The Business of Health Care Reform

With the passage and signing of the Health Care Reform Bill, revolutionaries need to analyze the effects of the bill both on health care and on the political terrain in the United States. This is an editorial from the November/December 2009 issue of International Socialist Review, the  bimonthly magazine of the International Socialist Organization. While not every prediction it makes is exactly on target, it offers a good starting point for a discussion of who this bill will serve and why.

by the Editors of International Socialist Review

Most great American fortunes were made by capitalists who used the power of government to gain advantages over competitors or to profit from public resources.

For example, the Gilded Age plutocrats—the Vanderbilts, the Astors, the Stewarts, the Goulds—built their railroad-based fortunes on the foundation of $100 million in federal and state grants and 200 million acres of federal land grants.

The Dupont chemical empire owed much to U.S. seizure of German chemical patents and government assistance in building its plants during the First World War. The modern nuclear power industry and the Internet are both products of the privatization of technologies developed in government laboratories.

Or consider the Telecommunications Act of 1996, one of the main legislative achievements (besides ending welfare) that Democratic President Bill Clinton claimed in that election year. The bill, passed overwhelmingly with little public debate and quickly signed by Clinton, took down barriers of ownership and transmission rights of content among major media, radio, phone, and Internet companies.

Although the industry promised a new era of competition that would lead to lower prices and greater choice for consumers, the exact opposite developed. The act unleashed a bacchanal of media mergers and industry consolidation.

In the decade following its passage, cable television rates jumped by almost 50 percent, and local phone charges increased by 20 percent. Under the law, the government gave away to broadcasters digital TV licenses that were valued at the time at $70 billion—one can only guess what they are worth today.

All of this for a total industry investment in the Democratic Party of about $309 million.

Despite the free-market rhetoric that claims “Big Government” and “Big Business” are pitted against each other, big business has always found it useful to invest in politicians and their political parties to win government policies that improve their bottom lines.

Karl Marx’s collaborator Frederick Engels described American political parties as “two great gangs of political speculators, who alternately take possession of the state power and exploit it by the most corrupt means and for the most corrupt ends—and the nation is powerless against these two great cartels of politicians, who are ostensibly its servants, but in reality exploit and plunder it.”

It is worth keeping this history—and Engels’ observations from a century ago—in mind as we observe the end game of the current health care reform debate. The media have tended to view the fight over health care reform as pitting a liberal government bent on providing a new health care entitlement to the uninsured against industry and conservative forces fearful of a “government takeover” of the U.S. health care system. Of course, reality is a lot more complex than that.

Where does business really stand? It simply isn’t the case that noble Democrats for health reform stand on one side, arrayed against the evil health insurance lobby on the other. In fact, the health insurers are playing both sides of the fence, as big business always does in “bipartisan” Washington.

The insurance, pharmaceutical, and hospital industries realize two things: first, the current model under which they reap their profits is unsustainable; and second, for the foreseeable future, Democrats are going to be in charge of Washington. So their leading lobbies have made the calculation that working with (rather than against) the Obama administration and congressional leaders will help them to reach their objectives.

Like the nineteenth century railroad barons who built their fortunes from the public trough, the health care lobbies can spot a bonanza in the making. If Congress establishes a government requirement for everyone to buy health insurance—a core idea of all the current health care bills—the insurance industry will reap a huge windfall.

This doesn’t mean that the health care industry lobby won’t try to shape the legislation that emerges even more to its advantage. Obama and the Democrats have made clear that they will make major concessions to keep these “stakeholders” on board. So health insurance lobbyists are pushing for as much as they can get away with and still have the potential of portraying the end result as a “reform.”

For this reason, the industry has lavished attention on the leading conservative Democrats on the Senate Finance Committee—Max Baucus, Kent Conrad, Bill Nelson, and Thomas Carper—to produce what Justin Ruben, executive director of the liberal lobbying group, called a “dream come true for the insurance industry.”

The Senate Finance Committee version of the health care reform legislation has everything the industry could want: the “individual mandate,” billions in government subsidies for the uninsured, a lower requirement for the percentage of care coveraged under insurance than other bills in Congress—and no “public option”—a publicly funded competitor to the private health insurance industry.

Even if some of these provisions are softened in subsequent congressional action, they have set down markers that assure the industry is going to get much of what it wants from health care reform.

The health care industry lobbies that have worked with the administration and Democrats to shape reform might be called the “pragmatic” wing of the health industry.

At the same time, there is an ideological wing of business allied with political conservatives that opposes health care reform completely. These are the people who ginned up the crowds that turned up at August town hall meetings, as Tim Dickinson’s exposé “The Lie Machine” in the September 23 issue of Rolling Stone described:

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  • Guest - Radical-Eyes

    This article is rather dated at this point.

    See the open letter from Physicians for a National Health Plan (linked below via Monthly Review) for a more concrete critical account of the recently passed "health care reform" plan:

    Here's the factual meat of their letter:


    "Instead of eliminating the root of the problem -- the profit-driven, private health insurance industry -- this costly new legislation will enrich and further entrench these firms. The bill would require millions of Americans to buy private insurers' defective products, and turn over to them vast amounts of public money.

    The hype surrounding the new health bill is belied by the facts:

    *About 23 million people will remain uninsured nine years out. That figure translates into an estimated 23,000 unnecessary deaths annually and an incalculable toll of suffering.

    *Millions of middle-income people will be pressured to buy commercial health insurance policies costing up to 9.5 percent of their income but covering an average of only 70 percent of their medical expenses, potentially leaving them vulnerable to financial ruin if they become seriously ill. Many will find such policies too expensive to afford or, if they do buy them, too expensive to use because of the high co-pays and deductibles.

    *Insurance firms will be handed at least $447 billion in taxpayer money to subsidize the purchase of their shoddy products. This money will enhance their financial and political power, and with it their ability to block future reform.

    *The bill will drain about $40 billion from Medicare payments to safety-net hospitals, threatening the care of the tens of millions who will remain uninsured.

    *People with employer-based coverage will be locked into their plan's limited network of providers, face ever-rising costs and erosion of their health benefits. Many, even most, will eventually face steep taxes on their benefits as the cost of insurance grows.

    *Health care costs will continue to skyrocket, as the experience with the Massachusetts plan (after which this bill is patterned) amply demonstrates.

    *The much-vaunted insurance regulations -- e.g. ending denials on the basis of pre-existing conditions -- are riddled with loopholes, thanks to the central role that insurers played in crafting the legislation. Older people can be charged up to three times more than their younger counterparts, and large companies with a predominantly female workforce can be charged higher gender-based rates at least until 2017.

    *Women's reproductive rights will be further eroded, thanks to the burdensome segregation of insurance funds for abortion and for all other medical services."

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