that currently do not offer healthcare to their employees.

Haydon also noted, however, that employers that do offer healthcare benefits do so often at a cost of 12 percent to 15 percent of their payroll.

Haydon said he expects health maintenance organizations (HMOs), insurance companies, pharmaceuticals and possibly the American Medical Association to come out against the plan or anyone who stands to lose financially as a result of a change in the status quo.

To help would-be displaced workers, the proposal includes a section to create a transition advisory group that would provide financial and education assistance for two years.

To get the proposal on the ballot, Haydon said the organization needs to collect about 97,000 signatures (3 percent of the number of 2002 voters), but to account for possibly invalidated signatures, the goal is to collect 140,000. Of those signatures, at least half of the state's counties (44) must have at least 1.5 percent of its 2002 number of voters sign the petition.

The signatures are to be submitted to the Ohio Secretary of State's Office 10 days prior to when the state legislature goes into session in January. Haydon said he does not know if the organization will be able to meet this deadline for 2006 or not.

If they do, then the Ohio Legislature will have 120 days to either do nothing, approve the plan as is, or amend it, he said.

But if it appears the legislators are not receptive to the plan, then the organization needs to collect 97,000 more signatures in 90 days to get the issue on the ballot, he said.

More information about the statewide healthcare plan is available at the organization's Web site, www.spanohio.org, and specific questions can be directed to the organization via e-mail at seospan@yahoo.com.

 

Rx for America: a national health plan

Fewer workers each year receive health insurance from their employers
By Ron Gettelfinger / Special to The Detroit News

In recent weeks, members and retirees of our union have confronted a new set of challenges in the field of health care.

The roots of this problem, however, are hardly new. As Walter Reuther said during an address to the American Public Health Association in 1968:

 


"We must first free ourselves of the illusion that we really have a health care system in America. What we have is a disorganized, disjointed, antiquated, obsolete non-system of health care. Consumers are being required to subsidize a non-system that fails to deal with their basic health care needs and the cost of that system is continuing to skyrocket."

 


Unfortunately, the problems have only become more serious in the intervening years. We now have nearly 46 million Americans -- including more than 8 million children -- with no health insurance at all.

 


Current system is wasteful

 


The U.S. has the best doctors, nurses and health care professionals anywhere in the world. But they are hindered by an ineffective, wasteful bureaucratic system. Our nation spends approximately $1.7 trillion, or 15.4 percent of our gross domestic product, on health care. Four hundred billion of this sum is absorbed by the cost of paperwork and administration.

 


Additionally, prescription drugs cost more in the United States than in any other country. One reason for these high costs is that pharmaceutical companies spend more than any other industry on lobbying, with more than 1,200 lobbyists in Washington. These lobbyists are doing well for their employers, crafting laws and regulations to protect an industry which earns tens of billions in profits each year. But what are they accomplishing for the rest of us?

 


For all our health care spending, the United States ranks near the bottom among industrialized countries on life expectancy, infant mortality and virtually every other measure. In fact, the infant mortality rate in our nation's capital is more than double the infant mortality rate in Beijing.

 


America deserves better.

 


Fewer workers covered

 


Our health care is based on employment, but each year, fewer employers are providing company sponsored insurance. The figure is now down to 60 percent, a decline from 69 percent in 2000. Members of our union have learned through hard experience that relying on individual employers to provide health care is inefficient and a drag on our ability to compete in the global economy.

 


At General Motors, for example, we recently negotiated an agreement intended to preserve the company's ability to provide affordable health care for workers and retirees for many years to come. During this process, we had to confront GM's staggering $61 billion liability for the cost of present and future UAW retiree health care.

 


Foreign firms have advantage

 


Global auto companies like Toyota, Honda and Volkswagen have little or no liability for retiree health care because in industrialized nations outside the United States, health insurance is a government responsibility.

 


With universal health insurance, no employer gains an advantage by offering lower benefits or passing higher costs onto workers. Does it make any sense for the United States to continue on a policy course -- employer-based health care -- which delivers inferior care to our citizens and gives foreign manufacturers a cost advantage worth tens of billions of dollars over U.S. companies that employ U.S. workers?

 


To be sure, no government policy will help a company that can't make products consumers want to buy. But a modern, competitive national health insurance system would go a long way toward helping U.S. manufacturers make products at affordable prices. We need a uniquely American system, not one that tries to copy a solution from a different country. A workable American plan would be universal, covering every single man, woman and child in the United States. It would be comprehensive, offering a range of medical benefits for workers and families. And it would have only a single payer, creating the leverage needed to negotiate the cost of medical care and keep prices from rising every year.

 


We've heard time and again that national health insurance might be a good idea, but it's not politically possible in the United States at the present time. One thing is for sure: it's not possible to ignore our current health care crisis any longer. American workers -- and American employers -- can't afford it.

 

Labor voices Ron Gettelfinger is president of the United Auto Workers union.

 

Samples of SPAN's printed materials and how to obtain copies for distribution

Organizations and individuals may purchase SPAN’s educational flyers and brochures in quantity; we will provide you with the printer's contact information upon request.

Any purchase arrangements you make will be between you and the printer. SPAN receives no part of your payment—you pay only the actual cost of printing and shipping. [Note: Sample copies can be obtained directly from SPAN Ohio at no cost.]

The following items are available for purchase:

Realizing the Human Right to Health Care
Full-color tri-fold brochure. (See sample in English in pdf format)

Small Business Benefits
Full-color (See sample in English in .pdf format)

Single Payer Primer
Full-color (See sample in English in .pdf format)

LABOR and Publicly Funded, Universal Access To Health Care
Full-color (See sample in English in .pdf format)

Universal Health Care and the Faith Community
Full-color (See sample in English in .pdf format)

The Conservative Case for Single Payer Health Care
 

 

Health Economics 101

November 14, 2005

New York Times
Op-Ed Columnist

By PAUL KRUGMAN

Several readers have asked me a good question: we rely on free markets to deliver most goods and services, so why shouldn't we do the same thing for health care? Some correspondents were belligerent, others honestly curious. Either way, they deserve an answer.

It comes down to three things: risk, selection and social justice.

First, about risk: in any given year, a small fraction of the population accounts for the bulk of medical expenses. In 2002 a mere 5 percent of Americans incurred almost half of U.S. medical costs. If you find yourself one of the unlucky 5 percent, your medical expenses will be crushing, unless you're very wealthy - or you have good insurance.

But good insurance is hard to come by, because private markets for health insurance suffer from a severe case of the economic problem known as "adverse selection," in which bad risks drive out good.

To understand adverse selection, imagine what would happen if there were only one health insurance company, and everyone was required to buy the same insurance policy. In that case, the insurance company could charge a price reflecting the medical costs of the average American, plus a small extra charge for administrative expenses.

But in the real insurance market, a company that offered such a policy to anyone who wanted it would lose money hand over fist. Healthy people, who don't expect to face high medical bills, would go elsewhere, or go without insurance. Meanwhile, those who bought the policy would be a self-selected group of people likely to have high medical costs. And if the company responded to this selection bias by charging a higher price for insurance, it would drive away even more healthy people.

That's why insurance companies don't offer a standard health insurance policy, available to anyone willing to buy it. Instead, they devote a lot of effort and money to screening applicants, selling insurance only to those considered unlikely to have high costs, while rejecting those with pre-existing conditions or other indicators of high future expenses.

This screening process is the main reason private health insurers spend a much higher share of their revenue on administrative costs than do government insurance programs like Medicare, which doesn't try to screen anyone out. That is, private insurance companies spend large sums not on providing medical care, but on denying insurance to those who need it most.

What happens to those denied coverage? Citizens of advanced countries - the United States included - don't believe that their fellow citizens should be denied essential health care because they can't afford it. And this belief in social justice gets translated into action, however imperfectly. Some of those unable to get private health insurance are covered by Medicaid. Others receive "uncompensated" treatment, which ends up being paid for either by the government or by higher medical bills for the insured. So we have a huge private health care bureaucracy whose main purpose is, in effect, to pass the buck to taxpayers.

At this point some readers may object that I'm painting too dark a picture. After all, most Americans too young to receive Medicare do have private health insurance. So does the free market work better than I've suggested? No: to the extent that we do have a working system of private health insurance, it's the result of huge though hidden subsidies.

Private health insurance in America comes almost entirely in the form of employment-based coverage: insurance provided by corporations as part of their pay packages. The key to this coverage is the fact that compensation in the form of health benefits, as opposed to wages, isn't taxed. One recent study suggests that this tax subsidy may be as large as $190 billion per year. And even with this subsidy, employment-based coverage is in rapid decline.

I'm not an opponent of markets. On the contrary, I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies.


That system is now failing. And a rigid belief that markets are always superior to government programs - a belief that ignores basic economics as well as experience - stands in the way of rational thinking about what should replace it.

Links

Wiki Page for 2015 SPAN Annual Conference

Healthcare Is a Human Right
Healthcare-NOW! A national grassroots advocacy organization in support of single-payer health care with a network of activists in 42 states.
Illinois Single-Payer Coalition
Kaiser Family Foundation: State Health Facts
Kentuckians for Single-Payer Health Care
Labor Campaign for Single Payer Healthcare
Maryland Chapter PNHP is a chapter of Physicians for a National Health Program, a nonprofit research and education organization of 16,000 physicians, medical students, and health professionals who support single-payer national health insurance.
Maryland Citizens Health Initiative
Massachusetts Campaign for Single Payer Health Care (MASS-CARE)
MEDICARE for ALL
Minnesota Citizens Organized Acting Together (COACT)
National Nurses United
Our Ailing Health Care
Physicians for a National Health Program (PNHP)
Physicians Working Group Proposal for Single-Payer National Health Insurance
Public Citizen
Single-Minded for Single-Payer: An Interview with Kevin Grumbach
Single-Payer: Answers and Facts About Health Care for All
Single-Payer Action A nonprofit activist-fueled organization based in Washington, D.C.
Single Payer Central
Single Payer New York
Single Payer NOW

SPAN State Council

The following individuals were elected by their respective constituencies to serve on the SPAN State Council for a one-year term ending in April, 2018:

Executive Committee
Deborah Silverstein — SPAN Ohio State Director
Johnathon Ross, M.D.— SPAN Ohio Secretary
Barbara Walden — SPAN Ohio Treasurer
Brad Cotton, M.D. — At Large
Bill Davis — At Large
Marcia Hartman — At Large
Mayo Makinde — At Large
Sean Nestor — At Large
 
Regional Coordinators
Region 1 — Ted Seuss
Region 2 — Dennis Slotnick
Region 3 — Patty Mercer
Region 4 — Dee Chavez, RN
Region 5 — Bob Krasen
Region 6 — John Gordon
Region 7 — Matt Noordsij-Jones, M.D.
 
Labor
Kurt Bateman
Bob Fry
John Gordon
Dave Pavlick, Sr.
Melvin Scott
  
Health Care Community
Stefan Athanasiadis
Richard Bozian, M.D.
Dee Chavez, RN
Jennifer Hatcher
Pia Kanistros, RN, BSN
Katherine Lambes, M.D.
Joan Matyskella
Melanie Moynan-Smith
Don Rucknagel, M.D., Ph.D.
Marilyn Webster, RN, MSN
 
Community Organizations
Albert Gabel, D.V.M.
Kathy Guest
Connie Hammond
Diana King
Bob Krasen
Logan Martinez
Patty Mercer
Sean Nestor
Rev. Susan Smith
 
Faith Groups
Brad Cotton, M.D.
Bill Davis
Ruth Ann Farthing
Alice Faryna, M.D.
Bonny Graham
 
Other Organizations / Individuals
Richard A. Bozian
Robert Mash
Mary Mynatt
Bob Parker
Mark Polley
Neilla Schiffman
Arlene Sheak
 
Business Community
Guy Desrochers
Freeda Flynn, M.D.
Tim Kettler
Jack Petsche
Ted Seuss
 

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UPCOMING EVENTS

  • Region 1 Meeting - Cleveland Mon. 29 Jan, 2018 (5:00 pm - 6:30 pm) North Shore AFL-CIO Office, 3250 Euclid Ave, 2nd floor - Note: enter parking lot from Prospect Ave. Enter building from re...
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