Our health-care system is failing. What will save it?

Jill Quadagno

8 The horrific events of Hurricane Katrina exposed layer upon layer of inequality, and none more shocking than the inequality of health care. While Tulane University Hospital in New Orleans, a private facility, safely evacuated about 1,400 patients and employees, Charity Hospital, the public facility across the street, had no money to charter helicopters and no working evacuation plan. Charity’s patients, among the poorest in New Orleans, remained behind as flood waters rose and conditions worsened. Like 46 million other Americans, most of them had no health insurance.

The health-care system is unraveling. Last year nearly a million more people were uninsured than the year before. Every year for more than a decade, the percentage of employers offering health benefits has declined. The only reason the situation doesn’t look worse is that the government is picking up the slack—through Medicare and Medicaid and through the coverage provided to public employees.

Most uninsured people do not have a regular family doctor and therefore do not receive preventive care such as cholesterol-lowering drugs or screening for cancer and heart disease. Often the care they do receive is in the emergency room, where there are no follow-up services. With hospitals closing in poor neighborhoods, many people receive no care at all.

The crisis of the uninsured reverberates throughout the economy. The cost of caring for the uninsured is borne by taxpayers through government programs and by privately insured patients when their doctors or hospitals distribute the burden of unpaid bills among them. Such “cost shifting” forces insurance companies to raise premiums. And as premiums rise, fewer employers offer coverage. Some companies have been pushed to the brink of bankruptcy by rising health-care costs: General Motors, for example, which recently laid off 25,000 workers.

In other nations, it is broadly accepted that everyone is in the same boat when it comes to health care and that fairness requires sharing risks over the entire population. Other nations guarantee every citizen comprehensive coverage for essential health-care services. To the extent that care is rationed, it is done on the basis of clinical need, not ability to pay.

Most countries also allow, and some encourage, private insurance as an upgrade to a higher class of service and a fuller array of services. But the insurance companies are heavily regulated to prevent the more pernicious forms of risk rating. Not so in the United States, where private insurance companies are allowed to use sophisticated forms of medical “underwriting” to segment people and employee groups into different risk pools. As a result, insurers can charge more to cover people who have, for example, allergies, high blood pressure, depression, or arthritis; exclude treatment of “preexisting conditions” such as cataracts, asthma, or migraine headaches; and deny coverage entirely to older people or people with serious illnesses such as AIDS, leukemia, or emphysema. Insurers can also exclude entire occupations or industries considered to be high-risk, such as beauticians, bartenders, or roofers.

Why is the United States the only industrialized nation that fails to guarantee coverage of essential medical services, rations care by income, race, and health, and allows for-profit insurance companies to exclude the people who need care the most? The answer is political. Throughout the 20th century each attempt to guarantee universal coverage has been attacked by powerful stakeholders with strong organizations and deep pockets. From the Progressive Era to the 1960s, the American Medical Association was the most vocal (although certainly not the only) opponent of government-financed health care. The AMA rallied local medical societies and individual physicians to persuade President Franklin Roosevelt not to include health insurance in the Social Security Act of 1935. It mobilized against President Harry Truman’s plan to make national health insurance part of his Fair Deal. It even objected to President Dwight Eisenhower’s modest attempt to subsidize the private insurance industry through government reinsurance for catastrophic health-care costs. Medicare was enacted in 1965, but only after a decade-long campaign for it waged by the AFL-CIO, and despite the AMA’s intense opposition.

Following the enactment of Medicare, physicians’ antipathy to government-financed health insurance dwindled, particularly because they came to appreciate the benefits of guaranteed payment. Health insurers replaced doctors at the forefront of the opposition. In 1988 the Health Insurance Association of America and the National Federation of Independent Business worked to defeat a proposal for home care for the disabled. The same coalition waged a successful campaign against President Bill Clinton’s health-security plan in 1993.

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What is the solution? The authors of the three essays that follow each have ideas about the fairest and politically most feasible way to break the logjam and expand access to care. Barbara Starfield is pessimistic about the prospects for a comprehensive solution, so she suggests taking intermediate measures that could alleviate some of the most pressing problems, most significantly, the shortage of primary-care physicians and the dominance of American health care by specialists. She also suggests ways to hold the insurance industry more accountable for practices that increase health disparities and reduce access to services.

John Geyman’s plan is more ambitious. It would eliminate the current health-insurance system and institute a single-payer plan, like Medicare, that would guarantee universal coverage. Geyman’s plan would be certain to face strong opposition from the private insurance industry, for-profit HMOs, for-profit hospitals, and for-profit nursing homes, as well as the drug manufacturers, who would be forced to negotiate prices with a federal board. Erasing 60 years of history by eliminating the employer-based health-insurance system that evolved in the years after World War II and the vast complex of for-profit health-care organizations that emerged after Medicare may not be possible. It may also be difficult to persuade small businesses that currently provide no coverage for their employees to pay a seven-percent payroll tax. But even if Geyman’s single-payer plan didn’t win the political support it needs, it could create what sociologists call the “radical flank effect,” making more-modest plans, like Starfield’s, more viable in comparison.

Ezekiel J. Emanuel and Victor R. Fuchs would achieve universal coverage by giving every individual a voucher to purchase a basic benefits package from a private insurance company. The advantage of a voucher plan, in their view, is that it would preserve market competition and cohere with core American values—in particular, the preference for limited government. In theory, vouchers might elicit less opposition than a single-payer plan, but they would have to be accompanied by regulation, a word that is anathema to the insurance industry. Without regulation, insurers would reject high-risk individuals, just as they do today.

So what are the prospects for universal coverage? According to Emanuel and Fuchs, three developments must coalesce for health-care reform to occur. The public must recognize that a problem exists, the major players must agree on a solution, and a transforming political event such as a natural disaster or electoral realignment must take place. Clearly, the first criterion has been met; but reformers have yet to agree on a solution. While this is not an easy task, three proposals explored here can become the starting point for a national discussion. Then the challenge will be to move health-care reform to the top of the political agenda.

Starfield’s idea of forming a coalition of informed consumers seems an ideal place to start. History suggests that prospects for reform are enhanced when a coalition mirrors the structure of the American state. At the top there must be a national leadership responsible for mapping out a grand plan to disseminate ideas, recruit members nationwide, and cultivate political insiders who can write and introduce bills and who understand the technicalities of the congressional budget process. At the middle level, a reform movement needs such institutions as state labor federations and senior-citizen clubs whose leaders can coordinate activities, tap into social networks, and disseminate the organizations’ models and ideas. Finally, a reform movement needs local chapters to funnel money to the higher levels of the federation and provide grass-roots activists who can engage in social action at the local, state, and national levels.

A grass-roots constituency for health-care reform already exists: the baby boomers, half of whom are now in their 50s, the Hispanic population, with nearly one-third uninsured, and the millions of low-income families made visible by Hurricane Katrina. That natural disaster may be the transforming political event that makes Americans more responsive to the plight of the disadvantaged and shifts national priorities from waging war to reforming health care. <

Jill Quadagno is the Mildred and Claude Pepper Eminent Scholar is Social Gerontology and Professor of Sociology at Florida State University. She is the author of One Nation, Uninsured: Why the U.S. Has No National Health Insurance.

Originally published in the November/December 2005 issue of Boston Review