Healthcare Reform: Who Wouldn't Want It?

The spectacle of the past few weeks, where scores of protesters take over town hall meetings and suppress any possibility of a dialogue over healthcare reform, is both alarming and bizarre. Alarming in that the atmosphere surrounding these events surpass in hostility the hysteric moments of the 2008 Presidential Campaign that, one feared, could at any moment lead to reprehensible acts of violence. Bizarre in that the people who so passionately vocalize their opposition to reform are the very ones who stand to benefit from it. Why wouldn’t they want healthcare reform? Undeniably, the election of Barack Obama was greeted in some sectors of the nation with malaise. Conservative circles seized upon the malaise, gave it a shape and lent it their voice. Soon that latent source of discontent was radicalized and adroitly used to fuel the insurrection against everything the President stands for. Nowhere is such strategy more successful than in the on-going healthcare debate, where reform proponents are on the defensive and literally demonized by protesters at town hall meetings, as evidenced by their posters, tee-shirt inscriptions, and angry gestures. These "protesters" range from a toddler holding a poster against the “socialist” policies of Washington to old age folk claiming "(their) America back,” as though the country was cast astray under the spell of some alien power and the Antichrist. This, believe it or not, is the "civil" aspect of the protest. More problematic is the disruptive behavior of some vocal groups who, under the guise of First Amendment rights, attempt to drown out the reform advocates or, under the cover of the Second Amendment, show off their weaponry at rallies, leaving us to wonder how either action advances the dialogue on healthcare. If anything, the behavior of these demonstrators denotes a troubling paradox. Why wouldn’t that toddler’s mother favor reform when the everrising insurance premiums and high deductibles claim a substantial share of her family budget? Why wouldn’t an unemployed middle-aged man embrace reform when the prohibitive cost of COBRA (the transition insurance program for the unemployed) forces him out of coverage? Why does a survivor or a potential victim of breast cancer see it fit to oppose reform when it makes sure her history or pre-existing condition will have no bearing on her ability to obtain coverage? Why do seniors speak so forcefully at those rallies against reform when they stand to gain from lower prescription prices? Such nonsensical behavior demonstrates the power of misinformation and ideology when expertly used by professional opinion manipulators. By all measures, healthcare reform should be an easy sell, as it promotes muchneeded affordability, availability, patient-centered quality care, and equilibrium of the marketplace. Healthcare is one of the issues with resonance throughout our socio-economic structures, from the state of personal finances to the operations of U.S. corporations and the stability of the national economy. Reform calls for the reduction of healthcare delivery costs, which are wreaking havoc on family budgets and the economy as a whole, the eradication of the practice of selective care so dear to the insurance industry, the availability of coverage despite catastrophic life events, pre-existing condition or lack of financial resources. Consider the following. The prohibitive costs of healthcare are one of the major causes of personal bankruptcies in the nation. As it turns out, insurers impose those costs less for the benefit of the insureds than the welfare of company executives, Washington lobbyists, and legislators who vow to keep the status quo intact in return for hefty campaign contributions. About a quarter out of every premium dollar is devoted to the trilogy--executive bonuses, lobbyism and political contributions. From a macroeconomic standpoint, there is a litany of considerations making a case for change as well. Healthcare expenditures account for as much as 15% of our gross domestic product (GDP) and, due to the high costs incurred by Medicare and Medicaid for prescription drugs and medical services, bear significant responsibility in the Federal budget deficit. Health costs, especially as regards retiree benefits, weigh heavily on the operational structure

of US corporations to the point of hindering their competitiveness in the global marketplace. Small businesses, the growth engine of the economy, find it unsustainable to provide insurance coverage to their employees, tend to recoil from the provision of such benefits, and experience difficulty recruiting and retaining qualified staff. Close to fifty million Americans (about 15% of the population—unheard of in any industrialized country!) have no health coverage, rely on emergency rooms for their care, and exert considerable pressure on hospitals and State and Federal budgets. That is the tableau that confronts policymakers and constituents alike and calls for reform—a reform the Obama Administration aims to bring about through competition. In effect, to counterbalance the omnipotence of the insurance industry, the Obama Plan introduces a public option, predicated on a self-sustained governmental entity chartered to offer more affordable health insurance and compete in the insurance marketplace. As could be expected, this prospect freaks out the private healthcare decision-makers, who set on a campaign to discredit the plan and, in so doing, find a natural ally in the Republicans in Congress. These Republicans, who suffered a crushing defeat last November and, for a while, were in a state of disarray, found their voice and, with it, a way out of irrelevance. The strident political discourse on healthcare offers them a platform from which they are launching their assault on Obama. As in the past, they rely on an old and endeared tactic of theirs—fear mongering. With invaluable help from acolytes on the talk show circuit who prey on the gullibility of a certain sector of their constituency, they set out unabashedly to make the healthcare issue Obama’s Waterloo--to paraphrase a Senator from South Carolina who alluded to the battle that doomed Napoleon’s myth of invincibility. Truth be told, unlike the Democrats who stand divided, the Republicans manage to patch over their differences and present a united front against the White house as they disseminate their untruths about the plan. Healthcare reform gives them the perfect opportunity to the extent that this issue cuts through the ideological rift that divides the two parties. Obama’s idea of a public option obviously does not sit well with the Republicans in Congress, their constituents, and their special interest groups. Not for the reason one might expect, though. This time around, their argument takes a twist that strikes by its dissonance. For a Party that made a sport out of bashing Government as inept and inefficient, only capable of promoting bureaucracy and wasteful spending, this twist was quite unexpected. It underscores the hypocrisy that of late has become the trademark of Republican behavior. Their long-held view is that private enterprise can always do better than government in the market of ideas and “know-how.” They have never missed an opportunity to caricature government and promote themselves as fierce advocates of the free market system and its corollary, competition--which by its very nature promotes choice for the benefit of the consumer. One would have thought that a public entity in the health insurance marketplace would be greeted with cheers by the Republicans, that it would be easily outperformed, outsmarted by the well-managed, efficient private insurance companies, and that their reaction would be, “Bring ‘em on!” On the contrary, they vehemently oppose the public option. Surprisingly, they contend that a public insurance entity would potentially cripple the private insurers and force them into bankruptcy. What a farce! So much about the ineptitude of the Feds! Informed minds have known that argument was a fallacy, disproved by Medicare, the government agency that provides insurance coverage for the elderly. Medicare has a much lower administrative cost rate than its counterparts in the private sector and could teach them a thing or two about cost containment. Translation, there is a lot of bloated bureaucracy within the private healthcare industry that we have been subsidizing through our premiums. Could it be that all the brouhaha about the inefficiency of the Feds is just a

façade, behind which government detractors hide their true feelings? Could it be that their staunch opposition or distrust of government is symptomatic of something more profound--glimpses of which surfaced from the secessionist threat of the Texas governor and the nostalgic bewailings at town hall meetings for the America of yesteryears? When was their America lost to them? Was it when the Civil Rights Act was passed? Or when Medicare and Medicaid were enacted to afford coverage to the weak and vulnerable amongst us? Or was it when Roosevelt instituted the New Deal to bring fairness and responsibility into governance? Was their America lost when Obama ascended to the presidency—which, in their eyes, epitomizes the culmination of the ills of the nation since Abraham Lincoln abolished slavery and the South lost the Civil War? It takes something visceral to stir such passion and dispense such vitriol. Surely, the prospect of healthcare reform has had some impact. In an attempt to dissuade the Obama Administration from the public option and sway public opinion in their favor, pharmaceutical companies and hospitals promptly came forward with billions of dollars worth of discounts. Specifically, the hospitals pledged $155 billion in Medicare and Medicaid savings over 10 years, followed by the pharmaceutical companies’ $80 billion in cost reduction initiatives. The insurance companies, for their part, have yet to come up with any plans to provide relief to their insured against the ever-rising cost of coverage. According to a survey done by The Kaiser Family Foundation in 2008, insurance premiums increased by 120 % for the period 1999-2007, whereas wages only grew by 29% over the same period. It is obvious that, as insured, we have the short end of the stick. Our plight does not stop at the escalating insurance premiums. We are also confronted with limitless out-of-pocket costs, from co-payments every time we set foot in a doctor’s office to high deductibles for doctor’s services, hospital stays and prescriptions. We are liable to providers for medical claims denied by the insurance companies. Instead of addressing these legitimate concerns, these companies and their surrogates run advertising campaigns designed to derail the debate. Why wouldn't we want reform? The U.S. runs the most expensive healthcare system in the world. According to World Health Organization’s statistics, we spent a whopping $6,719 per capita on healthcare in 2006 (the last year such worldwide data are available.) Yet, the U.S. was not listed amongst the ten healthiest countries for that year. Recent data confirm our unenviable standing in worldwide healthcare delivery. More shocking is a report by International Living (IL), a publishing firm engaged in the travel and leisure business. IL compiled health data from all the countries of the world and derived therefrom a metric called health index. In 2008, IL computed a health index of 74 for the US, the lowest of the G-8 group which comprise the eight richest countries in the world. In fact, we rank lower than such countries as Costa Rica (82), Egypt (79), and Jamaica (75). Meanwhile, Canada, whose healthcare system has been vilified by the Republican punditry to the point one might think of it a third world country, has a health index of 88. We trail all the industrialized countries in infant mortality rate and life expectancy. If anything, these statistics show that we have not efficiently spent our healthcare dollars, that we have not balanced our tremendous health resources with the needs of our citizens. Why wouldn’t anyone with a sense of equity want healthcare reform? Who benefits from the high costs of healthcare anyway? According to Fortune Magazine, pharmaceuticals and healthcare industries have been among the 25 fastest growing industries for the past 5 years. Another measure of their success is typified by a jump from the top 50 most profitable industries to the top 40 in the spate of one year, from 2008 to 2009. As regards the insurance component of the sector, its performance is predicated on its ruthless operations management, anchored in a strategy that reposes on increased premiums and low claim

satisfaction or, using the administrative lingo of the industry, low "losses." In the realm of insurance operations, a claim is referred to as a loss. A paid claim is a realized loss. It stands to reason that, as for-profit corporations, insurers must contain these losses. Hence the importance of the concept of Loss Ratio, a metric that essentially measures how well the industry manages its claims in relation to the premiums it earns. Lower claims mean lower loss ratio. The lower the ratio, the more beneficial to the bottom line. Wendell Potter, former senior executive with Cigna, echoed this point at his hearing before Congress on June 24, 2009: “The accounting firm (Price Waterhouse Coopers) found that the collective medical-loss ratios of the seven largest for-profit insurers fell from an average of 85.3 percent in 1998 to 81.6 percent in 2008. That translates into a difference of several billion dollars in favor of insurance company shareholders and executives and at the expense of health care providers and their patients.” So, denying claims is for the insurance industry a matter of survival. Why would the insurance companies want healthcare reform? Indeed, senior management at these companies, who have devised the high premium and claim denial schemes, have been rewarded with exponential compensation increase over the past decade, some of them, such as Ron Williams of Aetna and Edward Hanway of Cigna, ranking among the top 100 highly compensated CEO’s. According to U.S. Securities and Exchange Commission filings, "profits at 10 of the country’s largest publicly traded health insurance companies in 2007 rose 428 percent from 2000 to 2007, from $2.4 billion to $12.9 billion. In 2007 alone the chief executive officers at these companies collected combined total compensation of $118.6 million—an average of $11.9 million each. That is 468 times more than the $25,434 an average American worker made that year." Why would they favor healthcare reform? In addition to company executives, the lobbyists acting as surrogates for the pharmaceutical and insurance companies have benefited from the status quo. As an underpinning of the healthcare industries, the lobbying firms have made a successful living out of the millions of dollars they collected from consulting fees and services. According to the non-partisan Center for Responsive Politics, total lobbying spending in 2008 amounted to 3.3 billion dollars. Pharmaceuticals topped the list with $236 million and the insurance companies placed third with $161 million. With the healthcare debate intensifying, record lobbying spending will be set in 2009. As Daily Dose reported earlier in the year, "(t)he industry...set records from January to March, when health-care firms and their lobbyists spent money at the rate of $1.4 million a day" to position themselves in the upcoming debate. In the midst of these disbursements are Washington lobbyists. Their fate is intricately tied to the status quo. For them as well, it is a matter of survival to fight tooth and nail and obstruct any attempt to reform. Last, but not least, the congressmen and senators from both parties benefit from the largesse of the healthcare industry in support of their campaigns. Up until 2006, per the Center for Responsive Politics, Republicans received more than twothirds of the healthcare industries' political contributions. In 2008, however, as the impetus for change was brewing, these industries hedged their bets and orchestrated a shift in their strategy by equally funding both parties at $71 million apiece. In so doing, they planted the seeds for discord within the Democratic Party, the Blue Dogs (conservative Democrats) being among the big recipients of these funds. Yet, within the healthcare bloc, the insurance industry remains firmly entrenched in the Republican camp: in 2008, 55% of their contributions ($26 million) went to the GOP. The healthcare industries have played their hand with dexterity and made the task of reforming the healthcare system complicated. These various individuals or factions, who have acted as pawns of these companies, have a vested interest in seeing that the status quo is

maintained at all cost and that healthcare reform fails. Reform means that all these millions of dollars would be redirected to operations, used to modernize the healthcare systems, get rid of inefficiencies, satisfy insurance claims, and pass some of the savings to the insured in the form of premium and deductible reductions. Another argument advanced by the foes of the reform initiative is that the public option is a path to a single-payer system and leads to healthcare rationing. What they fail to realize is that we ARE in a healthcare rationing regime. Self-imposed rationing. An estimated sixteen million Americans die every year of preventable deaths due to lack of medical care. A great number of them did have health insurance. However, facing high premiums, ever-increasing co-payments, exorbitant drug prices, and unaffordable deductibles, they are forced to self-ration their care. They simply AVOID going to see a doctor and, sadly enough, take a gamble on life. That should never have been. Not in America! The argument that possibly gains more traction in the anti-reform camp is that it will cause the Federal budget deficits to widen. The Congressional Budget Office (CBO), a nonpartisan organization, projects deficits in the trillions-of-dollar range over the period 2010-2019. The White House's Office of Management and Budget (OM itself estimates “the out-year (2010-2019) deficits (to) hover in the range of 4 percent of GDP, which is higher than desirable.” The analysis went on to attribute a large part of the deficit increase to healthcare expenditures. Budget deficits do matter. However, a distinction need be made between chronic or structural deficits and temporary deficits. It is not the purpose of this article to expand on this distinction. Suffice to say that no economies can sustain chronic deficits without impeding economic growth. On the other hand, temporary deficits incurred to correct economic imbalances or make up for the anemia of the private sector are, from a Keynesian economics perspective, not only necessary but advisable. For sure, there are real costs associated with reform; these costs are susceptible to increase government spending, and by default will impact the deficit--despite the President's contention that his plan is deficit neutral. However, the cost of staying the course is even greater, as government spending for Medicare and Medicaid in terms of drug prices and hospital charges will skyrocket in the next decade and severely cripple the national economy. Viewed from this angle, the deficit prospect, rather than hurting the push for reform, makes an even more potent case for it. Healthcare reform is a must, a moral imperative that trumps party affiliation and transcends individual financial stakes. Inevitably, this reform goes through an overhaul of the insurance industry. Insurance should equate to peace of mind; it should not claim a piece of our mind and fill it with worries over unpaid claims. Reform should also mean access to health resources for the forty-six million Americans deprived of health benefits, for the sixteen million who die of preventable deaths every year due to lack of care. Something is definitely wrong when the richest country on earth has a lower health index than small third word countries and leaves 15% of its citizens out of the healthcare equation. The current system has not delivered the type of care susceptible to balance the health equation for the benefit of the nation as a whole. This makes it all the more urgent that a viable public option be left hanging over the healthcare companies like a Damocles' sword to "keep them honest." Should the impetus for public option wane or be defeated, tough regulation of the healthcare sub-sector would have to be instituted to ensure that the U.S. healthcare delivery system is second to none. The healthcare industries have been very astute; they muddied the waters through clever calibration of their campaign contributions and tied enough lawmakers' hands to slow the impetus for reform. These special interests have handed Obama a Gordian knot to untangle. He has no choice but to cut it. So, healthcare companies, take a pick: public option or heavy regulation!