health care industry

US Health Care: “Single Payer” or Socialized Medicine?

Roseann Demoro, leader of the California Nurses Association. She is the chief architect of the support for “single payer” in California.

When California’s “single payer” health care bill fizzled and died like a dud fire cracker, its rank and file supporters might have been surprised. Not so for Karen Bernal, though. Chair of the so-called “progressive (i.e. liberal) caucus of the California Democratic Party, she said “everyone has known in advance that that this bill was doomed to fail… And the only decision about this was where, and in what committee, it was going to die. That’s it. I know I’m sounding very cynical right now, but they never had the intention of passing this….” 

These machinations of the Democratic Party should not surprise anybody

California Assemblyman and Speaker of the House, Anthony Rendon.
He was unanimously elected Speaker, including with the support of the Republicans. Since he shelved the “single payer” health care bill not a single Assembly member has called for his removal. They are all in this together.

who’s been watching them with a critical eye, and we will return to them later. They also raise the question of the proposal of single payer itself. Of course, the workers movement in general, and socialists in particular, should support any reform, no matter how minor, and any step that weakens the death grip of the “free” market. That includes “single payer”. But we shouldn’t do it uncritically, and we should learn from history.

Vermont’s “Green Mountain Care”
California’s single payer bill, SB 562, was the second attempt to pass single payer on a state-wide level, the first being an attempt in Vermont five years earlier. In that case, a governor who had campaigned for office based, in part, on support for state-wide single payer (known as “Green Mountain Care”) cancelled it when push came to shove, and there were many similarities between the two plans. They both were top-of-the line “platinum” health care plans. In the case of Vermont’s, it would have paid for 94% of a person’s health care costs vs. an average of 60% under Obamacare. It would have also required cooperation from the federal government, since it would have in effect taken over Medicare and Medicaid. And as with SB 562, the plan left out a key issue: How would it be funded?

SB 562: The Devil is in the Details
A state senate committee estimated  that the cost would come to $400 billion per year. The California Nurses

Karen Bernal, leader of the California Democrats’ “Progressive Caucus”.
She expressed frustration with the entire system:
“we’re always constantly amazed how it is that California seems to have such a liberal and progressive reputation around the rest of the country. Because, I mean, we know so many dirty open secrets… We have fracking. We do drilling. We can’t get single-payer passed even though there’s a supermajority…. You know, the speaker of the assembly isn’t the speaker of the assembly just because he’s a great guy. It’s because he can bring in a lot of money. And the same with the committee: They bring in money. It’s a terrible situation.”

Association (CNA), which is the main force for single payer in California, paid for a study that claimed it would only be $330 billion. The CNA study apparently accepted the figures of the Senate estimate but factored in reduced prices that one single payer would presumably be able to obtain due to its large bargaining power.

Proposition 98
Whichever amount you accept, billions would have to be raised. One problem though is claimed in an article  in The Intercept. The article points to Proposition 98, passed by voters in 1988, which requires 40% of all general fund monies to go to K-12 education. “If you include community college spending, it must exceed 50 percent,” they claim. This would mean that the state would have to raise double the amount needed for health care, because half of it would have to go to education.

The CNA appears to dispute this. “Through consultations with the primary sponsor and constitutional legal experts, we are developing.. legislative approaches (to deal with this issue). Those consultations would bear fruit in the legislation if Rendon ends his subversion of the democratic process.” What these “approaches” are they do not even outline. Therefore, it’s hard not to take that claim of the Intercept seriously.

Even if the CNA is correct, it’s difficult – to say the least – to see how the money could be raised. However you cut it, a significant tax increase would be required. This can be accomplished either through a vote of 2/3 of the legislature or through a ballot initiative. True, in most cases the tax increase would be more than offset by the savings to individual workers through single payer, but do you seriously think that would be heard? Polls  show about 65% of Californians support single payer… if new taxes aren’t considered. When that is taken into consideration, the support drops to 42%, and that’s before the multi, multi-million dollar propaganda campaign got underway. As Melissa Michelson, professor of politics at Menlo College put it, “I think if this moves forward in a way that makes it look like it might happen, there will be such an enormous amount of lobbying, public opinion, commercials and mailers trying to get people to change their opinion: `Who do you want making these decisions — you or bureaucrats in Sacramento?’ The ads write themselves.” 

Provider Consolidation
In any case, neither the CNA nor the Senate committee, nor backers of single payer in general seem to account for the vast changes that the health care industry is undergoing.

According to the American Hospital Association (AHA), there were 6,100 registered hospitals in 1997. By 2016, that number was 5,627 and at present there are 5,564. “While the total number of hospitals has dropped, for-profit hospitals are on the rise,” the report states.

Closed hospitals.
The M&A trend in health care has resulted in hospital closures across the country.
This trend has accelerated. In 2015, hospiital M&A’s amounted to $6.54 bn. in value – a record at that time. It was eclipsed in 2016 by hospital M&A’s valued at $13.9 billion.

According to the Wall St. Journal, one of the factors that “helped set off a health-care merger frenzy” was the limited and partial regulation created by Obama’s Affordable Care Act. The WSJ explains that this “torrid” pace of M&A’s “reflects efforts by companies in both industries (hospitals and insurance companies) to gain the scale and heft to succeed amid changes unleashed or accelerated by the health law. Those include growing pressures to constrain costs, and new forms of payment that require providers to meet efficiency and care-quality goals.”

In other words, partly because of the very limited changes brought about by the ACA, insurance companies started to merge even more than they already had been doing. Partly in order to maintain bargaining power with the insurance companies, the hospital companies responded by merging also. We say “partly” in both cases, because from banking to the airline industry, corporate consolidation is the way of life under capitalism. So this hospital consolidation would have happened anyway; it was just accelerated by the ACA.

This urge to merge is also spurred on by the attempts to achieve economy of scale, for example by computerizing patient records. Such computerization is only primarily efficient if done on a large scale, through large doctor-hospital networks.

What is the end result? As US News reports:Wharton business school professor Lawton Burns led a study of cost and quality in 15 major health care markets. According to him, the data prove that “providers consolidate to gobble up more of the market, so they can reduce competition and thereby raise prices.” A Study by the Robert Woods Johnson foundation reached the same conclusion: “Hospital consolidation generally results in higher prices. This is true across geographic markets and different data sources.” The study went on to say that “Prices increase 40 percent or more when merging hospitals are closely located.”’ 

An L.A. Times article explained the same thing in regards to California: “The study found that the domination of the state’s hospital segment by two big systems, Sutter Health and Dignity Health, not only drove up prices everywhere their institutions were located but allowed even nonaffiliated hospitals to charge more.”  

Hospital Costs
Despite these M&A’s, expenses continue to increase. The American Hospital Association reports that total expenses for all US registered hospitals were $859.4 bn in 2013, but increased to $936 billion in 2016. Despite that increase, and despite the massive consolidation 52% of hospitals lost money last year.

M&A’s Would Accelerate
If hospitals and other providers in California were to face not just a few giant insurance companies, but one big one, this urge to merge would vastly increase. The supposed efficiencies and reduced costs of single payer seem to be exaggerated, therefore.

Quality Suffers
Consolidation also has an effect on the quality of health care in several ways, one of which is availability of emergency room services.

California is no exception to this trend. According to the same LA Times article cited above, from 1998 to 2007, 39 hospitals in the state have either closed down altogether or closed their emergency rooms.

As far as overall quality of care, the US News report cited above states, “as health care consolidates, quality suffers (through lack of meaningful competition to make providers do their best work). More patients actually die.”     

This general trend hits people in rural areas and in poor areas especially hard. In 2015, for example, Doctors

San Pablo residents protest the planned closure of Doctors Medical Center (“Doctors Hospital)

Medical Center in San Pablo closed. An article in the SF Chronicle reported on the consequences a year later. Residents who need “speedy treatment” (for example for a stroke or heart attack) have to travel greater distances, sharply decreasing their chances for a full recovery or even for survival. “A 2014 study that looked at California emergency department closures between 1999 and 2010 did find that patients who lived near a closed emergency department and were later admitted had a 5 percent higher chance of dying in the hospital than those who did not live near a closure.”

This sort of event is common in poor neighborhoods (and rural areas) throughout the state and the country. As the article says: “Wealthier communities, meanwhile, have kept their hospitals. ‘The best way to ensure access to health care is to live near a Nordstrom’” said Dr. Desmond Carson, a former ER doctor at Doctors Hospital.

Faced with one giant payer, faced with increasing costs, and considering that the for-profit hospital chains are an increasing percent of the hospitals overall, this consolidation and shut-down trend would vastly accelerate, and at the expense mainly of the poor.

Fee Schedule
Then there is the issue of fee schedules. Under SB 562, reimbursement schedules would be modeled after that paid by Medicare, but Medicare only pays for part of the what the providers charge. Many people on Medicare have a secondary insurance to pay for this. Without this secondary insurance, for example, a patient would pay about $50 co-payment for a visit to a doctor’s office. But single payer would eliminate secondary insurance, meaning that the patient is out of pocket for this amount. Given the state of the economy, many would still find this unaffordable.

Federal Waiver
A little discussed aspect of SB 562 was the fact that it would have required a federal waiver. That’s because the plan would have taken over the Medicare and Medicaid federal programs. And what are the chances of the Trump administration granting such a waiver? About zero is an optimistic guess.

Given the vagueness of the funding proposals, and given how backers – including knowledgeable ones – ignored the issue of consolidation of the industry, and given the absolute zero chance that the Trump administration would have granted a waiver, there is zero chance that California single payer could have come into existence, even if SB 562 had not been shelved. What, then, did the bill’s sponsors most likely have in mind?

As the SF Chronicle wrote, “the current debate might end up looking a bit more like a trial run for a renewed single-payer push a few years down the road. Backers of the plan no doubt hope that by the time they’d have to start asking the feds for waivers, the White House might have a friendlier occupant.  You don’t have to be

Trump and House Republicans celebrate their passage of “Trump Care”.
He later denounced this same bill as being “mean, mean, mean.”
But is he the real target of the single payer campaign?

Karl Marx (or Machiavelli) to read between the lines here: The bill’s backers, including the Democrats “Progressive Caucus” knew all along that this was never going to become a reality. The hope was, though that, with 65% support before any vote on new taxes would have to be held, that Trump & Co. would kill it, thereby giving the Democrats a popular issue to attack him and the Republicans when 2020 rolled around.

Single Payer vs. Socialized Medical Care
This writer remembers when, back in the 1980s, the whole issue of health care “reform” started off. At that time, the original call was for socialized medicine, for a system like the National Health Service in Britain,

 

A hospital in Germany.
They have a system similar to (although not exactly the same as) the proposed “single payer” here. A German patient describes the problems with that system:
“the staff in hospitals and nursing homes is extremely underpaid, but over stressed by double shifts etc. This causes more and more problems in the hospitals – the medical workers are tired and sick.
Believe it or not, the profession of the midwife is close to be extincted because they can’t survive anymore by the incoming money. At the moment we have many hospitals, but as long as you don’t pay your bill on private base, but through the insurance, they release you the day after the surgery or even the same day.
And the number of hospitals decreases dramatically, as well as the number of medical practises in poor or rural areas.
The problem is in my opinion not the health insurance problem, but capitalism itself.”

where the entire industry is publicly owned and operated and funded through taxes. (The NHS is now under attack by the Conservatives, mainly through starving it of funds, we should add.) What happened was that the union leadership got involved in the campaign here and convinced the campaign to change from calling for socialized medicine to “single payer”. They claimed that would be an easier sell.

Now, here we are, returned full circle and it’s time to reconsider this. Given the developments in the capitalist economy since that time, the idea of mixing a government-run health payment plan with private run health care providers (many of which operate on a for-profit basis) is like putting two competing wolf packs in the same territory. One will kill off or drive out the other; they cannot and will not survive together.

Health care services are just as important, and in many cases just as much of an emergency, as the services that fire fighters provide. Just imagine if your house caught on fire and when the fire fighters arrived the first thing you had to do was show them proof of insurance, or even worse pay out of pocket! No, fire fighting is a public service and the idea that it has to “pay for itself” is ridiculous. The for-profit “free market” cannot work for this service. The same is true as far as health care services. It shouldn’t have to pay for itself. It’s a social necessity that society as a whole should pay for and provide, free of charge at the point of consumption.

It can and must be socialized!

Some argue that it would be easier to institute single payer because it’s easier to get support for it. Not among workers, especially the young, who nowadays show more support for socialism than for capitalism. And not when the contradictions as outlined above are taken into account. There is one group, though, for whom single payer is an easier sell: The “Progressive Caucus” of the Democratic Party and types like that. Or, to put it another way, these types are willing to put up single payer as a means of attacking the Republicans. For them it’s a no-risk deal since they know it will never come to a vote on tax increases and it doesn’t really raise the heart of the matter, which is the basis of capitalist production itself – private ownership vs. socialized ownership in general.

Single Issue?
The other question is whether the issue of health care can adequately be dealt with through a single issue campaign at all. In Britain, where they have socialized medicine through their National Health Service, workers are seeing not only privatization but also a starving of the system, causing long waits, inadequate staffing, and the same threats of hospital closings as we are seeing in the US. For a public health system to be adequately funded, we would need a complete restructuring of the US tax system for one thing. On top of that, the massive expenditures for the US military – aimed at maintaining the domination of US capitalism around the world – would have to be cut.

As with every other issue, there is not even the beginning of a solution to the health care crisis through relying on the “progressive” Democrats. The issue of health care is directly linked with the crying necessity for a mass working class political party in the US, one with socialist policies.

Update: Here is a recording of a call-in we did to WRFU’s World Labor Hour on this issue.

6 replies »

  1. John Reimann: I respect you very much but your discussion here of “socialized medicine” (SM) is kind of weak. Maybe you didn’t have time to delve into its various meanings. We Canadians have a version of SM or “single-payer” (SP) as you USAsians put it. We barely use the term SP up here. It’s simply called Medicare or Universal Health Care which is funded by the federal government BUT, unfortunately, actually the responsibility for it is provincial, in more that one meaning of the term. You fail to say that the only aspect of our system, although in this day and age still very important, which is “socialized” is the payment system. We call it colloquially “health insurance.” but it barely scratches the surface of what a socialist system should truly mean. The whole fee-for-service crap would be an immediate victim of a truly socialist health care. Doctors should be salaried or better, work for wages. Since nearly all dis-ease is produced by the network of social relations, and employment settings first and foremost, in its true meaning, a socialist medicine would be fundamentally focussed on prevention of disease. You nowhere mention prevention as one of the goals of SM. I know it would take a complete overhaul of the capitalist system to bring that about but the issue of prevention needs emphasizing. What you call SM, if it were to be implemented in the US, would no doubt bring tremendous relief to millions upon millions of americans because of the COSTS of health care there. But it goes nowhere far enough as a means of reaching a socialist health care. Let’s prevent disease, not merely “cure” it. It has been said that in ancient China, your physician was to be paid according to how healthy you were. But if you got sick, the physicians lose their income. Thus they have, you might say, a vested interest in your health whereas in nearly all modern, even SM, systems, the doctors have an interest in your getting sick. There is a huge literature on this whole topic.

    • thank you, Clem, for these points. You are entirely correct, and what you write is another powerful argument for socialized medicine as in taking the entire health care industry – hospitals, pharmaceuticals, etc. – out of private hands and placing it in public hands under direct control and management of the workers and patients themselves. It is because of the profit motive that the health care system is so narrowly focused.

      It’s true that the issue of prevention was not raised, but the question of fee-for-service is implicit in the issue of REAL socialized medicine. If the entire industry were socialized, then everybody in it – including doctors – would be paid a straight up salary. It’s just like fire fighters, to which we compared the health care industry.

      Also, please see the above comment.

  2. I think that we should also take up demands for some form of democratic control of these institutions. That is, they should not just be nationalized or socialized but also put under the democratic control of the workers, patients, and the broader public. I think that an instructive example here is the case of the occupied factories in Argentina, the most politically conscious factory committees are demanding “nationalization under workers control” as a means of protecting themselves from being forced out to become ordinary capitalist firms by the market. This is tied into a vision of being “social factories”, that is that they exist not just to make a profit but to meet human needs.

  3. “True, in most cases the tax increase would be more than offset by the savings to individual workers through single payer, but do you seriously think that would be heard? Polls show about 65% of Californians support single payer… if new taxes aren’t considered. When that is taken into consideration, the support drops to 42%, and that’s before the multi, multi-million dollar propaganda campaign got underway.” Isn’t it likely that a lot of the issues which Socialists advocate for would be likely not to be heard including the ultimate goal of socialized medicine?

    • My suspicion is that socialized medicine would get a lot more support than we think. In any case, how do you build support if you don’t advocate it?

      But socialized medicine is not the “ultimate” goal; full on socialism is. While the polls show massively increasing support for “socialism”, I think there is still widespread confusion as to what socialism really is. And this cannot be cleared up without discussing it. The call for socialized medicine and the explanation for why it’s necessary is part of that process.

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