Sam Uretsky

Profit-Making Bureaucracies


Robert J. Samuelson writes an economics column for the Washington Post; Paul Krugman writes about economics for the New York Times. On Jan. 26, Mr. Samuelson wrote a column explaining that increasing government involvement in health care cannot reduce costs. The following day, Mr. Krugman wrote a column saying that the government can greatly increase the efficiency with which health care is offered. As it happens, Mr. Krugman is right, and Mr. Samuelson is wrong. The trouble is, Mr. Samuelson has some interesting points to make.

It would be wrong to accuse Mr. Samuelson of coming up with talking points or sound bites -- the normal length of a newspaper column forces even the most astute writers to oversimplify. Talking points are glib statements that take two seconds to say, and half an hour to refute. Here's an example from Samuelson: "From 1970 to 2003, Medicare spending rose an average of 9% annually, reports the Kaiser Family Foundation. In the same years, private insurance costs rose 10.1% annually. Part of the gap reflected private insurance's greater generosity. It covered drugs while Medicare didn't."

What's left out is the vital fact that Medicare deals with the elderly and disabled. According to the Center to Advance Palliative Care, 27% to 30% of lifetime healthcare costs are spent in the last year of life, and for most people, that means Medicare picks up the brunt of the expenses.

While the private insurers are recruiting customers among the Olympics decathlon contenders, Medicare is quietly picking up the costs for people in their 70s, 80s and 90s. If you qualify for Social Security Disability, regardless of age, Medicare coverage is automatic.

Mr. Samuelson is half right when he says that Medicare didn't cover drugs -- it did cover drugs used in hospital care. Hospital care still represents over 30% of healthcare expenditures, and for most people, that's still associated with age. And, according to a 2005 study by the California Healthcare Foundation, the fastest growing area of healthcare costs isn't prescription drugs, it's administrative costs.

One of the fastest growing areas of healthcare expenditures is simply trying to figure out who is going to pay for what. There was a time when a medical practice only required an MD, or an MD with one assistant to send out bills and schedule appointments. Now, the support staff of a medical practice is probably the most important part. You can always get a per diem physician, but finding someone who knows the billing procedures is a lot more difficult. The computer resources of even an average pharmacy can multitask Doom and Grand Theft Auto while calculating the pentagon budget without showing an hourglass symbol.

Every prescription has to be written and filled twice: once when the physician writes it and it's presented to the pharmacy, and again after the insurer reports that it's non-formulary and the co-pay will be $257.26. All insurance companies pay a fee based on everything going right the first time, and of course, because of the number of insurers, that's not going to happen.

Mr. Krugman, in contrast, points to the Veteran's Administration as the model for things going right. Yes, there was a time when the VA was a third-rate system, but during the Clinton administration it was improved dramatically, and now stands as a model for what can be done if anybody is willing to do it. For one thing, eligibility only has to be demonstrated once. If you're in the system, that's it, and that means there's only one set of rules that everybody learns and follows. Yes, the VA can be as obnoxious and obstreperous as any commercial insurer, but at least the rules are laid out clearly. Administrative costs are low because there's no fighting over who should pay the bills.

And here's a major plus -- unlike commercial insurers, who have no interest in maintaining your health, the VA, and any central, universal care system, does. If you have insurance through your employer, you know that Human Resources can switch insurers every time a contract comes up, so that your insurance company is only concerned with your health for 2 years at a time. It's too much like a hospital ward where the goal is to keep the patient alive so that the next shift can deal with the paperwork. A single-payer system knows you're not going anywhere, and has a vested interest in keeping you healthier longer.

We've been force-fed a version of economics that makes the private sector sound like a model of efficiency and government a bloated bureaucracy, and some otherwise intelligent people have bought into it, just as some people still believe there are weapons of mass destruction in Iraq. All that's required for government programs to work is that the administrators keep in mind whom the program was intended to benefit. Unfortunately, Aetna, Cigna, MetLife and United Healthcare never lose sight of their purpose, and Congress usually does.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.

From The Progressive Populist, March 1, 2006

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