This cure leaves the disease untreated

March 29, 2010

Millions of people hoped the new Obama administration would finally confront the disastrous injustices and inequities of the American health care system. But after an agonizing year of debate, discussion and deal-making, the law that Barack Obama signed last week will be a terrible disappointment to anyone who correctly sees the medical-insurance-pharmaceutical complex as the source of the problem.

Dr. Steffie Woolhandler is a professor of medicine at Harvard Medical School, a prolific writer and co-founder of Physicians for a National Health Program (PNHP). She talked to about what's in the new health care law and why it won't solve the crisis.

THE MAIN thing you hear from supporters of the health care law is that it's a historic expansion of coverage for tens of millions of people. But there's an underside that doesn't get as much notice, isn't there?

THE BIG problem with the bill is that so much money and power is being handed to the private health insurance industry, which is the cause of the problem in the first place.

There are two ways that coverage will expand. One is a Medicaid expansion. Now if middle-class Americans want to tax themselves to pay for health care for the poor--and I think we should--we could have done this without the rest of the legislation.

The other big expansion is the so-called individual mandate that basically tells people that they have to buy private insurance. So if you have insurance through your employer right now, you have to keep it--whether you like it or not. If you don't have insurance, you'll be forced to turn over thousands of dollars to the private health insurance industry.

Under the new "exchanges" set up under the law for the uninsured to go to buy insurance, people will have to spend up to 9.5 percent of their income for policies that cover only 70 percent of health care costs. So you would still be in a situation of having insurance that was so skimpy that you would have difficulty getting care when you needed it.

President Obama signs the new health care bill into law
President Obama signs the new health care bill into law

As you know, Massachusetts has the prototype of this reform. If you go on the Internet to look at our insurance exchange, it's called the Massachusetts Connector.

For someone in their mid-50s, the cheapest policy available that would meet the mandate for someone who is paying the full rate--which is anyone who makes more than $33,000 in income a year--costs more than $5,000 per year in premiums. Then, if you get sick, there's a $2,000 deductible--so you have to take another $2,000 out of your pocket before the insurance kicks in. And then, for the next $15,000 in health spending, you're responsible for 20 percent of everything--$3,000.

So it's extremely expensive if you get sick and have to use it once you buy it. That means that many people will still lack access to care--because they won't be able to afford to use their insurance policy, even if they own it.

IS THERE anything in the law that would control the cost of these policies sold through the government-run exchanges?

THERE WERE regulations attached that sound like they would be very helpful, but those regulations are full of loopholes. There's a possibility that the government could review insurance rate increases, and there was a limit of 15 percent placed on insurance companies for what they could charge per policy for overhead.

But 15 percent is still a huge overhead. That means that if you buy a $10,000 a year insurance policy, $1,500 of that premium never leaves the insurance company--it stays right there for their overhead and profit. For a large insurance company, 15 percent is quite attainable as an overhead. This is really just a restriction on the smaller companies that sell individual policies.

There are some other regulations on the insurance industry. I do think that regulating insurance is better than no regulation, but because the bill is actually written by the insurance industry, there are huge loopholes in almost all of those restrictions.

For example, there's the ban on the policy called rescission. Basically, what it means is that once you have insurance, and you get sick and use your insurance, the insurance company can't go back and cancel you--that would be called a rescission.

But what the law says is a company can't do a rescission unless there was fraud. Well, that's always what the insurance company says when they do a rescission. It's already illegal under contract law for them to agree to do something and then not do it. So rescissions were always based on the insurance companies alleging that the insured committed fraud.

It looks good to say "no rescissions unless there's fraud," but the fraud loophole is huge. They can tell you, "It was fraud because you forgot to tell us that 20 years ago you once had an abnormal pap smear. Oh, you didn't tell us that 10 years ago, your blood pressure was elevated once, even though it's been normal ever since."

They go back and search the records to find things you didn't tell them. You might have forgotten about it, but they can allege that you committed fraud by not telling them about that one abnormal pap smear and that one abnormal blood pressure. That's a huge loophole, and unfortunately, it means that the rule against rescissions isn't airtight.

There is a group that will benefit from this bill, and that's important to say. Around 7 percent of Americans buy their insurance in the so-called "individual market," where they have to go out as an individual family or individual person and buy insurance.

That market is a terrible place to be because people get stuck with very high costs. This bill will help people in that market by regulating it and making it somewhat easier to get insurance. Nonetheless, there are loopholes even there--because, for example, the bill allows insurance companies to charge older people three times as much as it charges young adults.

So there's regulation, but there are plenty of loopholes for the insurance industry.

IF WHAT you say about this law working out to the insurance industry's advantage is true, then why was such a big deal made of insurance company opposition? Were the companies really opposed to the legislation, or were they working together with Democrats to shape the bill behind the scenes?

ONE WAY to think about this is to follow the money and see where they spent their lobbying and advertising dollars.

You can think of this debate as having a left, a right and a center--with President Obama in the center, with Republicans as the right, and the left being the single-payer/Medicare for All forces. The insurance industry gave tens of millions of dollars to the Obama Democrats, and they also gave tens of millions of dollars to the far-right opposition.

In doing this, they cleverly positioned the debate as being between the center and the right--that's where the bulk of the political debate occurred this time around.

If you look at the donations, plenty of insurance industry money did go to the Democrats. An insurance industry vice president, Elizabeth Fowler, actually came to work for Sen. Max Baucus, the head of the Senate Finance Committee, and was the author of the Baucus Framework for the legislation. If you go to the Baucus Framework on the Finance Committee's Web site, and right-click on the Properties box, you can see that the Baucus Framework was written on Elizabeth Fowler's computer.

ONE OF the most significant aspects of this legislation that has gotten almost no attention is the cuts to spending and benefits for Medicare. Can you talk about this issue?

THE MEDICARE cuts are a bit of a mixed bag.

Some of the cuts will be at the expense of the so-called Medicare Advantage plans--which are the private HMOs that can step into Medicare, recruit Medicare enrollees and get the federal government to pay the HMO premium. Those Medicare Advantage plans have been overpaid relative to traditional Medicare, and part of the Medicare cuts will be reducing the overpayment to the Medicare Advantage HMOs--to level the playing field, if you will. So that's okay with me.

But some of the other cuts are very harmful. For instance, $40 billion will be taken out of safety net hospital payments. The safety net hospitals, where uninsured and underinsured Americans go when they get sick, are going to be shrunk by at least $40 billion.

PNHP HAS talked about how this law will have the effect of continuing the downward pressure on employer-provided insurance, which still covers a majority of Americans. Why is that?

YOUR EMPLOYER-sponsored coverage, if you have it now, is now mandatory. Under the new bill, you can't leave it when the mandate goes into effect.

President Obama liked to say, "If you have private health insurance and you like it, you can keep it." But he neglected to say, "If you have private health insurance through your employer, and you hate it, you still have to keep it." So that's the first thing.

Then, if costs continue to escalate--and based on the Massachusetts experience, we have every reason to think they will--many people with employer-sponsored coverage will be subject to the excise tax that goes into effect by 2018. It's a very steep tax--a 40 percent tax on the value of your benefits. And you would have pay no matter what your personal income is--even if you're a low-wage janitor, but you happen to have a good health care plan, the tax will be imposed.

This means that people in high-cost states, such as Massachusetts or New York, are likely to be forced to pay the excise tax. This is widely seen as an attack on unions, particularly public-sector unions, many of which have traded wage increases in order to maintain very high health benefit levels.

Unionized workers in high-cost states are the ones most likely to end up paying that excise tax.

YOUR GROUP has also pointed out that this law will make the insurance industry richer and more powerful still--and therefore that much harder to challenge.

THE TAXPAYERS will be subsidizing premiums to private insurers for some middle-income uninsured people. The value of those subsidies will reach $447 billion by 2019. So that's $447 billion to strengthen the financial and political power of the private health insurance industry, and make it more capable of obstructing future health care reforms.

That's probably the most negative aspect of this bill from my point of view. I think the private health insurance industry is the cause of our problems--it's the reason that we're in this conundrum. I think decades of experience show that the private health insurance industry cannot control costs, nor can it provide the American people with the coverage they need.

I think the need for single-payer nonprofit national health insurance is just as clear as it ever was. I think there may be a dip in activity around this as people are exhausted and they're also confused. But very quickly, it will become clear that what was passed was no solution--that we still have all the cost problems, we still have all the access problems, we have all the same need and the same reasons for single payer that we've always had.

If people want more information, I strongly suggest that they go to the Physicians for a National Health Program Web site--there are many scientific articles and fact sheets, and, of course, there are contacts for other organizations working on single-payer national health insurance.

I think there will be a continued movement for that. Certainly our group, Physicians for a National Health Program, plans to continue advocating for national health insurance and educating the American people about why it's so necessary.

Transcription by Rebecca Anshell-Song

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