Health Care and the Logic
of Radical Reform
by Robert Kuttner
excerpted from the book
Taking America Back
and taking down the radical
edited and introduced by
Katrina Vanden Heuvel and Robert L. Borosage
Nation Books, 2004
America has suffered a staggering decline in its fortunes over
the past three years. We've fallen from prosperity to recession
and "recovery" without jobs. We've gone from peace to
war, from relief at the end of the Cold War to fear at the hand
of terrorists. We've experienced the worst corporate scandals
in a century, the worst stock market collapse ever, the most glaring
inequality since the Gilded Age. The federal budget has gone from
record surplus to record deficit, while we keep adding to the
largest foreign debt on record. The states are still struggling
with the worst fiscal crisis in fifty years.
America's families are paying the price.
Even with the economy officially "in recovery," wages
are down and unemployment is up. Health care is broken. Millions
have had their dreams for retirement shattered. Children are victimized
as teachers get laid off, classrooms grow more crowded, and preschool
and afterschool programs are discontinued. College tuitions are
soaring, pricing more and more young people out of the education
Instead of addressing those challenges,
the policies of the Bush administration are part of the problem.
Selected for office by the conservative majority of the Supreme
Court after losing the popular vote, Bush has pursued a radical-right
agenda remarkably divorced from what he campaigned on- pre-emptive
war; destabilizing tax cuts; radical court packing; relentless
rollback of protections for workers, consumers, and the environment;
assault on the rights of women and minorities; and a crony capitalist
corruption devoid even of shame.
... in a brazen payoff to the drug companies that spent millions
campaigning for Republicans in the last election, the president's
prescription drug plan actually prohibits Medicare from negotiating
the best price for seniors.
Health Care: The Logic of Radical Reform
by Robert Kuttner
Most Americans say that they want universal
health insurance "that can never be taken away," as
Bill Clinton memorably put it. But universal health insurance
is off the political radar screen, a victim of the power of the
health insurance and drug lobbies, the reluctance of large corporations
to support a major increase in government functions (that would
actually save them money), the ambivalence of the medical profession,
and the caution of most mainstream politicians.
A related problem is budgetary. Although
universalizing health coverage under government auspices would
deliver a far more efficient use of the health dollar for society
as a whole, it would have the fiscal effect of shifting nearly
a trillion dollars of financial flows from private to public sector,
at a time when that seems inconceivable.
Ours is said to be a highly individualistic
society. But history has shown that universal programs of social
insurance are immensely popular in America once the democratic
system mobilizes public support to break through barriers to their
enactment. Social Security is the most expensive, redistributive,
and socialistic of our public programs. It is wildly popular,
and conservative politicians profess loyalty to it even as they
seek to undermine it mainly by stealth. Likewise Medicare, our
second most universalistic program and an island of single-payer
health insurance. Even with the assaults on its funding and reductions
in its coverage, Medicare remains far more efficiently administered
than any private insurance program, and is exceptionally popular.
The solidarity that these programs engender
is self-reinforcing. There is little doubt that universal and
public health insurance, if enacted, would be highly prized by
voters. This reality was perceived and explicitly articulated
by House Republicans in 1993, when they vowed to resist any version
of the Clinton health plan for fear that it would bond a new generation
of voters to universal social insurance and to the Democratic
Party as its steward.
Today, the system of employer-based health
insurance combined with the tender mercies of managed care is
a shambles. Expenses are out of control, but the cost-containment
pinches in the wrong places. Hospitals are shutting their doors
while new for-profit hospitals for special surgery leach money
from the rest of the system. Most people lack pharmaceutical coverage.
Doctors and patients alike resent the bureaucracy, the cost shifting,
the denial of necessary care, the interposition of case reviewers
between physician and patient, the skimming of scarce health dollars,
the paper-chase, the insecurity of coverage, and the plain misallocation
Managed care, under private insurance
auspices, was billed as the market's answer to reliable health
coverage. Today's version of managed care is a far cry from its
community-oriented antecedent-nonprofit prepaid group health plans.
Those plans, such as Kaiser Permanente, Group Health of Puget
Sound, and the Health Insurance Plan of Greater New York, offered
a semblance of universal heath insurance within one community.
They covered preventive care, they offered far better coordination
among a team of clinicians than conventional medicine, and then
invested in the long-term health of plan members. They were also
"community rated," meaning that everyone paid the same
premium, so there was the kind of broad pooling of risk and intergenerational
compact that a true national health insurance system provides.
Care was "managed" in the sense that there was no financial
incentive (or disincentive) to provide clinically unnecessary
surgery, and the money saved by using health resources more efficiently
could be reprogrammed to better preventive care.
Today's version of managed care under
the direction of for-profit HMOs has reversed virtually all of
these features and incentives. Managed-care organizations maximize
profits by "risk-selecting"-targeting relatively healthy
subscribers and avoiding sick ones-or by denying necessary care.
Physicians have financial incentives to stint on care, not to
maximize the right blend of prevention and acute care. As HMOs
have given way to loose networks of approved providers, the promise
of close collaboration on cases of the old staff or group model
practice has largely evaporated. Moreover, managed care has increased
fragmentation and diminished patient choice of doctors. And as
frustrated consumers move from one insurance company to another,
insurers have little incentive to invest in the long-term wellness
of their patients. Managed care is just a euphemism for hammering
down costs, while contributing to the inefficiency of the system
overall. At least $200 billion of the more than $1.3 trillion
spent on health care nationally goes for administrative costs
and profits that would not exist under a national health insurance
program, even as 85 million Americans have been without insurance
at one time or another during a recent four-year period.
Meanwhile, the traditional system of employer-provided
insurance is unraveling. This system was an accidental byproduct
of wage and price controls during World War II. During the era
of strong unions, regulated industries, and stable corporate oligopolies
of the postwar boom, most large employers provided good health
insurance and most workers spent their careers with one employer.
Today, health insurance costs represent
a huge drain on company resources, corporations are shifting costs
onto employees as fast as they dare, workers who lose jobs or
change employers often lose good health insurance, and smaller
businesses and newer giants like Wal-Mart often provide no insurance
at all. This shifts more costs onto workers or to the public sector,
and causes more people to simply forgo necessary care. According
to a recent report, fully 26 percent of workers without health
insurance, or their dependents, are employed by large companies
with 500 or more employees.
This crisis will only worsen in coming
years, as science keeps inventing new treatments and cures, as
the population ages, and as the federal deficit driven by the
Bush tax cuts deepens. We can get a good picture of the Republican
approach to the cost crisis. As part of a package tied to grossly
inadequate prescription drug benefits, the Republicans have promoted
"competition" in the Medicare program. This approach,
sometimes called "premium support," has at times been
supported by center-right Democratic politicians such as Sen.
John Breaux, and by Democratic policy-intellectuals who are mainly
concerned with the Medicare cost crisis.
The proposed new system would retain conventional
Medicare, but cap the federal contribution to it. In most versions,
seniors would be given a voucher worth a fixed amount of money.
They could use that voucher toward the cost of either traditional
public Medicare or a private plan. However, the costs of decent
coverage, public or private, would soon outstrip the value of
the voucher. Private insurance companies would target younger,
healthier elderly people, and because their payout costs per subscriber
would be lower than conventional Medicare, they would continue
to skim off the relatively healthier population. Traditional Medicare,
meanwhile, would be stuck with an ever sicker and more expensive
set of patients, so it would have to cut back what it covered.
The system would rapidly fragment into multiple insurers and two
basic tiers. More affluent retired people, who could subsidize
the government voucher out of pocket, would get adequate coverage,
while others would have to choose between necessary medical care
and other necessities such as rent and food. The universalism
and solidarity-producing benefits of the current Medicare system
would be ruined.
If market-based medicine ever enjoyed
a presumptive reputation for greater choice and efficiency, that
advantage has evaporated. However, because of what political scientist
Walter Dean Burnham calls a "politics of excluded alternatives,"
too many Democrats are thinking too narrowly. Some Democrats fell
into the trap of trading gradual privatization of Medicare for
a completely inadequate drug benefit. Other Democrats have settled
for very modest incremental increases in coverage, at a time when
the whole system is built on sand. Still others have proposed
a totally self-defeating auto-insurance model, in which citizens
would be required to obtain health insurance, and government would
subsidize the poor to purchase stripped-down policies. This approach
suffers from all the failures of the proposed voucherization of
Medicare, and would leave tens of millions of Americans with coverage
in name only. It would also introduce demeaning means-testing,
which both creates poverty traps (you lose benefits as your income
rises) and frustrates the politics of universalism.
Progressives today face a twin challenge.
First, we need to return to center-stage universal health insurance
as the more efficient and equitable alternative to the current
This requires a massive program of public
education about the inferiority of market-driven medicine, compared
to a universal, government-sponsored system. While we're at it,
we need a better term than "single-payer," which is
an insider term that mystifies more than it clarifies. My preference
is Medicare for All. We need politicians willing to champion it.
Second, we need to defend fiercely the
islands of universalism that exist, such as Medicare, and resist
voucherization, privatization, and means testing. Any kind of
income or asset testing or any voucherization fragments the constituency
for universal social insurance. The better the basic package,
the fewer people feel the need to purchase supplemental private
insurance. More meager the basic benefits, either in a public
program or via vouchers, the more the constituency for social
Third, we need to think hard about the
right and wrong kinds of incrementalism. The French radical Andre
Gorz used the phrase, "non-reformist reform" to describe
modest reforms that logically led to more fundamental reforms.
Some partial increments in health coverage logically pave the
way more far-reaching changes. Others merely reinforce the fragmentation
and the flaws in the current system.
As noted, a number of moderate and liberal
politicians have tried to improve health coverage, incrementally,
by "filling in gaps" in those who are covered. The State
Children's Health Insurance Program (SCHIP), for example, is intended
to provide coverage to children who fall between the cracks and
receive coverage neither from their parents' policies nor from
Medicaid. But SCHIP illustrates everything wrong with this sort
of incrementalism. It has slightly increased coverage, but at
the cost of reinforcing fragmentation. In the same year, a child
can find herself covered by Medicaid, by a plan provided by a
parent's employer, and by a state program reimbursed by federal
funds under SCHIP. This approach reinforces the administrative
complexity, the paperwork, the lack of continuity of care, and
the byzantine impenetrability of the system as experienced by
There are several possible approaches
to universal health insurance. The most far-reaching would be
for Democrats and progressives to put on the table a Medicare
for All program, and to organize around it, building support from
doctors frustrated by the current mess, trade unionists, editorial
writers, elected officials and candidates, and mass-membership
organizations. Rep. Dennis Kucinich did this during his campaign
for the Democratic presidential nomination, and Physicians for
a National Health Program has been doing heroic work on this front,
leading to favorable coverage in leading medical journals including
both the New England Journal of Medicine and the traditionally
more conservative Journal of the American Medical Association.
Doctors have gotten such a screwing from the present system that
they are fast becoming political allies.
The long-term strategy needs to be a coalition
of forces that puts nearly everyone on one side-doctors, patients,
unions, mass-membership groups, seniors in danger of losing Medicare,
corporations that stand to save money from a socialization of
costs-and two powerful nemesis groups on the other side: the for-profit
health insurance industry and the drug companies. President Clinton,
in 1993, made the disastrous strategic mistake of thinking that
"managed competition," running universal care through
private insurance companies, could co-opt their political support.
But the companies understood the threat to their autonomy, power,
and profit; they preferred to insure fewer people with higher
profits and substantial control rather than face government regulation
of their plans and premiums. Their answer was Harry and Louise.
If Clinton had gone to the country in
the midterm election of 1994 and waged a populist campaign pitting
health care for all against the selfishness and inefficiency of
the insurance industry, political history might have been very
different. A presidential candidate or president with nerve and
vision could restore Medicare for All to mainstream debate and
could create such a coalition politics.
Pending that long-term strategy, which
forms of incrementalism might help seed the ground?
One big first step is universal health
care for children- not SCHIP but extension of public, federal
Medicare to all kids. Children are very cheap to insure because
most don't get sick. For the cost of a repeal of part of the Bush
tax cut, well under $100 billion a year, every new baby could
get a Medicare card, and every child under eighteen or under twenty-five
could be covered within two years. Politically, this would create
a powerful intergenerational alliance. It would reduce health
costs for employers (who would cover workers but no longer children
of workers). And, as children turned eighteen or twenty-five,
it would produce powerful political pressure to allow them to
keep their coverage.
A variant would combine Medicare for the
young with a Medicare buy-in option for people age fifty-five
to sixty-five. These are the people who are disproportionately
losing their insurance and finding new coverage astronomically
expensive to purchase. One combination strategy would cover all
children under 18 in 2005, extend that to people under twenty-five
and allow the over-fifty-five buy-in in 2006, and then extend
Medicare to people forty-five to fifty-five in 2007, and fill
in the remaining group, the twenty-five to thirty-five-year-olds,
These initiatives would help seniors learn
that the way to make Medicare secure is to extend it to other
age groups who are less costly to insure and whose participation
broadens the Medicare political constituency. They would also
help educate politicians of the broader fact that Medicare for
All is the only sure way to reconcile the cost crisis with the
crisis of declining coverage, and to yoke the political interests
of those without insurance to those fearful of losing good insurance.
A whole other approach would be to build
universal health programs state by state. This is attractive in
principle. But the current state budget crisis makes it improbable.
And states typically fall back on fill-in-the-gaps approaches
such as Howard Dean's vaunted Dr. Dynasaur program in Vermont,
which is far from a true single-payer program, or on employer
mandates, another second-best reform that doesn't logically build
toward true universalism.
A predicate to any incremental non-reformist
reform agenda would be careful thought about its elements and
dynamics. A good start would be to create the broadest possible
commission for universal health coverage, with representation
of physicians, insurance experts, elected officials, trade unionists,
academics, and leaders of mass membership organizations. This
commission would be tasked with creating both the blueprint for
the program, as well as a political and popular-education strategy
for bringing it about.
The history of American social insurance
is that good ideas remain available, waiting for rare moments,
such as 1933-37, or 1941-45, or 1967-68, in which progressives
gain rare working majorities. The next time that rare moment occurs,
the worst possible thing would be for progressives to settle for
modest, partial reform.
At present, the Right dominates Washington.
But this is a teachable moment for progressives. The market-based
health insurance system is collapsing, and ordinary people are
the victims. Regular Americans understand the need for a breakthrough,
and the Right's remedies will only worsen the shift of health
burdens onto citizens. Progressives need the political courage
to indict the Right for its failure, and the leadership to show
that a bold and comprehensive alternative is possible.