By Sean Healy
In the United States today, 37 million people (8.3 million of them children) are completely without medical insurance. The UN children's agency UNICEF ranks the US 21st among nations on children's health — behind China, India and Panama. The death rate among blacks in the US is 18 per 1000, higher than Bulgaria, and black people live on average 10 years less than whites.
However, these figures are not the motive for US President Bill Clinton's Healthcare Reform Bill, sure to be the major piece of legislation to be put to Congress in 1994. The bill is aimed at addressing another priority far closer to the administration's heart — the US budget deficit.
Between 1983 and 1993, the cost of health-care in the US tripled — from US$300 billion to US$900 billion, roughly one seventh of the entire economy. The direct cost to the government is in the area of $300 billion. Particularly alarming for Clinton is the inflation rate in the health industry — 11% per annum or roughly 3-4 times the inflation rate in the rest of the economy.
The Healthcare Reform Bill therefore has to be seen within the context of the administration's deficit reduction strategy. Clinton's 1995 budget, unveiled in mid-January, is centred on projections of deficit reduction from $302 billion to $176 billion, through cutting more than 300 federal programs, eliminating 115 of them. The health-care package seeks to guarantee US$59 billion of this projected figure.
Driven by the rising costs of new technology, greater demand on services, the needs of an increasing and aging population and (most fundamentally) the frequent price rises introduced by the giant pharmaceutical and insurance companies, health care threatens to become a major fiscal nightmare for the Clinton administration.
The health care reform plan therefore foresees a system in which large health alliances, bringing together hundreds of thousands of people in a locality, would purchase insurance in bulk from different insurance companies. Subscribers would then be offered a choice between three standard types of plan: a basic package with a health maintenance organisation (HMO) employing its own doctors, a fee-for-service option, which would give wider choice of doctors for those who could pay, and a combination plan.
Payment would be 80%-20% between employers and individuals, with individual payments capped at $360 per year for individuals and $840 for a two-parent household. Self-employed business people would pay the whole premium, which would, however, be tax-deductible.
The "health security card", unveiled with much pomp by Clinton in September, would seek to guarantee certain basic health provisions for everyone, including such things as doctor visits, hospitalisation, preventive care and some home health care.
But funding for the plan has proven dubious at best. The projected cost, from 1994 to 2000, is upward of $441 billion. In addition to a "sin tax" on cigarettes and alcohol, much of the cost would be made up in cuts to Medicare and Medicaid, the two standard health schemes for the aged and welfare recipients. Though the administration claims that both these groups will be covered to the same level by the new plan, its real impact on the poor and disadvantaged is yet to be determined.
The most likely result predicted by unions, community groups and health professionals is the dilution of service standards provided by insurers under the standard premium.
It's also very unlikely that any reregulation of the insurance industry, such as caps on premiums, will affect the ability of insurers to "skim". It is standard practice in the US health insurance industry for companies either to refuse to cover or to charge higher premiums to those most likely to put in claims: the old, the sick and others most in need of insurance.
The Wall Street Journal at the time of the launch of the package in September listed various ways companies could circumvent the plan's toothless anti-"skimming" regulations. These could involve: not working with doctors in poor neighbourhoods, only using young people in commercials to discourage the elderly and situating offices and health providers far away from public transport.
The big insurance companies in general reacted badly to the package, so unused are they to having any governmental oversight at all. So did lobbyists for industries that would have to pay a slice of their employees' premiums for the first time.
But in fact, it's the big insurers, and in particular the Big Five (Aetna, Prudential, Cigna, Metro Life and Travellers'), that are the winners from this package. That was certainly the message from the financial markets. In spite of the insurance giants' protestations, Wall Street reacted with a "collective yawn" — confident that the plan provided no threat to profitability.
The fundamental premise of the Healthcare Reform Bill is that there has to be a continuing central role for the private insurers. It's still the big insurers that the health alliances buy premiums from, not directly from care providers or from the state. Other options, such as the single-payer system which operates in Canada and (partially) in Australia, were passed up because they would have destroyed the private insurers.
The plan therefore serves as a deficit reduction tool without challenging the private insurance companies. But it's the existence of those companies running the health industry that is the cause of both the startling inflation levels in the industry and the patent inadequacies and injustices of the US health system. In the words of Nation columnist Alexander Cockburn, the plan is Clinton's "homage to corporate oligopoly".
The package skirts the central issue: what is the health sector there for anyway? Taking up that issue would require answers that Bill Clinton cannot honestly give.