| Number 241 | January 30, 2004 |
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This Week:
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Greetings, This whole issue is about health care, loaded with explanations and details about the kind of system we could have, should have, and will have in this country. Next week, in the final installment of this health care series, I’ll talk about why health care is such a great issue to organize around. For this week, sit back and read about the simple, elegant solution to the madness that is the U.S. health care system. And, remember what I said back on January 9th, in the first installment of this series: When I say “simple,” I don’t mean “easy!” There are a lot of numbers, a lot of details, a lot of potentially-confusing things in this week’s Nygaard Notes. My intention is to provide references that people can use to discuss this issue with their friends, to inform their responses to the presidential candidates (and the media reports on them), to help people respond to opinion polls, and, in general, to give people the facts they need to engage with the issue. But, everything you are about to read was put in here to support the basic points made in this week’s “Quote” of the Week. So, if you don’t remember all the details, just quote the “Quote” when talking about health care and you’ll be fine. I want to loudly thank two people for donating important things to Nygaard Notes this week. Debbie from Minneapolis was kind enough to donate a wonderful 17-inch Hitachi monitor this past Monday to replace the failing Nygaard Notes KDS monitor that has served me so well for so long. (R.I.P.) Thanks, Debbie! And, on Wednesday, Gloria from Northfield donated a scanner to the Nygaard Notes project, a hardware item long needed but never acquired. Thanks to you, too, Gloria! Donations like these continue to allow me to use most of your financial pledges to free up time for doing a better job on the Notes, instead of having to spend it on machines. ThankYouThankYouThankYou! Gratefully yours, Nygaard |
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This brief summary attempts to answer some of the most common questions that people ask about a universal, single-payer health care system. Most of it is drawn from the “Proposal of the Physicians’ Working Group for Single-Payer National Health Insurance” that I just cited above. (“NHI” stands for “National Health Insurance.”) The Principles Here are the four principles that shape the Physicians’ proposal:
Nice principles, but the big question is, how would it work? Here are answers to a few obvious questions: WHO WOULD BE ELIGIBLE AND WHAT WOULD BE COVERED? A single public plan would cover every United Statesian for all medical services, including long-term care, mental health and dental services, and prescription drugs and supplies. As the authors point out, “Only a single comprehensive program, covering rich and poor alike, can end disparities based on race, ethnicity, social class, and geographic region that compromise the health care of the American people.” Private insurance would not be allowed, as it would undermine the public program and inevitably lead to a “two-tiered” system of care. HOW WOULD HOSPITALS PAY THEIR BILLS? The NHI program would pay each hospital a monthly lump sum to cover all operating expenses. The hospital and the regional NHI office would negotiate the amount of this payment annually based on past budgets, clinical performance, projected changes in demand for services and input costs, and proposed new programs. Hospitals could not use any of their operating budgets for expansion, profit, excessive executives’ incomes, marketing, or major capital purchases or leases. Investor-owned hospitals would be converted to not-for-profit status and their owners compensated for past investment. HOW WOULD DOCTORS MAKE A LIVING? Physicians and other practitioners could choose to be paid salaries from the clinic, hospital, or HMO where they work (the money would be drawn from a “global budget” paid to the institutions by NHI). Or, they could choose to have a “fee-for-service” practice, where they would submit bills directly to NHI for all services and would be paid promptly based on a simple, binding fee schedule. Global budgets would allow institutions to virtually eliminate billing, while assuring them a predictable revenue stream. Such funding could also stimulate the development of community prevention programs whose costs cannot be attributed (or billed) to individual patients. WHAT ABOUT LONG-TERM CARE? The NHI program would cover disabled United Statesians of all ages for all necessary home and nursing home care. A local public agency in each community would determine eligibility and coordinate care. The NHI program would pay long-term care facilities and home care agencies a lump sum budget to cover all operating expenses. For-profit nursing homes and home care agencies would be converted to not-for-profit status. Since most old people and people with disabilities would prefer to remain in their homes, the program would encourage home- and community-based services. Nurses, social workers, and an expanded group of trained geriatric physicians would assume leadership of the system. WHAT ABOUT BUILDINGS, EQUIPMENT, INVESTMENTS, AND PROFIT? The NHI budget would fund the construction of health facilities and the purchase of expensive equipment, making sure that capital funds would go to excellent and efficient projects in areas of greatest need. The NHI program would compensate owners of investor-owned hospitals, HMOs, nursing homes, and clinics for the loss of their clinical facilities. WOULD MEDICATIONS AND MEDICAL SUPPLIES BE PAID FOR? The NHI program would pay for all prescription drugs and medical supplies, based on a national formulary. Outpatient suppliers would bill the NHI program directly for the negotiated wholesale price, plus a reasonable dispensing fee, for any item in the formulary that is prescribed by a licensed practitioner. HOW WOULD ALL OF THIS BE PAID FOR? People are so worried about this that I will spend most of the rest of this issue of the Notes talking about it. Suffice it to say that the NHI system, which would cover all currently uninsured people, pay for long-term care, and fully cover needed prescription drugs, would cost the nation no more—and possibly less—than we are spending now. |
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Last week I gave a report on some of what I consider the good news about health care in this country. One bit of good news that I didn’t mention is that the issue has now become so pressing that all of the candidates for the presidency of the USA are inclined to talk about their plans for health care, loudly and often, on the campaign trail. As I said, that’s the good news. The bad news is, first of all, that most of their plans (excepting for those of Kucinich and Sharpton, and the recently-withdrawn Mosely-Braun) are woefully inadequate and aim only at piecemeal reform of the current monster of a system that we have, which just doesn’t cut it anymore. The second piece of bad news is how the candidates’ proposals get reported by the media. As an example, let’s take a look at a big report that appeared in the Star Tribune (Newspaper of the Twin Cities!) on January 11, headlined “Plight of the Uninsured Inspires Democrats.” The reporting in this article on the costs of the various proposals was so laughably wrong-headed as to be almost funny. If it weren’t so serious. In the article, all of the Democratic candidates’ proposals were summarized (so briefly as to be almost unintelligible, I might add). Each of the summaries included an estimate of the “10-year cost” of each proposal, were it to be enacted into law. As is often the case with federal budget numbers, these figures are too large for mere mortals to comprehend, such as the Edwards proposal at “$590 billion,” the Kerry proposal at “$895 billion,” the Gephardt proposal at “$2.5 trillion,” and, finally, the Kucinich proposal at “$22 trillion.” Now, really. Can anyone understand these numbers? No, they can’t, but reporters still have a responsibility to report them in a way that doesn’t hopelessly mislead people. Consider, first of all, the basic idea of “costs” for each proposal. Kucinich’s, for example, is pegged at “$22 trillion.” Do most readers know that, under current projections from the federal government’s Centers for Medicare and Medicaid Services, health care spending in the U.S. is already projected to be about $22.4 trillion over the next ten years? It’s not mentioned in the article. If that’s true, then the Kucinich plan would actually be a bit less costly than maintaining our current system. So, would the plan “cost” $22 trillion? Or would it “save” $400 billion? See what I mean? Likewise, once you know the projections for future health care spending, you understand that it really makes no sense at all for the paper to report that the Edwards proposal would cost “$590 billion,” unless they are saying that he has a plan that would reduce anticipated health care spending by 97 percent. Which is not what they are saying. Like I said, this is bad reporting. The missing piece here—which is the wrong-headed part of the entire article, and of most articles on healthcare reform—is that they talk as if “health care spending” only counts if it is done by something called “The Government.” But, of course, much of our current spending in this country is done by businesses and individuals, in the form of insurance premiums, co-pays, and out-of-pocket payments for uncovered expenses. So, a proposal like the Kucinich/Sharpton/Mosely-Braun single-payer initiative, might “cost” $22 trillion dollars in government expenditures, but under such a plan individuals would no longer be paying insurance premiums or co-pays, businesses would no longer need to provide insurance for their workers, and all prescription drugs would be paid for. Get it? Government spends more, most private individuals spend less (as I show elsewhere in this issue of Nygaard Notes). How much less would depend upon a key fact: the distribution of costs. That is, we need to understand WHO is paying for health care, and how the costs are shared among different groups in the society. In terms of a government-administered, single-payer system, the question would be, how does the government raise the money to cover this? I’ll talk about that in the next three articles. |
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Let’s face it: Whenever you talk about universal health care, the first question people ask is, “How would you pay for such a thing? It would cost ‘way too much to cover all the uninsured, pay for long-term care, and so forth.” Well, OK, how WOULD we pay for it? This piece will describe who pays for health care now, and the two following pieces will give the financing details from a couple of different plans. The Big Picture The first thing to remember is that the United States already spends more per person on health care than any other country in the world (or, at least, more than any country that has national, universal health care), despite having 43 million people uninsured. We spend two-and-a-half times as much as England, Sweden, or Japan, even 43 percent more than Switzerland, the second-biggest spender. So, this should make it clear that in this country we already spend more than enough money to provide health care to everyone. We just don’t do it. In other words, the problem is not how much we spend, but how we spend it. So, how do we spend it? Here are some rough figures, mostly from the federal government, as of the year 2000: “The Government” (fed, state, and local) currently accounts for 45 percent of health care spending, mostly through Medicare and Medicaid, which take up about 33 percent. The other 12 percent comes from other government stuff like workers’ compensation, public health spending, veterans’ health benefits, and so forth. The 55 percent of health care costs currently paid for by “private” sources breaks out like this: 25 percent of the nation’s health care spending is paid by businesses who provide insurance for their employees. Seven percent is paid by individuals buying insurance for themselves. Nineteen percent is paid for “out-of-pocket” by individuals. This is stuff that is not covered by insurance, like prescriptions, nursing home costs, eyeglasses, co-pays, and any health care that uninsured people have to get and end up paying for out of their own pocket. There’s another 3 or 4 percent that’s paid for by funny things like sales in hospital gift shops, donations from individuals and foundations, etc. So, that’s what we’re doing now. |
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A technical paper published in 1998 by the Economic Policy Institute called “Universal Coverage: How Do We Pay For It?” did the numbers on a switch to a universal, single-payer system. The author of the paper was Edith Rasell, formerly a family physician and now an economist with EPI. The data is a few years old, but the basic picture hasn’t changed much. Rasell’s paper describes a way to finance universal coverage that preserves much of the current financing system, but replaces funds obtained from regressive sources with revenue from progressive ones. Premiums, for example, would be eliminated since their cost is the same to everyone regardless of income (that is, low-income folks pay the same as high-income folks, which means it’s regressive). Cost sharing and out-of-pocket spending for medical services would also be abolished, for the same reason. Such regressive sources currently make up about 24 percent of health expenditures. In a more equitably-financed system, employers would pay a new payroll tax that raised the same amount of money they currently spend for employee health insurance premiums; this would require a payroll tax of about 7 percent, Rasell says. Revenue from an increase in the federal personal income tax would replace household out-of-pocket expenditures for medical services and payments for insurance premiums. The paper assumes that these regressive funds would be replaced with revenue from the federal personal income tax, the most progressive source of funding. For the average, middle-income family, the tax increase would total $731 (1998). In exchange for the tax increase, no resident of the United States or U.S. employer would need to buy health insurance or face out-of-pocket charges for any health care. In addition, as the paper points out, if funding were reduced for other federal programs (for example, the military), then the amount of replacement funding needed would be reduced. Single-Payer Tax Changes Looked at by income groups, here are the changes in taxes that would be required to fund universal, high-quality health care under a single-payer system: The lowest 20 percent of households, with an average income of $8,860 per year, currently get a tax credit of $611, due largely to the Earned Income Tax Credit program. This would not change under a universal system. The second-lowest-earning 20 percent of households, with an average income of $22,530/year, currently pay a tax of $315, or 1.4 percent of their income. Under a universal system, they would pay $426, or 1.9 percent, an increase of $110. The middle 20 percent of households, with an average income of $37,290/year, currently pay a tax of $2,088, or 5.6 percent of their income. Under a universal system, they would pay $2,819, or 7.6 percent, an increase of $731. (Point of interest: This same family paid almost 12 percent in federal income taxes in 1980.) The second-highest-earning 20 percent of households, with an average income of $56,170/year, currently pay a tax of $4,550, or 8.1 percent of their income. Under a universal system, they would pay $6,142, or 10.9 percent, an increase of $1,592. The top 20 percent of households, with an average income of $130,577/year, currently pay a tax of $20,351, or 15.6 percent of their income. Under a universal system, they would pay $27,473, or 21.0 percent, an increase of $7,123. Just in case these tax increases ranging from $110 to $7,123 seem excessive, consider that a typical family health insurance premium goes for about $8,000 per year, and these premiums would be completely replaced by the taxes above. If you want to read the whole paper, with all the charts and graphs, go to http://www.lights.com/epi/virlib/Technical/1998/universalc.PDF. You’ll need Acrobat Reader to see it. For a regular web version (without charts and graphs), go to http://www.thirdworldtraveler.com/Health/UniverCoverage_HowPay.html. |
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Now I return to the work of the Physicians Working Group on Single-Payer National Health Insurance (PHG), an ad hoc collaboration by 18 of the nation's top physicians. Besides writing the article I quoted above, the PHG also endorsed the National Health Insurance Bill (H. R. 676) introduced by Representative John Conyers on February 11, 2003. This bill would provide comprehensive coverage (including medications, coverage of all 43 million uninsured persons, and long-term care) to all United Statesians as of January 1, 2005. The numbers that follow accompanied the PHG’s endorsement of H. R. 676. They’re a bit different than the 1998 technical paper cited in the other article in this week’s Notes, but the ideas are basically the same. They introduced their endorsement with these words: “By eliminating unnecessary, duplicative paperwork (with single-source financing) and adopting rational, proven mechanisms to stretch our health care dollars (such as bulk purchasing of medications), the United States can provide comprehensive health care coverage—including long-term care—to every resident of the United States for less than what we are currently spending.” The 2005 cost of universal coverage, they say, would come to $1.861 trillion (that’s $56.7 billion less than without reform.) Where would this money come from? Well, in the year 2005, the money would come from: GOVERNMENT ($852.5 billion): H. R. 676 would keep existing federal, state and local revenues that currently pay for Medicare (employer and employee payroll taxes of 1.45 percent each or $194 billion) and other federal and state programs. EMPLOYERS ($220.8 billion): H. R. 676 would implement a modest payroll tax of 3.3 percent on all public and private employers, while eliminating employer premiums for private health plans. Companies that already provide health insurance for their workers will save money. The 3.3 percent tax is low enough so employers who do not currently provide insurance should be able to handle it. THE RICHEST 5 PERCENT OF UNITED STATESIANS ($221.8 billion): The top 5 to 1 percent of wealthiest United Statesians (with declared incomes of $140,000 to $250,000) would pay an additional 5 percent income tax. This tax exempts the first $140,000 in income, and does not include unrealized capital gains in stocks, bonds, home sales, etc. The richest 1 percent (average incomes of $1,100,000) would pay an additional income tax of 10 percent. As the physicians poignantly note, “The most well-off Americans also are the most dependent on a healthy labor force for employees and services. Thus, they will benefit greatly from their modest additional investment in universal health care.” STOCK AND BOND TRADERS ($144.6 billion): Anyone who buys or sells a stock will pay a transaction tax equal to one quarter of one percent of the purchase price. For example, a $100 stock purchase will be taxed a total of 50 cents. For those who invest and hold on to stocks, the tax is minimal. Other financial transactions will also be taxed minimally. This will provide another progressive revenue stream for health care. The wealthiest 10 percent of households own over 80 percent of all stocks, including those in mutual funds or pension plans. Over 40 percent of all stock is owned by the richest 1 percent of households. About half of all households own no stocks, not even in mutual funds or pension plans such as IRAs, 401(k), 403(b) or Keogh plans. CORPORATE TAX EVADERS ($105.2 billion): According to the Treasury Department, corporations are very skilled at avoiding paying their taxes, costing the government billions annually. Closing loopholes and making corporations pay their fair share of taxes will raise over $100 billion annually for health care BUSH’S TAX WINNERS ($206 billion): H. R. 676 would repeal the Bush tax cut of 2001 and invest the Bush “economic stimulus plan” of 2003 into health care. Redirecting this funding into health care spending would provide a genuine economic stimulus while providing an important public service. HOUSEHOLDS ($65.9 billion): Total household expenditures will drop from $326.7 billion to $65.9 billion annually. The only expenses left for individuals will be over-the-counter drugs (such as aspirin), elective cosmetic surgery, etc. This represents an 80 percent reduction in current out-of-pocket expenses. OTHER ($44.5 billion):Existing funds raised from donations from individuals and foundations and from hospital gift shops will continue to contribute a small percentage of the total budget. Total budget: $1.861 trillion You can read the entire proposal (“Financing National Health Insurance February 4, 2003” on the web at http://www.pnhp.org/nhibill/nhi_financing.html. |