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U.S. health reform: unkindest cuts.

If the 1994 health care reform debate was unsatisfying, this past year's was grotesque. The Republicans' proposals would imperil the already inadequate insurance coverage of the poor, sick and old; accelerate the corporate invasion of medicine; and virtually abolish legal and regulatory restraints on profit-driven transgressions. The Democrats have joined in encouraging corporate medicine, merely proposing less draconian cuts of their own. Meanwhile, the American Medical Association mortified the public and the profession by flipping from opposition to support of the Republican Medicare agenda in exchange for a promised few extra dollars--about 30 cents per physician per day.

As this sorry debate has unfolded, polls document growing unease about health care. Neither patients nor doctors like the corporate H.M.O.s being foisted upon us. Corporate care most often evokes grumbling resignation among the healthy, but each week begets thousands of new medical rebels among the sick who are being denied services. In September, more Americans said they were interested in the Medicare debate than in the O.J. Simpson trial, and health care again tops the list of voters' concerns. Meanwhile, knots of worried physicians, nurses and other workers gather in clinic corridors and hospital cafeterias to commiserate and rue the impending catastrophe. In a few spots, workers have organized demonstrations, doctors have burned their A.M.A. cards and patients have invaded hearing rooms. Such informal, fragmentary protest needs formalizing and amplifying.

For Physicians for a National Health Program, our group of 7,000 doctors, medical school and hospital teach-ins (often in the dignified guise of Grand Rounds) are one order of the day; speaking out in churches, public meetings, local newspapers and radio talk shows is another. Many are willing to join patients in more mutinous displays.

In the face of these signs of public restlessness, the Republicans' political strategy is to jam through legislation before anyone but the lobbyists who wrote it knows what's in there. Meanwhile, the Democrats launch verbal fire at Gingrich from a position mere inches to his left. As the leaders of both parties haggle over a budget compromise, the specifics of their health care proposals evidence the bipartisan abandonment of the public's health.

The Republican plan that Clinton vetoed in December called for cuts of $270 billion from Medicare (government insurance for the elderly) and $163 billion from Medicaid (government insurance for some of the poor and disabled) over the next seven years. Although Republican rhetoric highlighted the impending bankruptcy of Medicare's hospital trust funds few of the party's savings would accrue there. Most would go toward a $245 billion tax reduction, largely for the affluent.

About $50 billion of the Republicans' Medicare "savings" would come out of the pockets of the elderly; their share of the premiums would nearly double, to $1,067 annually per person by 2002. Hospitals would also take a heavy blow, with funding reductions of about $94 billion. Teaching hospitals and those serving the poor would be hardest hit, losing billions in special payments that have subsidized these missions; many would close. At the same time, for-profit hospitals would get a small windfall in the form of payments to cover their previously unreimbursed local tax bills.

While doctors would lose some on their fees, the entrepreneurial element in our profession would gain. Physician-owned H.M.O.s, a rising phenomenon, could compete for Medicare business unburdened by previous antitrust limitations or the financial reserves required of other H.M.O.s. Prohibitions on self-referrals would be relaxed: Doctors could send patients to laboratories and imaging centers they own, a practice shown to increase costs and unneeded tests.

For the insurance and H.M.O. industries, the Republicans propose to open vast new markets at government expense. The elderly could use their share of Medicare funds to purchase a low-premium, high-deductible private insurance policy, and put the remainder in a Medical Savings Account. The M.S.A. could be used to pay for uncovered services--though Medicare's contribution would be far lower than the insurance deductible--or for personal use. Such plans would appeal mainly to healthy people who anticipate needing little care. They would gain a modest windfall, and would switch back to regular Medicare once they got sick. Private insurers would cover low-risk seniors, and Medicare, its funds drained by the exodus of the healthy. would remain responsible for the sick. Even the Congressional Budget Office says M.S.A.s would increase costs.

H.M.O. enrollment would be encouraged under the Republican plan with similar subsidies and a relaxation of regulations, despite Medicare's past experience with such plans. Cream-skimming (selectively enrolling the healthy and squeezing out the sick) has been rife, often implemented through questionable, even illegal, practices. So while Medicare has paid H.M.O.s only 95 percent of the average per-patient Medicare spending, H.M.O.s have recruited healthier seniors whose care within traditional Medicare would have cost just 89.3 percent of the average. Hence, shifting patients to H.M.O.s has actually increased Medicare's costs by 5.7 percent. Meanwhile, a disturbing number of H.M.O. patients complain about their care, and a study sponsored by the Health Care Financing Administration has shown poor outcomes for the very frail--quality problems likely to grow as Medicare ratchets down payments to H.M.O.s.

The Republicans want to cut regulations and federal funds for Medicaid, and instead deliver the money as a block grant to each state. Specifics of what to cut are left to the states, but the details are devilish. Medicaid is by far the largest payer for nursing-home care, and the federal Medicaid regulations have, in most locales, been the only nursing-home standards. These regulations, adopted in 1987 after a public outcry over patient abuse in this predominantly for-profit industry, halved the number of patients who are tied down (from about 40 percent to 20 percent); greatly decreased the previously epidemic use of neuroleptic agents like Thorazine in nonpsychotic patients; and set minimum standards for nurse and paraprofessional staffing and training. Even so, government inspections last summer found two-thirds of nursing homes not in "substantial compliance," and 18 percent providing substandard care. Senate Republicans rejected Gingrich's plan to abolish quality standards completely, but joined in eviscerating them and in eliminating the requirement that Medicaid payments cover the cost of adequate care.

Most other regulations governing who and what Medicaid should cover would be gutted as well under Republican proposals. States would undoubtedly proceed willy-nilly to force more patients into cut-rate, for-profit H.M.O.s dell spite compelling evidence that the poor fare poorly even in IL the best H.M.O.s. The scandals in Florida--where twenty-one of the twenty-nine contracted private plans failed the most minimal quality inspection; overhead and profit consumed more than half of the premiums paid to five of the plans; and three executives pocketed 19 percent of the premiums the state paid for the care of 48,000 patients--are merely prelude. Such abuses have similarly tainted plans in New York, Tennessee, Maryland and California. Even Oregon's relatively civilized Medicaid H.M.O.s have resulted in deteriorating prenatal care and rising rates of low-birthweight babies.

The assault on Medicaid is threatening on other grounds. Between 1989 and 1993, Medicaid enrollment grew by 10.5 million. Despite this expansion, the number of people without any insurance increased by 6.3 million. With sharp Medicaid cuts and the delinking of Medicaid from welfare benefits, the number of uninsured will surely rise much faster. Moreover, these cuts will threaten the very survival of many inner-city and rural clinics and hospitals, which provide most of the care for the uninsured and are often denied contracts by Medicaid (and Medicare) H.M.O.s. Already, the nation's largest public hospital and clinic systems in New York and Los Angeles teeter on the brink.

The Republican theme is disdain for government and trust in private companies. Speaker Gingrich and his colleagues never tire of comparing Medicare's 10 percent spending growth in 1994 with the alleged I percent growth of private employers' health insurance premiums. Democrats seem loath to challenge this central claim, having themselves pushed for privatizing Medicare and Medicaid. Yet on inspection Gingrich's cost comparison fails. The supposed I percent private growth rate is a misinterpretation of a consulting firm's report--H.M.O. costs actually rose 9.7 percent for large employers last year. Moreover, between 1976 and 1993, Medicare's per capita expenditures grew more slowly than similarly comprehensive private plans. Finally, Medicare is administratively far more efficient than any private insurer; overhead consumes about 2 percent of spending versus an average of 13 percent in private plans. Most of the H.M.O.s whose efficiency both political parties tout take upward of 20 percent for overhead and profit. Herding Medicare patients into them means a further de facto 18 percent cut in funding for their actual care.

In the near term, the Republicans would saddle the elderly with higher costs for less care and shrink the already skimpy care now available to the poor. Over the longer haul, the cunningly engineered splintering and privatization of Medicare would erode the nearly undivided support it enjoys among the elderly; the medical institutions that care and advocate for the poor would wither; and the scope of for-profit medicine would widen, leaving few vestiges of noncorporate care.

Clinton's veto, impelled by polls showing a nearly three-to-one rejection of the Republican cuts, signifies more pre-tense than progressiveness. His 1992 embrace of health care reform based on corporate-run H.M.O.s signaled Wall Street that speculation in private health care investment was safe on his watch, opening the floodgates to more than $60 billion in mergers and acquisitions last year alone. And contracting out Medicare and Medicaid to for-profit H.M.O.s is as much Democratic policy as Republican. Indeed, Clinton proposes a 10 percent increase in the already fat payments to Medicare H.M.O.s; the Republicans only 8 percent. Both would have Medicare pay H.M.O.s about $400 per enrollee annually to cover medical teaching and the care of the uninsured, though H.M.O.s spend little on teaching and nothing on the uninsured. Clinton would raise Medicare patients' costs by $9 billion, and cut payments to hospitals by $50 billion. He'd keep Medicaid as an entitlement, but slash spending by $54 billion. He'd also eliminate the requirement that Medicaid payments to hospitals and nursing homes cover the cost of adequate care, and remove most regulations on Medicaid H.M.O.s. In sum, he'd keep Medicaid enrollment up but decimate the already poor quality of care. The partisan disputes and ballyhooed bargaining over a final compromise now center on how much regulation to drop; whether the poor and elderly should suffer greatly or moderately; and whether inner-city hospitals should close sooner or later.

Medicare and Medicaid--and the entire U.S. health care industry desperately need reform, but not this. Medicare already leaves the elderly paying 23 percent of their incomes for uncovered services; Medicaid is often little better than no insurance at all, and covers only 46.2 percent of the poor. Forty million people have no insurance, and the 28 million with private coverage are grossly underinsured. Useless paperwork consumes at least 14 percent of total health spending, and investors are skimming billions. Astoundingly, though Congress's own agencies have certified the Canadian-style single-payer approach as most efficient, and polls continue to show substantial support for it, politicians of both parties refuse to mention it.

A moment of truth approaches. Our profession must rise to defend its ethic, and the public to defend its care.

David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., practice medicine at Cambridge City Hospital and teach at Harvard Medical School. This article was originally written on be hay of Physicians for a National Health Program and has been endorsed by 555 other physicians and health professionals. (Contact P.N.H.P at 332 South Michigan, Suite 500, Chicago, IL 60604, or call 312-554-0382.)
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Author:Himmelstein, David U.; Woolhandler, Steffie
Publication:The Nation
Date:Jan 22, 1996
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