On health care, governor's view hard to diagnose
Current proposals are all 'ideas from the past,' he says
Tom Chorneau, Chronicle Sacramento Bureau
Monday, July 3, 2006

Health care reform has emerged as a high priority in statehouses and city halls throughout the nation, with more than a half-dozen states and municipalities looking seriously at plans to cover the uninsured.

But in California, home to the nation's largest population of uninsured residents, recent plans to extend coverage have all crashed and burned -- something Gov. Arnold Schwarzenegger said in an interview that he wants to change.

The pledge comes despite Schwarzenegger's mixed record on health care, including his opposition to legislation and ballot measures intended to expand care. In an interview with The Chronicle, the Republican governor said that all of the proposals that have come before him so far have not adequately addressed the whole problem.

"All of those ideas were ideas from the past. I'm looking for something creative," Schwarzenegger said. "Something that brings down the cost of health care for everyone."

The question of how to provide care for the state's 6.5 million uninsured residents is critical to Schwarzenegger as he heads into his re-election campaign.

With the costs of care spiraling and employers looking to push more and more of the burden onto workers, health care reform has jumped to the top of most voter survey polls.

And elsewhere the problem is being attacked. Maine and Hawaii have long had plans in place to cover the uninsured. Recently Massachusetts approved a groundbreaking program that is getting serious consideration in several other states. Proposals have also been floated in San Francisco and Oakland.

But Schwarzenegger has no plan, except to call a summit of stakeholders sometime in the next few months to begin work on the problem. He's also promised to make health care reform a priority next year if re-elected.

Already Democrat Phil Angelides, who faces Schwarzenegger in the fall, has attacked the governor for failing to fulfill a 2003 promise to extend health care coverage to all children in the state.

Unlike Schwarzenegger, Angelides would go along with higher taxes if needed to pay for expanded coverage. He supports legislation that would provide a universal health care system run by the state and has also come out in favor of expanding a children's care program.

A close look at Schwarzenegger's record on health care issues shows the governor has been far more worried about hurting the state economy.

To fulfill his promise not to raise taxes, his budget proposals have included numerous cost-saving ideas that would have imposed caps on enrollments in public programs, limited services, cut reimbursements to providers and required that patients pay more of the cost of care.

Schwarzenegger also vetoed legislation last year that would have expanded coverage to all children in the state and campaigned in 2004 against a proposal that would have required businesses with 50 employees or more to provide health insurance.

Schwarzenegger came into office facing a $17 billion deficit and had to find ways to save money quickly. In his first year in office, he withdrew many of his proposed cuts to health care after voters approved a huge bond measure to help stabilize the state's finances

And in 2005, Schwarzenegger endured much political heat from the state's powerful teachers union when he chose not to give an additional $2 billion to schools that educators believed they were owed. He said at the time that if he did, health care programs would have suffered.

The governor said tough choices had to be made.

"I came in here in unusual circumstances, the state was in crisis," he said. "A lot of problems had been ignored -- like this one. We didn't get 7 million uninsured since I've been in office; this is something that took years to create."

He said his emphasis has been on trying to protect existing programs so that the problem didn't get bigger. "What we tried to do is chip away at it," he said. "And to stimulate the problem so that we have enough money to take care of those things."

Most health care experts said that they were respectful of the problems that Schwarzenegger has faced, but still believe more could have been done by now.

"He has a positive record in terms of incremental steps, but at the same time, we have achieved less than hoped for," said Wendy Lazarus, a longtime advocate for improving care for children and founder of the Children's Partnership.

"Sitting in a room with him and listening to him talk about children and health care -- I do think he understands it and he does seem to want to make things happen to take care of that part of the problem," she said. "But it's time now to make something more happen."

Some activists said they will have a hard time viewing Schwarzenegger as anything but hostile to their cause.

"He's been largely silent on health care issues," said Anthony Wright, executive director of Heath Access, a nonprofit advocacy group. "And when they have come up, he's generally sided with the pharmaceuticals, big insurance companies or other business interests."

Schwarzenegger said putting the burden on business or the taxpayers is not the answer. He opposed Proposition 72, which would have required employer coverage and narrowly lost on the ballot two years ago.

"Where is the creativity?" he said. "You mean go to the companies in the middle of a crisis, when everything is going downhill and people and businesses are moving out of the state? And on top of that, you want to say to employers, 'You have to pay 80 percent of coverage and employees pay 20 percent'?

"That would just drive more businesses out," he said. "I disagreed."

The governor's plan for a summit, tossed out almost accidentally last month on a campaign stop near Chico, is still taking shape but Schwarzenegger insisted he and his staff have been talking about the idea since January.

He said his plan will be similar to what he did this year in getting agreement on the $37 billion infrastructure bond measure that voters will consider this November. He wants to bring together hospital administrators, doctors and consumers as well as national experts to help shape the dialogue. He said he has no preconceptions heading into it except for two things -- the cost of coverage has to be brought down and everyone will need to share the burden.

"What we have to do is find a way where it is cheaper so that people can afford to cover themselves," he explained.

Dr. Jack Lewin, head of the California Medical Association, said he has talked with Schwarzenegger in recent weeks about the health care crisis and believes that Angelides or Schwarzenegger will need to address the problem.

"In his heart of hearts, I think he has a lot of interest in universal coverage," said Lewin, whose group was on the other side from the governor on Prop. 72. "But maybe we need to take incremental steps."

Duane Dauner, president of the California Hospital Association, said that he has not spoken directly to Schwarzenegger about his summit but is aware that preliminary plans are taking shape.

Dauner said his organization would like to see mandates on employers to provide coverage and on individuals to carry coverage. He also said, however, he did not think such a change is politically possible and suggested that the best approach might be to concentrate on creating a care package with limited services that would also be cost-effective.

Dauner and Lazarus both said they are waiting with some anticipation to see if Schwarzenegger agrees to support a measure on the November ballot that would raise taxes on cigarettes to pay for health care coverage of uninsured children.

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The governor's record
Here is a list of major decisions by Gov. Arnold Schwarzenegger on health care issues since taking office:

January 2004 -- Schwarzenegger presents first budget plan that includes cost-saving proposals such as caps on enrollments, limits on services and higher co-payments; it also cuts services for severely ill children.

May 2004 -- A revised budget plan removes almost all of the drastic cost-saving proposals.

September-October 2004 -- Schwarzenegger vetoes legislation intended to help Californians buy cheaper prescription drugs from Canada. As an alternative, he gets drug manufacturers to agree to a voluntary plan that offers drug discounts.

November 2004 -- The governor campaigns against Proposition 67, which would have raised phone taxes to benefit emergency care; it lost. He also opposed Prop. 72, a measure that would have required large employers to provide health insurance.

January 2005 -- Schwarzenegger's budget denies additional $2 billion that educators believe schools were owed in order to fund health care programs.

October 2005 -- Schwarzenegger vetoes bill that would have changed the eligibility requirements for the Healthy Families program, which provides low-cost insurance to children and teens, and extended coverage to nearly 800,000 uninsured children, including undocumented immigrants.

January 2006 -- The governor takes emergency action to provide $70 million to cover the cost of prescription drugs for 1 million elderly residents whose federal assistance had been denied or delayed because of flaws in the new Medicaid program.

May 2006 -- Schwarzenegger proposes spending $23 million to help a number of counties provide care to uninsured children -- including undocumented immigrants.

June 2006 -- Schwarzenegger rejects a revised Democratic plan to expand Healthy Families to cover all uninsured children.

Doctors  urge for protection of public health care
May. 29 2006
CTV Canada News Staff

A newly formed organization representing  Canadian doctors is launching a call to strengthen and protect public  access to health care on Monday.

Canadian Doctors for Medicare (CDM) is  making its appeal nearly one year after the Supreme Court ruled that one could legally use private insurance for medically necessary physician and  hospital care.

"It's important to understand that the ... decision  spoke to what happens in the public system when wait times are excessively  long... It's our belief that the best way to solve the problems with wait  times in this country is to fix medicare, to fix the public system," CDM  Board chair Dr. Danielle Martin said at a news conference on  Monday.

"We don't have enough doctors in this country, we don't have  enough nurses, we don't have enough human resources to staff the system as  it exists today. If you open up a parallel private tier, those health-care  resources move into the private system and the wait lines in the public  sector get longer."

CDM Board members said they are concerned by the  potential repercussions of the Supreme Court ruling, saying this could  allow two-tier health care to become the acceptable Canadian  standard.

Martin dismissed suggestions the organization was distancing  itself from the Canadian Medical Association (CMA) because it favoured a  two-tier system.

"We are not accusing the CMA of anything. We are here  to stand for what we believe in and for what we belief is best for our  patients and we hope the CMA will stand with us," said Martin, adding that  most of the CDM board members also belong to the CMA.

The CDM  launched its membership drive in Ottawa on Monday.

CDM says its mandate  is to "help ensure that health system reforms remain true to the intent of  the Canada Health Act and do not include the option of private insurance  for physician and hospital services."

Last month, the Alberta  government quietly backed away from attempting framework legislation for  the so-called Third Way health-care reforms, which were scaled back  recently because of the public backlash.

The province hoped to allow  doctors to operate in both public and private health-care systems at the  same time. It also wanted to allow Albertans the right to buy their way to  the front of the line for procedures such as joint replacements even  though the measures would risk breaching the Canada Health Act.

"We  recently witnessed a close call with Alberta's Third Way reforms. Our  patients need us to stand up for them," Dr. Tom Noseworthy, a  Calgary-based critical care physician and CDM Board member said in the  statement.

Alberta's health minister said that although her ministry  will proceed with some changes, any legislation will be left until a new  premier is chosen to succeed Premier Ralph  Klein.

Clinton warns Canadians against letting 'finance tail wag health care dog'
Angela Pacienza
Tuesday, May 16, 2006. Canadian Press

TORONTO (CP) - They were in town to discuss economics and humanity but it was Canada's health-care system the audience wanted advice about.

Asked about the growing interest by some for a privatization of the health-care system, former U.S. president Bill Clinton said Monday night that Canadians should think long and hard before making any move. "Whatever you do, there's no such thing as a perfect system," the charismatic leader told the approximately 250 dinner guests, which included Finance Minister Jim Flaherty and businessman Conrad Black, attending the inaugural World Leaders Forum.

But Clinton said the last thing anyone would want to do is let the "health care finance tail wag the health care dog."

He said America did just that and the system is a mess.

He said the U.S. spends 34 per cent of its health-care costs on administration, equalling $280 billion "to pay two million people to go to work every day for all the providers and insurers and play tug-of-war."

"It is insane," said Clinton. "It is a colossal waste of money. Don't go down that road. Don't do anything that will lead to increased administrative costs."

By comparison, Canada spends 19 per cent on administration, Clinton said.

He was joined by Israeli Vice-Premier Shimon Peres at a $3,000-a-plate fundraiser at Toronto's tony Windsor Arms hotel. Monies raised will benefit Ontario's Pine River Institute, a teen recovery program, and Israel's Nano Technology Research.

During his speech, the former president spoke eloquently and passionately on a range of topics including interdependence among countries, the threat of a pandemic flu and peace in the Middle East.

But it was Canada's health system that peaked the crowd's interest. Clinton played to the crowd, returning to the health care topic before answering a question about AIDS.

He suggested the government set up a task force to examine whether other counties, including Germany, Norway and Denmark, were successful at integrating some privatization of health services.

"Surely there's somebody that's figured out how to solve this problem that bothers so many Canadians," said Clinton.

"I know there are problems with this system. But you can't imagine what it's like (for us)."

Peres had a more optimistic outlook on privatization - only for a much different application.

"Since we've privatized so many parts of our life, why not privatize peace as well," he said in his speech, suggesting that big business does a better job of thinking on a more integrated, global scale than governments do.

Our Sick Society
Paul Krugman
May 5, 2006. The New York Times

Is being an American bad for your health? That's the apparent implication of a study just published in The Journal of the American Medical Association.

It's not news that something is very wrong with the state of America's health. International comparisons show that the United  States has achieved a sort of inverse miracle: we spend much more per person on health care than any other nation, yet we have lower life expectancy and higher infant mortality than Canada, Japan and most of Europe.

But it isn't clear exactly what causes this stunningly poor performance. How much of America's poor health is the result of our failure, unique among wealthy nations, to guarantee health insurance to all? How much is the result of racial and class divisions? How much is the result of other aspects of the American way of life?

The new study, "Disease and Disadvantage in the United States and in England," doesn't resolve all of these questions. Yet it offers strong evidence that there's something about American society that makes us sicker than we should be.

The authors of the study compared the prevalence of such diseases as diabetes and hypertension in Americans 55 to 64 years old with the prevalence of the same diseases in a comparable group in England. Comparing us with the English isn't a choice designed to highlight American problems: Britain spends only about 40 percent as much per person on health care as the United States, and its health care system is generally considered inferior to those of neighboring countries, especially France. Moreover, England isn't noted either for healthy eating or for a healthy lifestyle.

Nonetheless, the study concludes that "Americans are much sicker than the English." For example, middle-age Americans are twice as likely to suffer from diabetes as their English counterparts. That's a striking finding in itself.

What's even more striking is that being American seems to damage your health regardless of your race and social class.

That's not to say that class is irrelevant. (The researchers excluded racial effects by restricting the study to non-Hispanic whites.) In fact, there's a strong correlation within each country between wealth and health. But Americans are so much sicker that the richest third of Americans is in worse health than the poorest third of the English.

So what's going on? Lack of health insurance is surely a factor in the poor health of lower-income Americans, who are often uninsured, while everyone in England receives health care from the government. But almost all upper-income Americans have insurance.

What about bad habits, which the study calls "behavioral risk factors"? The stereotypes are true: the English are much more likely to be heavy drinkers, and Americans much more likely to be obese. But a statistical analysis suggests that bad habits are only a fraction of the story.

In the end, the study's authors seem baffled by the poor health of even relatively well-off Americans. But let me suggest a couple of possible explanations.

One is that having health insurance doesn't ensure good health care. For example, a New York Times report on diabetes pointed out that insurance companies are generally unwilling to pay for care that might head off the disease, even though they are willing to pay for the extreme measures, like amputations, that become necessary when prevention fails. It's possible that Britain's National Health Service, in spite of its limited budget, actually provides better all-around medical care than our system because it takes a broader, longer-term view than private insurance companies.

The other possibility is that Americans work too hard and experience too much stress. Full-time American workers work, on average, about 46 weeks per year; full-time British, French and German workers work only 41 weeks a year. I've pointed out in the past that our workaholic economy is actually more destructive of the "family values" we claim to honor than the European economies in which regulations and union power have led to shorter working hours.

Maybe overwork, together with the stress of living in an economy with a minimal social safety net, damages our health as well as our families. These are just suggestions. What we know for sure is that although the American way of life may be, as Ari Fleischer famously proclaimed back in 2001, "a blessed one," there's something about that way of life that is seriously bad for our health.

Medicare's Shrinking Options
New York Times Editorial.
May 4, 2006

The most worrisome news in the latest annual report on Medicare is not that the hospital trust fund will run out of money in 2018 or that premiums for coverage of doctor bills are rising faster than projected. Bad as that news is, Medicare is not really to blame — the culprit is the relentlessly escalating cost of health care that is staggering employers and private insurers as well. The really troubling development is that this year's report starts a process that will force the White House and Congress to confront Medicare's fiscal problems with one hand tied behind them.

When Congress passed the new Medicare prescription drug program three years ago, it slipped in a clause intended to cap the amount of general revenues that could be used to support Medicare. The provision held that if two successive reports from the Medicare trustees estimated that general revenues would soon finance more than 45 percent of total Medicare expenditures, then the president would have to propose, and Congress would have to consider, ways to drive the proportion back down below 45 percent. In an effort to shield himself from taking the heat, President Bush's latest budget proposal would amend the law to require automatic cuts once the 45 percent threshold is exceeded.

We are now halfway to the trigger point. The trustees projected that the 45 percent level would be reached in fiscal year 2012. If next year's report makes a similar finding, as seems likely, Medicare financing is due for a lopsided shakeup.

Capping the share of financing from general revenues is a perverse way to deal with Medicare's very real financial problems. Ideally, Washington should take a multipronged approach that would restrain the underlying health care costs, reform Medicare and bolster its finances. Yet the cap on general revenues, generated mostly by federal income taxes, removes the most progressive source of financing from further consideration. That leaves only the regressive Medicare payroll tax, increases in premiums and co-payments, or cuts in services or payments to providers on the table.

Some critics charge that the 45 percent threshold was imposed to rule out any attempt to scale back the president's huge tax cuts for the wealthy and divert the money to Medicare. Intended or not, that will be the effect, and it is not one that most American voters would endorse.

The trigger needs to be eliminated or fixed to allow for more options. If not, when painful Medicare cuts are required, voters will need to remember that ideologically driven politicians blocked the fairest and most palatable source of financing.

Death by Insurance
Paul Krugman
May 1, 2006. The New York Times

For lower-income working Americans, lack of health insurance is quickly becoming the new normal. That's the implication of survey results just released by the Commonwealth Fund, a nonpartisan organization that studies health care. The survey found that 41 percent of nonelderly American adults with incomes between $20,000 and $40,000 a year were without health insurance for all or part of 2005. That's up from 28 percent as recently as 2001.

Many of the uninsured reported spending their entire savings on health care and/or that they were having difficulty paying for basic necessities. And most uninsured adults reported cutting corners on medical care to save money — failing to fill prescriptions, skipping medications, going without preventive care.

Here's the other side of the same coin: health insurers' business is lagging, reports The Wall Street Journal, as "rising premiums and medical costs push more of their traditional-employer customers to shun or curtail company health benefits." And some investors are feeling the pain. Aetna's stock price fell sharply last week, on news that its "medical cost ratio" — a term I'll explain in a minute — rose from 77.9 to 79.4.

Taken together, these stories tell the tale of a health care system that's driving a growing number of Americans into financial ruin, and in many cases kills them through lack of basic care. (The Institute of Medicine, part of the National Academy of Sciences, estimates that lack of health insurance leads to 18,000 unnecessary American deaths — the equivalent of six 9/11's — each year.) Yet this system actually costs more to run than we would spend if we guaranteed health insurance to everyone.

How do we know this? The medical cost ratio is the percentage of insurance premiums paid out to doctors, hospitals and other health care providers. Investors are upset about Aetna's rising ratio, because it leaves less room for profit. But even after the rise in the cost ratio, Aetna spends less than 80 cents of each dollar in health insurance premiums on actually providing medical care. The other 20 cents go into profits, marketing and administrative expenses.

Other private insurers have similar ratios. And here's the thing: most of those 20 cents spent on things other than medical care are unnecessary. Older Americans are covered by Medicare, which doesn't spend large sums on marketing and doesn't devote a lot of resources to screening out people likely to have high medical bills. As a result, Medicare manages to spend about 98 percent of its funds on actual medical care.

What would happen if Medicare was expanded to cover everyone? You might think that the nation would spend more on health care, since this would mean covering 46 million Americans who are currently uninsured. But the uninsured already receive some medical care at public expense — for example, treatment in emergency rooms that would have been both cheaper and more effective if provided in doctors' offices.

And Medicare manages to spend much more of its funds on medicine, as opposed to other things, than private insurers. If you do the math, it becomes clear that covering everyone under Medicare would actually be significantly cheaper than our current system.

And this calculation doesn't even take into account the costs our fragmented system imposes on doctors and hospitals. Benjamin Brewer, a doctor who writes an online column for The Wall Street Journal, recently commented on the excess expenses he incurs trying to deal with 301 different private insurance plans. According to Dr. Brewer, he currently employs two full-time staff members for billing, and his two secretaries spend half their time collecting insurance information. "I suspect," he wrote, "I could go from four people in the paper chase to one with a single-payer system."

Many pundits see red at the words "single-payer system." They think it means low-quality socialized medicine; they start telling horror stories — almost all of them false — about the problems of other countries' health care. Yet there's nothing foreign or exotic about the concept: Medicare is a single-payer system. It's not perfect, it could certainly be improved, but it works.

So here we are. Our current health care system is unraveling. Older Americans are already covered by a national health insurance system; extending that system to cover everyone would save money, reduce financial anxiety and save thousands of American lives every year. Why don't we just do it?

A Health Fix That Is Not Fanctasy
David Leonhardt
April 12, 2006. The New York Times

TO a lot of thoughtful people, the only way to fix the health insurance crisis is to get the federal government to cover everyone. Britain, Canada, Japan and a number of other rich countries do so, and they each spend less money on health care than this country does. They also don't have major companies, like General Motors <http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&amp;symb=GM> , flirting with bankruptcy in large part because of the cost of health benefits.

It is a pretty good argument, but it has an undeniable flaw. There is almost no chance of universal coverage happening anytime in the foreseeable future.

Health insurers made $100 billion in profits last year, and industries of that size are just not legislated out of business, as the economist Jonathan Gruber has pointed out. The party that controls the White House and Congress also happens to oppose the idea. Republicans have their own utopian notions, which generally involve letting loose the free market for Americans to demand better care on their own.

So the discussion has basically been paralyzed for years. In the meantime, the problem has grown worse. Forty-six million people do not have health insurance, according to the most recent estimate, up from 31 million in 1987.

But last week, out of the blue, Massachusetts changed the terms of the debate. Gov. Mitt Romney <http://topics.nytimes.com/top/reference/timestopics/people/r/mitt_romney/index.html?inline=nyt-per> , a Republican, and the Democratic-controlled legislature reached a deal to cover almost everyone in the state. The plan will cut the cost of health insurance for families that do not have it and make it free for many poor families. Then, just as important, the state will require every resident to have insurance or face a stiff fine. Mr. Romney is scheduled to sign the bill in Boston this morning.

The plan breaks free of the usual ideological shackles by dealing with both of the big reasons that nearly one-sixth of the population lacks insurance. One, many people just cannot afford it. Two, some who can afford it imagine that they will not need it — and then stick the rest of us with the bill when they end up in the emergency room.

LET'S start by acknowledging all the problems that Mr. Romney's big idea does not solve. It will not reduce misdiagnosis or wasteful medical spending, because hospitals will still be paid for what they do rather than how well they do it. If the plan is really going to make insurance affordable, it's also going to cost a fair bit of money, despite the boasts from the governor and legislators about cost-effectiveness.

"One of the biggest fallacies is that keeping people healthy will save money, and that's why we should do it," said Dr. Mark R. Chassin of the Mount Sinai School of Medicine, who used to be New York State's health commissioner. "That is complete baloney."

But keeping people healthy is, obviously, a worthy goal by itself, and society has done a remarkably good job of it over the last half-century. In the 1950's, after indoor plumbing and refrigeration had become the norm, the average American life span stopped rising, as David Cutler, a health care expert at Harvard <http://topics.nytimes.com/top/reference/timestopics/organizations/h/harvard_university/index.html?inline=nyt-org> , has noted. Some people wondered whether it had reached its limit. Instead, thanks to new medical treatments, an American born today can expect to live nine more years on average than someone born in 1950, which is a stunning amount of progress.

But there are now new worries that the gains in life expectancy are slowing, and science isn't the reason. The fact that so many people do not have health care is, and that is the problem Massachusetts is trying to fix.

In the current system, the only affordable ways to get coverage are from your employer or through a government program like Medicare. If you try to buy a policy on your own, insurers will worry, rightly, that you expect to need a lot of medical care. So they charge a lot for individual plans.

Massachusetts deals with this by pooling together all the people who are not covered through their jobs and treating them like the employees of one enormous company. The healthy will then subsidize the sick, just as they do at your job, and the policies will become cheaper.

Still, insurance will cost thousands of dollars a year, too much for many families. So the state will pay for policies for anyone who falls under the federal poverty level — about $20,000 a year for a family of four — and subsidize those who make less than three times the poverty level.

Some of the money for the new subsidies will have to come from new spending. Other funds will come from the federal government, the penalties paid by the uninsured and possibly some minimal fines assessed against companies that do not help their workers buy insurance.

But a good chunk of the program's cost will come simply from acknowledging the obvious. Massachusetts now spends $320 million a year reimbursing hospitals for taking care of the uninsured. Soon, it will be able to spend that money helping people buy policies. "We should require them to have insurance," said Mr. Gruber, a Democrat who has been advising Mr. Romney, "because otherwise we're going to pay for it anyway."

I know that a lot of fans of a government-run system will find the Massachusetts solution complicated and inefficient. But the reality is that a national system will remain a fantasy as long as most employers offer health insurance.

Mr. Romney and the legislature have given Massachusetts companies a way to drop coverage without appearing brutish. If they do so — if they really want to get out of the insurance business — the debate about health care will change very quickly.


email: leonhardt@nytimes.com

Moral Imperative
by the Editors of The New Republic Online
Post date: 03.10.06; Issue date: 03.20.06

Over the last 25 years, liberalism has lost both its good name and its sway over politics. But it is liberalism's loss of imagination that is most disheartening. Since President Clinton's health care plan unraveled in 1994--a debacle that this magazine, regrettably, abetted--liberals have grown chastened and confused, afraid to think big ideas. Such reticence had its proper time and place; large-scale political and substantive failures demand introspection, not to mention humility. But it is time to be ambitious again. And the place to begin is the very spot where liberalism left off a decade ago: Guaranteeing every American citizen access to affordable, high-quality medical care.

The familiar name for this idea is "universal health care," a term that, however accurate, drains the concept of its moral resonance. Alone among the most developed nations, the United States allows nearly 16 percent of its population--46 million people--to go without health insurance. And, while it is commonly assumed that the uninsured still get medical care, statistics and anecdotes tell a different story. Across the United States today, there are diabetics skimping on their insulin, child asthmatics struggling to breathe, and cancer victims dying from undetected tumors. Studies by the Institute of Medicine suggest that thousands of people, maybe even tens of thousands, die prematurely every year because they don't have health insurance. And even those who don't suffer medical consequences face financial and emotional pain, as when seniors choose between prescriptions and groceries--or when families choose between the mortgage and hospital bills.

These are not the sorts of hardships that an enlightened society tolerates, particularly when those hardships so frequently visit people who, as the politicians like to say, "work hard and play by the rules." Yet American society has tolerated this situation for a long time. It has done so, at least in part, because the majority of working Americans still had private health insurance, generally through their
jobs--the consequences of losing health coverage were, for the most part, somebody else's concern. Universal health care promised them security they already had. Change would only be for the worse.

But how many people can really count upon such security now? Precisely because working people expect to get insurance through their jobs, they are dependent upon the enthusiasm of employers to help pay for it--an enthusiasm that is waning in the face of rising medical costs and global competition. Companies have responded by reengineering their workforces to shed full-time workers that receive benefits, by redesigning their insurance plans to offer skimpier coverage, or by simply declining to offer coverage altogether. Soon, the only employers left offering generous health coverage may be the ones forced to do so by union contracts--employers like the Big Three automakers, which, when we last checked, were barely skirting bankruptcy themselves.

When such gaps in insurance have appeared previously in U.S. history, the government has stepped in to fill them. It did so most audaciously in the 1960s, when the Great Society produced Medicare and Medicaid in order to guarantee at least some coverage to the elderly and the poor--groups the employer-based system had repeatedly failed to serve. But chronically under-funded Medicaid, a program that never reached all of the uninsured, cannot accommodate the growing demand when conservatives keep cutting taxes and gutting public services. Combined with the decline of employer-sponsored coverage, this failure means that even middle-class Americans are just one downsizing away from losing health insurance altogether.

Such widespread insecurity might be understandable (though not necessarily forgivable) if it were the unavoidable consequence of an
otherwise well-functioning health care system. After all, economics teaches us that tradeoffs between efficiency and equity are inevitable. But medical care in this country is inequitable and inefficient. The United States pays more for its health care than any other nation on the planet: 16 percent of our national wealth, at last count. Money spent on health care is money not spent on other things, like corporate investment and wages. That's an exorbitant cost that even Americans with secure health insurance pay.

"Exorbitant," to be sure, is a subjective word: Money spent on well-applied medical technology might be worth it. But, perversely, our
extra spending doesn't seem to buy us better medical care. According to virtually every meaningful statistic, from simple measures like infant mortality to more carefully constructed data like "potential years of life lost," Americans are no healthier (and are frequently unhealthier) than the citizens of countries with universal health care. Nor do Americans always get "more" medical care, as is commonly assumed. The citizens of Japan, for example, have more CT scanners and MRI machines than we do. And the French, whose system the World Health Organization recently declared the planet's best, have more hospital beds. They get more doctor visits, too, perhaps because their access to physicians is nearly unfettered--a privilege even most middle-class Americans
surrendered with the spread of managed care. In fact, aside from cost, the measure on which the United States most conspicuously stands out from other advanced nations may be public opinion: In a series of polls a few years ago, just 40 percent of us said we were "fairly or very" satisfied with our health care system, fourth worst of the 17 nations surveyed.

The last time a Republican president presided over a nation with serious health care problems, in the early '90s, he had little of
consequence to say until he was about to lose reelection. And, while this Republican president talks about health care more frequently, none of what he says is particularly encouraging. To conservatives, it is axiomatic that the private sector can deliver health insurance better than the public sector. It was precisely such thinking that led Bush and the Republicans to insist that private insurers, not the
government, be put in charge of providing drug coverage to seniors. The result has been chaos, with seniors baffled as they try to figure out which plans cover which drugs and, even worse, with many of the sickest and poorest Medicare beneficiaries unable to get their prescriptions during the program's early days. The only benefits the program delivers effectively, it seems, are enormous subsidies to insurance companies.

But the Medicare drug benefit is just a taste of things to come. The right's real hope for health care is to radically transform health
insurance altogether, so that risk is gradually transferred away from large groups (i.e., the government and large employers) and onto
individuals (i.e., you). And, while Bush promises that this approach will empower consumers by offering them more choices, the effect would be just the opposite. Insurance works best when large numbers of people share risk, so that modest premiums from a large number of healthy people cover the very high medical costs incurred, at any one time, by just a few. Enacting the conservative agenda would unravel such arrangements, shifting the burden of paying for care back from the healthy to the sick. The worst-off would be those left to buy insurance on their own, directly from insurance carriers rather than through their employers or the government, since they will be at the mercy of underwriters who screen out bad medical risks. Beat cancer? Have your diabetes under control? Well, no matter. The commercial insurance industry still wants nothing to do with you--at least not at a price you can bear.

The right, in other words, has decided the problem with unaffordable health care is that it needs to be more unaffordable, at least for the people who need it most. And, into this vast, disturbing intellectual void on what is arguably the most important domestic issue of our time, the Democrats are proposing ... well, not a whole lot. In Washington, party leaders not named Ted Kennedy or Pete Stark have called only for modest, incremental changes, such as expanding Medicaid to cover more of the poor or opening up the insurance plan for federal employees to modestly wider enrollment. These ideas are all worthy enough. The number of people without health insurance today would be far higher if not for the quiet expansions of Medicaid and the creation of the State Children's Health Insurance Program during the '90s. But, taken together, these suggestions are still inadequate. It's the equivalent of giving aspirin to a heart attack victim: At best, it keeps a bad situation from getting worse. And only for short time.

It's time for the government to be much bolder, to try something even more far-reaching than what it attempted in the '60s: making health care a right, not a privilege. And doing so for everybody, even if that means having the government provide insurance directly. Such a proposal might confound the conventional notions about what works and what doesn't work in public policy. But providing health insurance happens to be a job the public sector has already proved it can do very well. The most popular health insurance plan in the United States is Medicare--which, except for the drug benefit and a few HMOs that contract for the business, is a government-run health care program. And Medicare isn't only popular. It's also efficient. Nearly all of the money that goes into the program, via taxes and the premiums seniors pay, goes back out to purchase actual medical services. Private insurance, by contrast, inevitably diverts a much greater share of its premium dollars to administration, marketing, and profits, which means less money for the beneficiaries. In theory, insurance companies should be competing to provide their subscribers with the best, most cost-effective medical care. In practice, they compete over who can enroll the healthiest patients, since that is the surest way to improve profit margins.

The other reason universal health care may seem an unconventional suggestion is because it is an "old" idea. The first proposals for universal health care surfaced at the end of the Progressive era, nearly a century ago. But "old" is not the same thing as "bad," and
time has only made universal health care more relevant, not less. During the twentieth century, this country saved capitalism not only
from its foes abroad but also from its deficiencies at home--chief among them its tendency to visit catastrophe on a few unlucky souls. While the foreign threat to capitalism has subsided, the domestic inadequacies are becoming severe once again, as pensions and job security vanish in the hypercompetitive global economy. The historic solution to this problem was to insulate individuals from excessive risk. And, while the private sector once did this for health care, it's no longer up to the task. Government isn't the best way to provide all Americans with health security. It's the only way. And it's time for liberalism to say so openly.

Two Tiers, Slipping Into One
by Louis Uchitelle
February 26, 2006, New York Times

RICK DOTY is a 30-year veteran of Caterpillar, the big tractor and earth-moving equipment manufacturer. He is paid $23.51 an hour as a machinist, and he receives additional benefits worth almost as much. That sets him far above newly hired workers consigned to a much lower wage scale.

To these fellow workers, Mr. Doty, who is also a local union leader, struggles to justify an inequality that he helped to negotiate.

"I remind them they are making more now than they were before they came to Cat," said Mr. Doty, who spends part of his day at the one-story union hall of United Automobile Workers Local 974 arguing that $12 to $13 an hour is good pay here. "And I assure them that five years down the road, when the present contract expires, we in the union are going to improve their lot in life."

That does not seem likely. After more than a decade of failed strikes and job actions < mainly in Illinois, where Caterpillar has its biggest factories < the U.A.W. reluctantly accepted a two-tier contract that provides for significantly lower wages and benefits for newly hired employees. The new second tier is as much as $20 an hour below the cost of employing Mr. Doty, 50, and a dwindling band of other veterans.

As older workers depart, at Caterpillar and at other companies, the longstanding wage advantage that manufacturing workers enjoy over their counterparts in services or construction is shrinking fast. The trade-off is the promise of a manufacturing revival at long last in the old Rust Belt, as new hires come aboard at much lower labor costs.

"What we've done is reposition ourselves to actually grow employment in our Midwestern plants," said Jim Owens, Caterpillar's chief executive. "We finally have a labor cost that is viable."

Caterpillar is adding a significant chapter to the labor cost-cutting that is widespread in America, particularly at old-line manufacturing companies. Until recently, cutbacks in the wages and benefits of hourly workers were limited mostly to money-losing companies: failing steel mills, for example, and struggling airlines. They have said that their survival was at stake.

Now, however, even healthy and highly profitable companies like Caterpillar are engaging in the practice, and as they do so, the longstanding presumption that factory workers at successful companies can achieve a secure, relatively prosperous middle-class life for themselves and their families is evaporating.

"Caterpillar is a powerful symbol of this process," said Harley Shaiken, a labor economist at the University of California, Berkeley. "It dominates its field. It is one of America's largest exporters, and it is very profitable. If there ever was a company that could bring back the social contract of the mid-20th century, it is Caterpillar. But it chooses not to."

As Caterpillar's managers see it, they have no choice. "There is a balance that must be struck between being competitive and being middle class," said Douglas R. Oberhelman, a group president. Although Caterpillar's factories are among the most productive in the world, the managers argue that the company cannot afford to be more generous simply because it is doing well right now.

"You could say that in good times you could afford a different kind of package and in bad times you couldn't," said Christopher E. Glynn, the director of corporate labor relations. "The real question is: What's competitive? And our target is competitiveness."

The new contract reflects the company's success in imposing a "market competitive" pay scale; that is, wages and benefits that attract enough qualified workers by being slightly better than the packages offered by others in each community or region where Caterpillar has operations.

In the Midwest market, the competitive wage-and-benefit package is about $23 an hour, on average, Mr. Glynn says. Caterpillar's package for new hires in the U.A.W. contract ratified 13 months ago is pegged above that, at $28 an hour, which includes about $9 an hour in benefits.

Only the most skilled workers in the new lower tier < electricians and machinists, for example < make more than $20 an hour, or $41,000 a year, while in the gradually expiring upper tier, everyone does, even unskilled laborers and shop helpers.

In the new lower tier, such easily replaceable workers will no longer earn more than $12.50 an hour, or $26,000 a year. They must work their way up toward middle-class jobs, Mr. Owens argues, shedding the "union mind-set" of annual raises for doing the same minimally skilled task year after year.

"I want people to have a higher income," Mr. Owens said. "But you do that by starting out maybe driving a forklift or working in a warehouse and then you get new skills. You can learn how to paint. You can learn how to assemble. You can become a welder." Beyond that, he says, talented workers are encouraged to take courses to qualify for promotion to salaried jobs, like supervisor, outside the union.

Going back decades, the hourly wage in manufacturing has been higher, on average, than in nonmanufacturing jobs. Through most of the 1990's, that premium was 10 percent or more, but by last year, it had fallen to just 7.45 percent above the average in other industries, according to an analysis of Bureau of Labor Statistics data by the Economic Policy Institute, a research group based in Washington.

"We are converging in the Midwest on a $13- to $18-an-hour wage package and $9 more for benefits," said Daniel Luria, an economist at the Michigan Manufacturing Technology Center in Ann Arbor. "That is roughly $25 an hour, and it is down from about $40."

The trade-off for lower wages, Caterpillar's top executives counter, is more jobs for the region. Three-quarters of the 4,200 hourly workers that Caterpillar added in the United States last year, after the new labor contract was ratified in January, joined factories in Illinois instead of the network of small, low-wage plants that the company has opened in recent years in the South.

This southern network, as well as plants in Mexico, feeds parts and components to the big Illinois factories, where most of Caterpillar's
tractors and earth movers, backhoes and excavators, giant off-highway trucks and other heavy equipment are assembled for sale in the United States and, to some degree, for export.

The domestic plants form the hub of what Mr. Owens calls a "globally cost-competitive" system that includes factories elsewhere in the world to serve different markets. A plant in Japan, for example, is producing earth movers for China's expanding mining industry; the next step, Mr. Owens says, is to put a factory in China.

But the company itself, he says, cannot succeed without the concessionary U.A.W. contract, combined with the network of lower-wage "focus plants" in the Sun Belt and in Mexico.

"It's a beautiful North American equation," Mr. Owens said.

Shane Hillard says he does not think it is so beautiful. He is one of the new Illinois hires, having taken a second-tier job at the big tractor factory here, closing down a small landscaping company to join Caterpillar. In doing so, he lowered his health care costs — he is a diabetic, and Caterpillar's health insurance was less expensive than his own —and he is no longer idle in winter.

"When you get down to it, I earned a little more in landscaping than I am earning now, even after expenses," he said. "But I enjoy structure, and I enjoy my job. I need something to do every day."

By the end of last year, Mr. Hillard, 28, had moved up from welder to machinist and to a wage of $18 an hour, $2 above what the original contract called for. Caterpillar increased the pay scale for those jobs last October, to make sure that it could continue to attract the workers it wanted in the face of higher-wage offers for people with skills in those categories.

Those offers were coming to welders and machinists at a Caterpillar plant in Aurora, Ill., a suburb of Chicago where earth graders for highway construction are made. "We were having difficulty hiring some of the people we wanted," Mr. Owens said. "And our attrition rate was higher than we wanted, so we adjusted the wage to get the people we wanted and retain them."

Mr. Hillard, 160 miles away in Peoria, benefited. But even the $18 an hour is not enough, he says, to support the four people in his household. He lives with his fiancée, who is going to college and not working, and two children, one each from their previous marriages.

"We don't ever have any extra money to do things," Mr. Hillard said. "I'd like to do normal things that I remember doing as a kid. The family going on vacation, that kind of thing."

WHAT he would like, he said, is the $23 an hour or so that Mr. Doty and others earn as machinists, doing essentially the same work that Mr. Hillard does.

"I am not upset that they are making more," he said. "I believe they are being paid what they are worth. They are being paid what they need to live the way people ought to live."

His anger, directed at Caterpillar for not sharing more of its soaring profits, has made him an active member of U.A.W. Local 974. If the bottom tier does not rise substantially in the next contract, he says, he will vote against ratification. His superiors in the union are more circumspect, including Mr. Doty, who counts on a rising membership to strengthen the U.A.W.'s bargaining position.

The Illinois hiring over the past year has swollen the U.A.W.'s ranks to 11,500 of Caterpillar's 41,000 employees in the United States. Local 974 now has 6,000 members, up from 4,500 in 2004, and Mr. Doty, an executive vice president of the local who also works nearby at Caterpillar's diesel engine factory in Mossville, Ill., argues that the greater "union density" will give the U.A.W. more negotiating leverage when its contract expires in 2011.

"We have to get down the road to where we can bargain a better agreement," he said, "and six years will pass before you know it."

CATERPILLAR, meanwhile, is prospering. It reported revenue of $36.34 billion last year, up 20 percent from 2004. That was on top of a 33 percent increase in 2004 from 2003. Net income was up 40 percent last year, to $2.85 billion; it has nearly tripled since 2003. Tens of millions of dollars have gone into research to develop a great variety of Caterpillar products that sell against those of Komatsu and Volvo, the two biggest foreign competitors.

In the past, such gains would have also translated into higher wages and more generous benefits as contracts were renegotiated every two or three years. But the current, long-term U.A.W. contract at Caterpillar calls for just one general raise: 2 percent in December 2008.

Otherwise, there are some fixed bonuses and modest specified increases every six months as new hires work their way up the wage scale, which starts at $12 to $13 an hour for most factory workers and rarely gets to $20.

Fixed monthly pensions go now only to veteran workers, like Mr. Doty, and job security is effectively canceled for new hires, who must work 12 years without interruption to become immune to layoffs. Mr. Glynn notes that the arrangement gives Caterpillar leeway to shed the new workers when demand turns down for the company's products.

Employee co-payments for health insurance also rose in the current contract, for retirees as well as for active workers, although not by as much as the company had initially wanted, particularly for the retirees. The union membership voted twice against ratification and then approved the contract, with 59 percent voting in favor, after the company sweetened its health care package for retirees.

Having essentially won against the U.A.W., Caterpillar's managers are trying to persuade hourly workers to think of the current contract as having only one tier, the lower one, while those in the upper tier should be thought of as older workers whose wages were "grandfathered" until they depart. Ultimately, they hope to shift their new workers' basic loyalty from the union to the company.

"It's a good term, 'grandfathered,' because those folks were preserved at a wage-and-benefits level that was essentially twice the market," Mr. Glynn said. Already, 50 percent of the upper-tier workers who were around in 2004 have left, through retirement and attrition.

New hires are encouraged to view assembly-line work as short term. The way up from the admittedly meager wage scale is not a better union contract, the message goes, but a promotion < if not within Caterpillar, then at another employer. Driving a forklift or working on an assembly line for 20 years should not be a career goal.

"We talk these things out in round-table discussions with workers on every shift," said Paul Strang, operations manager for the tractor division in Peoria, where Caterpillar started in 1925, making tractors with tracks instead of wheels.

"People say: 'My dad hired in at $25 an hour, and I'm at $12 an hour. Help me understand that.' And we just talk through that," Mr. Strang said, adding that "we are competitive; this is a place where people want to work, and there are opportunities for promotion."

That goal is very much on display at the diesel engine plant in Mossville, which employs 2,400 people, about 25 percent of whom have been on the job less than a year. To make employees feel better, D. Dean Messinger, a plant manager, said, the bathrooms have been modernized and the cafeteria redecorated in a cedar shingle design. More to the point, a learning center recently opened on the factory floor, equipped with 30 computers and staffed with teachers from a nearby community college.

TRAINING in résumé-writing and job interviewing are staples of the eight-week curriculum. For those who want to go on to college, Caterpillar offers to pay up to 90 percent of their tuition costs, as it has done in the past, and career counselors help steer hourly workers toward salaried office jobs.

"Whether people get a promotion or not, they have the opportunity, and that is what matters," Mr. Messinger said. "The ones who are most aggressive, they go back to school and they can rise.

U.S. to Pay Big Employers Billions Not to End Their Retiree Health Plans
Mary Williams Walsh.
February 24, 2006, New York Times

America's largest companies expect the federal government to pay them about $4 billion over the next four years to help keep their retiree health plans alive at a time when such benefits are increasingly on the chopping block, according to a new study by Credit Suisse First Boston.

The money is due to start flowing to employers this month as part of Medicare's new prescription drug benefit. When Congress authorized the Medicare drug benefit, it also agreed to start subsidizing the drug component of employers' retiree health plans, to keep them from shifting their retirees into the government program.

The goal is to save the government money, even after the subsidies, while giving the retirees a better deal than they might get if they were pushed into Medicare.

Among the nation's 500 largest companies, 331 offer retiree health plans.

With the program just starting its first year, it is not yet clear whether the subsidy will achieve its goals. For one thing, there are about 36 million people 65 and older in this country who are eligible for Medicare, but only about 7 million retirees currently covered by employer-sponsored health plans. Still, the Credit Suisse study, published on Wednesday, shows that the subsidy is popular with big employers, even those that do not fit the stereotype of companies in waning industries unable to cope with health care inflation and armies of baby-boomer retirees.

The money, to be sure, will flow to some financially weaker companies staggering under the weight of their health plans, like General Motors, which is expected to receive $1.1 billion over the next four years in drug subsidies for their retired workers.

But there are also thriving businesses like the utility company Exelon, which seem able to afford their plans on their own but will nonetheless receive the federal payouts.

There are companies, too, like BellSouth, that have been setting aside money for retiree health care for years and have billions on hand.

And some that have no reserves for those outlays, like Delta Air Lines, will also receive subsidies.

The government is not drawing distinctions because the subsidy is meant only to help employers stay in the retiree health care business, not to direct public funds to the neediest employers.

Mark Hamelburg, director of employer policy and operations at the Centers for Medicare and Medicaid Services, the agency that runs Medicare, said, "The whole purpose was to incentivize employers to keep providing the good level of coverage that they have had." So far, employers covering 6.4 million retirees have enrolled for the subsidy, he said.

To get the new subsidy, a company must offer retirees a prescription drug benefit that is at least as valuable as the minimum benefits now available under Medicare. Even though General Motors, 3M, Unocal, International Flavors and Fragrances and Avaya are among businesses that have limited or cut back their retiree health plans in recent years, the study showed, all still offer benefits generous enough to qualify for the subsidy.

At the same time, the study found a few large companies that were expanding their retiree health plans, not cutting them. General Electric, for example, in 2003 increased its total obligations of this sort by about $2.5 billion, as part of a new labor agreement. The Medicare subsidy will offset some $583 million of that increase.

And BellSouth's commitments to retiree health care increased $3.3 billion in 2004, after auditors for the company required changes in the way it was accounting for the benefits. The Medicare subsidy will offset $1.1 billion of that.

The Credit Suisse analysts who conducted the study, David Zion and Bill Carcache, prepared it to show investors how successful, or not, companies had been in shifting the cost of their retiree health plans onto other payers.

Companies that fear they have promised more benefits than they can deliver "are actively trying to pass the buck," the analysts wrote. This means trying to shift costs "to anyone who will bear them: their retirees, active workers, the U.S. taxpayer, etc.."

"If they succeed," the analysts added, "it's a giant transfer of risk from corporate America to the work force, and retirees."

Instead of increasing corporate profits in a given year, the subsidies are supposed to free up cash that the company would otherwise have to spend on health care. Mr. Zion and Mr. Carcache said this effect would show up on corporate cash-flow statements. In the future, though, after the Financial Accounting Standards Board completes its current project on pension accounting, retiree medical plan activity might make its way onto corporate balance sheets.

The company with by far the biggest retiree health plan is G.M. < a plan so large that the $77 billion obligation constitutes 18 percent of the combined retiree health obligations of the nation's 500 largest companies. G.M. projects that it will make cash outlays of about $18 billion for retiree health care over the next four years.

Those projections were made before it negotiated a package of concessions with the United Auto Workers union in October, but a G.M. spokesman, Jerry Dubrowski, said newer projections were not available. He said the cutbacks were still being challenged in court by retirees, who argue that the union has no legal authority to negotiate for them, only for active workers. If the concessions are upheld, Mr. Dubrowski said, the retirees will still get a better deal under G.M.'s health plan than if they were pushed into Medicare.

"This is an important first step in reforming the whole health care system," he added.

But the company that will get the biggest boost from Medicare on a percentage basis is not G.M., but Genuine Parts, a distributor of auto replacement parts and office products that has rising sales and profits, and a much smaller health plan. The subsidy, estimated at $6 million over the next four years, will reduce its overall health care obligations to retirees by 62 percent, the study found.

The Credit Suisse analysts found that the big companies, over the life of their retiree health plans, expected to receive about $25 billion from the federal subsidy arrangement.

But Mr. Hamelburg of the federal Centers for Medicare and Medicaid Services said that companies' estimates did not capture the entire outlay expected because they did not include the substantial subsidies that would go to state and local governments that run retiree health plans. The government expects to pay all employers, private and public, about $14 billion over the next four years.

Big trouble ahead for Medicare
by David Lazarus
February 12, 2006, San Francisco Chronicle

After failing in his efforts to reform Social Security, President Bush is now intent on tackling Medicare.

Good luck with that.

"More than anything else, this one program threatens the long-term federal budget," said Brian Riedl, chief budget analyst at the conservative Heritage Foundation.

"The government has made promises that the economy and taxpayers cannot come close to ever fulfilling," he said. "It's a fantasy that we can meet these obligations."

Security faces serious funding shortfalls in the years ahead, Medicare's troubles are exponentially larger.

Over the next 75 years, the Social Security system is forecast to be about $4 trillion in the hole. In the same time frame, Medicare's deficit is expected to reach almost $30 trillion.

There are two key forces at work here. First, as is also the case with Social Security, about 77 million Baby Boomers will start retiring in just a few years, placing unprecedented strain on federal coffers to deliver benefits.

Second, and this is what really throws Medicare for a loop, U.S. health care costs continue rising year after year.

The upshot is that we'll have an increasing number of seniors turning to Medicare for their health care needs as medical treatments grow ever more expensive.

Spending on Medicare now represents 2.7 percent of the overall economy, according to government figures. By 2050, that total will jump to 9.3 percent of the nation's gross domestic product.

Riedl said his calculations show that this represents a spending increase in today's dollars of $756 billion.

"It's a huge problem," he said. "It's a situation that's totally unsustainable."

So what does Bush plan to do about it?

In submitting his $2.8 trillion budget to Congress last week, he said he wants to trim about $36 billion in spending for Medicare over five years -- money that otherwise would go to hospitals, nursing homes and other health care providers.

This is a small fraction of the $397 billion expected to be spent on Medicare this year and the projected $458 billion in 2007.

Put another way, Bush's proposed cutbacks mean spending for Medicare would rise by an average 7.5 percent annually over the next decade. Without the "I look behind the numbers and see the quality-of-life issues," Bush said in a speech Wednesday. "Those of us who put it together really did see the human dimension behind the budgeting."

Medicare now covers almost 44 million people, including all Americans over 65 and about 6 million disabled people.

"This cut will not have any immediate impact," said Helen Halpin, a professor of health policy at UC Berkeley. "All they're doing is nipping away at the program."

Her sense is that the Medicare cutbacks announced last week represent a first stab at reducing the federal government's obligations to seniors. Instead, it will outsource health coverage to private insurers.

Halpin observed that this is essentially what the White House is trying to do with its Medicare prescription drug benefit.

The badly bungled program, which has caused confusion among millions of eligible people, requires participants to choose their own insurers for prescription medication.

Along these lines, Bush has recently advocated expansion of so-called health savings accounts so that people can sock away money for health care just as they save cash in 401(k) plans for their retirements.

"This administration clearly believes that health care is the responsibility of individuals," Halpin said. "But with Medicare, you can't leave these sorts of things to the marketplace. There's no way anyone is going to be able to figure out on their own which doctor to go to for heart surgery."

She and other health care experts say at least part of the solution to Medicare's woes would be to do the exact opposite of what the Bush administration is proposing.

Rather than scale back Medicare, Halpin said, the government should focus on expanding it to include everyone -- universal health coverage, in other words.

"This would spread the insurance risk more broadly," she observed. "It would also help you get control of costs by being able to administer a uniform system."

Researchers at Harvard Medical School estimate that about a third of the $2 trillion that will be spent this year on health care will be squandered on bureaucratic overhead.

This cost could be greatly reduced, or even eliminated, if Medicare covered all Americans. Instead of dealing with a wide array of private insurers, hospitals and other facilities would instead use a standardized system to bill the federal government for treatment provided.

Another possible fix for Medicare would be to make it more closely resemble the Federal Employees Health Benefit program, which provides coverage for about 8 million federal workers and their dependents.

Under this approach, Medicare recipients would basically receive a voucher to purchase their own health insurance, with taxpayers footing most of the bill.

"What we need is a public and private effort to get better value for health care dollars," said Judy Feder, dean of the Georgetown Public Policy Institute.

As it stands, she said, Bush's approach to trimming Medicare spending will accomplish little more than making Medicare patients seem less attractive to doctors.

"If Medicare begins to constrain what it pays, it essentially makes Medicare a lousy payer to doctors and hospitals," Feder said. "They'll just avoid admissions for Medicare patients and look for people with other insurance."

Bush is late to the game -- this is his first attempt at reining in Medicare spending since he took office five years ago.

"In 2030, spending on Social Security, Medicare and Medicaid alone will be almost 60 percent of the entire federal budget," he noted last week.

"I mean, there is a problem," the president said. "One of the tricks in Washington is just to pass them on to future Congresses and future presidents. That's not my style. I want to get something done."

Time to start.

First, Do More Harm
By PAUL KRUGMAN
Januaryr 16, 2006, New York Times

It's widely expected that President Bush will talk a lot about health care in his State of the Union address. He probably won't boast about his prescription drug plan, whose debut has been a Katrina-like saga of confusion and incompetence. But he probably will tout proposals for so-called "consumer driven" health care.

So it's important to realize that the administration's idea of health care reform is to take what's wrong with our system and make it worse. Consider the harrowing series of articles The New York Times printed last week about the rising tide of diabetes.

Diabetes is a horrifying disease. It's also an important factor in soaring medical costs. The likely future impact of the disease on those costs terrifies health economists. And the problem of dealing with diabetes is a clear illustration of the real issues in health care.

Here's what we should be doing: since the rise in diabetes is closely linked to the rise in obesity, we should be getting Americans to lose weight and exercise more. We should also support disease management: people with diabetes have a much better quality of life and place much less burden on society if they can be induced to monitor their blood sugar carefully and control their diet.

But it turns out that the U.S. system of paying for health care doesn't let medical professionals do the right thing. There's hardly any money for prevention, partly because of the influence of food-industry lobbyists. And even disease management gets severely shortchanged. As the Times series pointed out, insurance companies "will often refuse to pay $150 for a diabetic to see a podiatrist, who can help prevent foot ailments associated with the disease. Nearly all of them, though, cover amputations, which typically cost more than $30,000."

As a result, diabetes management isn't a paying proposition. Centers that train diabetics to manage the disease have been medical successes but financial failures.

The point is that we can't deal with the diabetes epidemic in part because insurance companies don't pay for preventive medicine or disease management, focusing only on acute illness and extreme remedies. Which brings us to the Bush administration's notion of health care reform.

The administration's principles for reform were laid out in the 2004 Economic Report of the President. The first and most important of these principles is "to encourage contracts" - that is, insurance policies - "that focus on large expenditures that are truly the result of unforeseen circumstances," as opposed to small or predictable costs.

The report didn't give any specifics about what this principle might mean in practice. So let me help out by supplying a real example: the administration is saying that we need to make sure that insurance companies pay only for things like $30,000 amputations, that they don't pay for $150 visits to podiatrists that might have averted the need for amputation.

To encourage insurance companies not to pay for podiatrists, the administration has turned to its favorite tool: tax breaks. The 2003 Medicare bill, although mainly concerned with prescription drugs, also allowed people who buy high-deductible health insurance policies - policies that cover only extreme expenses - to deposit money, tax-free, into health savings accounts that can be used to pay medical bills. Since then the administration has floated proposals to make the tax breaks bigger and wider, and these proposals may resurface in the State of the Union.

Critics of health savings accounts have mostly focused on two features of the accounts Mr. Bush won't mention. First, such accounts mainly benefit people with high incomes. Second, they encourage wealthy corporate employees to opt out of company health plans, further undermining the already fraying system of employment-based health insurance.

But the case of diabetes and other evidence suggest that a third problem with health savings accounts may be even more important: in practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase. "Consumer driven" is a nice slogan, but it turns out that buying health care isn't at all like buying clothing.

The bottom line is that what the Bush administration calls reform is actually the opposite. Driven by an ideology at odds with reality, the administration wants to accentuate, not fix, what's wrong with America's health care system.

Big Labor's Big Secret
By Robert Fitch
December 28, 2005, New York Times

As most Americans are aware, our auto industry is in a crisis.



Workers' wages are falling, and hundreds of thousands of jobs are being sent offshore. America's largest parts supplier, Delphi, filed for bankruptcy protection, and General Motors, Delphi's main customer, may too, if a threatened United Auto Workers strike occurs next month. Meanwhile, Ford and its main parts supplier, Visteon, seem to be skidding down the same road.



How did we get here? There are many causes: poor car designs, high pension costs, increased foreign competition. But much of it comes down to the overwhelming health insurance costs borne by the auto makers. This is why the union's president, Ron Gettelfinger, has urged Congress to enact sweeping health insurance reforms.



If the government paid everyone's health insurance bills, as those in Canada and most of Europe do, Detroit's Big Three could save at least $1,300 per vehicle. Profitability would return. With deeper pockets, the auto makers could afford to pay their suppliers. Communities would be spared layoffs.



Of course, there are a lot of other compelling reasons to support a single-payer plan besides helping the auto industry. Although it is by far the most costly in the world, our health care system still leaves 43 million people uncovered. The latest World Health Organization rankings listed America's system 33rd, below Costa Rica and only two notches above Cuba.



Most advocates of universal health care focus on the opposition of Republicans and insurance companies. But perhaps the most important factor keeping an overhaul off the national agenda is one that few Democrats acknowledge: most of Mr. Gettelfinger's fellow labor leaders don't support a single-payer system either.



The reason comes down to simple self-interest. The United Auto Workers is one of the few private-sector unions that doesn't run its own health plan. Rather, most have created huge companies to administer their workers' plans, giving them a large and often corrupt stake in the current system.



Opposition to a national health care plan is as much a part of the American trade union tradition as the picket line. It goes back to Samuel Gompers, the founder of the American Federation of Labor, who railed at early Congressional efforts to pass a law mandating employer coverage as Britain had done, which he said had "taken much of the virility out of the British unions."



This line of thinking led to the notorious decision in 1991 by the A.F.L.-C.I.O.'s health care committee to reject a proposal that the federation support a single-payer plan. The majority said a national system simply had no chance in Congress, but others saw a conflict of interest: government-supplied health care would put union-run plans out of business.



The deciding vote was cast by Robert Georgine, chief executive of Ullico, a huge insurance provider created by the unions. A decade later, Mr. Georgine, who was paid $3 million a year by Ullico, and several other company directors - all heads of major A.F.L.-C.I.O. unions - were investigated by a federal panel for insider trading involving Ullico stock. Mr. Georgine and several directors resigned, and this year he agreed to pay back $13 million to the company.



Let's face it: union-administered health insurance funds provide irresistible opportunities for labor leaders. First there's patronage: hiring friends and relatives. Then there are the conventions, junkets and retreats provided by the plans and the providers. And for those willing to cross the line of legality, there's the chance to take kickbacks from health care vendors.



Many officials are charged, but few go to prison, even when money allegedly winds up in Mafia hands. Last month federal prosecutors lost a criminal case in Brooklyn in which they charged that the Genovese crime family leaned on two International Longshoremen's Association local presidents to, among other things, choose a favored health vendor.



Evidently, the jury was convinced by the defense's argument that the union leaders were under duress. Even Lawrence Ricci, the principal accused Genovese figure, was acquitted, although he disappeared during the trial and never testified. (His body was found last month in the trunk of a car in Union, N.J.)



Despite shrinking membership, organized labor still has enough money and muscle to get behind a campaign for national health insurance. Last month, public-sector unions in California came up with tens of millions of dollars in a successful campaign to defeat a ballot measure that challenged their right to use union dues for political purposes.



The problem is getting American unions to fight for common concerns as opposed to narrow institutional interests. It may just be that a broad-scale union overhaul will have to precede one in American health care.



Robert Fitch is the author of the forthcoming "Solidarity for Sale: How Corruption Destroyed the Labor Movement and Undermined America's Promise."

Drugs, Devices and Doctors
By PAUL KRUGMAN
December 16, 2005, New York Times

Merck, the pharmaceutical giant, is under siege. And one side effect of that siege is a public relations crisis for the Cleveland Clinic, a celebrated hospital and health care organization.

But the real story is bigger than either the company or the clinic. It's the story of how growing conflicts of interest may be distorting both medical research and health care in general.

Merck stands accused of playing down evidence that Vioxx, a best-selling painkiller until it was withdrawn last year, increases the risk of heart attacks. The most recent accusation of obscuring the evidence came from The New England Journal of Medicine, which discovered that the authors of a Merck-supported paper published in the journal had removed data unfavorable to Vioxx. The journal called on the authors to issue a correction.

Dr. Eric Topol, a famed cardiologist at the Cleveland Clinic, has been warning about the dangers of Vioxx since 2001. In videotaped testimony at a recent federal Vioxx trial (which ended in a mistrial), he accused Merck of scientific misconduct, and also testified that Merck's former chairman had called the chairman of the Cleveland Clinic to complain about his work - an action Dr. Topol called "repulsive."

Two days after that testimony, according to Dr. Topol, he was told early in the morning not to attend an 8 a.m. meeting of the clinic's board of governors, because the position of chief academic officer, which gave him a seat on the board, had been abolished. A clinic spokeswoman denied that the abrupt elimination of this post had any link to his Vioxx testimony.

A few days later, The Wall Street Journal reported on a web of financial connections between the Cleveland Clinic, its chief executive and AtriCure, a company selling a medical device used in a surgical procedure promoted by the clinic. Dr. Topol - whose demotion also cost him his seat on the conflict-of-interest committee - was "among those who questioned the ties," the newspaper said.

O.K., it's sounding complicated. But the essence is simple: crucial scientific research and crucial medical decisions have to be considered suspect because of financial ties among medical companies, medical researchers and health care providers.

That should come as no surprise. The past quarter-century has seen the emergence of a vast medical-industrial complex, in which doctors, hospitals and research institutions have deep financial links with drug companies and equipment makers. Conflicts of interest aren't the exception - they're the norm.

The economic logic of the medical-industrial complex is straightforward. Prescription drugs and high-technology medical devices account for a growing share of medical spending. Both are products that are expensive to develop but relatively cheap to make. So the profit from each additional unit sold is large, giving their makers a strong incentive to do whatever it takes to persuade doctors and hospitals to choose their products.

The tools of persuasion go beyond hiring cheerleaders as sales representatives. There are also financial inducements, sometimes disguised, sometimes blatant. A few months ago, Reed Abelson of The New York Times reported on a practice in which device makers give surgeons who are in a position to choose their products (with others paying the cost) lucrative consulting contracts, in some cases running to hundreds of thousands of dollars a year.

Above all, the line between medical researcher and medical entrepreneur has been blurred. In her book "The Truth About the Drug Companies," Marcia Angell, a former editor of The New England Journal of Medicine, writes that small companies founded by university researchers now "ring the major academic research institutions ... hoping for lucrative deals with big drug companies." Usually, she says, "both academic researchers and their institutions own equity" in these companies, giving them a strong incentive to make the big drug companies happy.

The point is that the whiff of corruption in our medical system isn't emanating from a few bad apples. The whole system of incentives encourages doctors and researchers to serve the interests of the medical industry.

The good news is that things don't have to be that way. Economic trends gave rise to the medical-industrial complex, but only because those trends interacted with bad policies, which can be fixed. In future columns I'll talk about how serious health reform can reduce the conflicts of interest that taint our current system.

The Health-Care Crisis: States Are Rushing In
Business Week. November 28, 2005.

Business is wary of a statehouse push for widespread coverage

Health costs are skyrocketing, the number of uninsured is growing steadily, and squeezed companies are bailing out of the benefits business. Yet Washington is sitting on its hands. Enter the states. Governors and legislators are trying in a variety of ways to expand coverage while reining in their own expenses. Business is watching warily to see whether states can achieve health-care nirvana: widespread coverage and lower costs without steep, job-crushing taxes.

The hottest debate is in Massachusetts. On Nov. 3 state representatives passed a bill that would achieve near-universal coverage by making their state the first to impose a so-called individual mandate -- a requirement championed by Governor Mitt Romney -- that directs all residents who can't get coverage at work or from Medicaid to buy their own insurance. In Illinois, Democratic Governor Rod Blagojevich on Nov. 15 signed into law his $45 million "All Kids" plan, which would make the Land of Lincoln the first to extend comprehensive coverage to all children under age 18. And in 2006, 22 states across the political spectrum will be expanding eligibility for Medicaid programs, according to the Henry J. Kaiser Family Foundation.

Increasing health coverage is a laudable goal. But visionary governors should study the results of past state experiments. Hawaii launched an employer-financed universal-coverage plan in 1974, but today up to 12% of its residents still remain uninsured. Tennessee tried to expand coverage dramatically in 1994 with a massive state-run insurance program called TennCare, but its staggering costs fueled a taxpayer backlash. And California dropped plans to require employers to cover workers or face new taxes because of widespread opposition from the business community.

Yet Romney thinks a more market-based solution to the health-care crisis can be a winning issue. The Republican governor is expected to announce his Presidential candidacy before Christmas and figures expanding coverage could win him praise as a can-do compassionate conservative. Rather than force employers to provide coverage, he would require individuals who don't qualify for Medicaid to buy their own health insurance. Massachusetts would encourage insurers to offer less expensive but more restrictive policies costing about $200 a month, or half current levels. The state would help subsidize the cost for people earning less than triple the poverty level. Those who don't buy insurance would face stiff tax penalties -- a stick designed to encourage participation. House Speaker Salvatore F. DiMasi, a Democrat, estimates the plan would extend coverage to 95% of the 500,000 residents who are now uninsured. "This could become a model for other states," he predicts.

Pack-Up Time?
But health plans that work on paper often fail in the clinics. The individual mandate could create a backlash among healthy young singles who often choose to go without insurance. And DiMasi's troops in the Democratic-controlled Massachusetts House are adding a wrinkle that is strongly opposed by business: a 5%-to-7% payroll tax on companies that don't insure their own employees.

"This would clearly undercut job creation at a time when we are already a very high-cost state," says Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a business-oriented research group. And for employers who already provide coverage, the tax could prove a cheaper alternative, inducing them to dump workers onto the state plan as costs rise.

Romney, who knows his 2008 prospects could vanish if he endorsed a steep tax hike, is counting on the state Senate to nix the tax: It's pushing a less sweeping plan that would cover no more than half the uninsured. "If you try to do too much, too fast, you end up with nothing," says Senate President Robert Travaglini (D).

Even that modest progress could prove appealing to voters in states where coverage is shrinking. Slammed by increasing health-care costs, 14 states -- almost all of them carried by George W. Bush in 2004 -- are scaling back their Medicaid programs. Tennessee has already slashed 200,000 from TennCare, and Missouri has cut some 100,000 residents off Medicaid.

Over the past five years, the number of companies offering insurance has fallen from 69% to 60%, says Gary Claxton, a Kaiser vice-president. Where coverage is offered, premium hikes have more employees opting out. The upshot: The number of uninsured rose from 15.3% to 18% between 2000 and 2004. Faced with those facts and with Washington's inaction, governors like Romney and Blagojevich feel they have little choice but to ignore the grim record of state reforms and take action on their own.

By William C. Symonds in Boston, with Howard Gleckman

Age of Anxiety

By PAUL KRUGMAN
NY Times
November 28, 2005

Many eulogies were published following the recent death of Peter Drucker, the great management theorist. I was surprised, however, that few of these eulogies mentioned his book "The Age of Discontinuity," a prophetic work that speaks directly to today's business headlines and economic anxieties.

Mr. Drucker wrote "The Age of Discontinuity" in the late 1960's, a time when most people assumed that the big corporations of the day, companies like General Motors and U.S. Steel, would dominate the economy for the foreseeable future. He argued that this assumption was all wrong.

It was true, he acknowledged, that the dominant industries and corporations of 1968 were pretty much the same as the dominant industries and corporations of 1945, and for that matter of decades earlier. "The economic growth of the last twenty years," he wrote, "has been very fast. But it has been carried largely by industries that were already 'big business' before World War I. ... Every one of the great nineteenth-century innovations gave birth, almost overnight, to a major new industry and to new big businesses. These are still the major industries and big businesses of today."

But all of that, said Mr. Drucker, was about to change. New technologies would usher in an era of "turbulence" like that of the half-century before World War I, and the dominance of the major industries and big businesses of 1968 would soon come to an end.

He was right. Consider, for example, what happened to America's steel industry. In the 1960's, steel production was virtually synonymous with economic might, as it had been for almost a century. But although the U.S. economy as a whole created lots of wealth and tens of millions of jobs between 1968 and 2000, employment in the U.S. steel industry fell 60 percent.

And as industries went, so did corporations. Many of the corporate giants of the 1960's, companies whose pre-eminence seemed permanent, have fallen on hard times, their places in the business hierarchy taken by new players. General Motors is only the most famous example.

So what? Meet the new boss, same as the old boss: why does it matter if the list of leading corporations turns over every couple of decades, as long as the total number of jobs continues to grow?

The answer is the reason Mr. Drucker's old book is so relevant to today's headlines: corporations can't provide their workers with economic security if the companies' own future is highly insecure.

American workers at big companies used to think they had made a deal. They would be loyal to their employers, and the companies in turn would be loyal to them, guaranteeing job security, health care and a dignified retirement.

Such deals were, in a real sense, the basis of America's postwar social order. We like to think of ourselves as rugged individualists, not like those coddled Europeans with their oversized welfare states. But as Jacob Hacker of Yale points out in his book "The Divided Welfare State," if you add in corporate spending on health care and pensions - spending that is both regulated by the government and subsidized by tax breaks - we actually have a welfare state that's about as large relative to our economy as those of other advanced countries.

The resulting system is imperfect: those who don't work for companies with good benefits are, in effect, second-class citizens. Still, the system more or less worked for several decades after World War II.

Now, however, deals are being broken and the system is failing. Remember, Delphi was once part of General Motors, and its workers thought they were totally secure.

What went wrong? An important part of the answer is that America's semi-privatized welfare state worked in the first place only because we had a stable corporate order. And that stability - along with any semblance of economic security for many workers - is now gone.

Regular readers of this column know what I think we should do: instead of trying to provide economic security through the back door, via tax breaks designed to encourage corporations to provide health care and pensions, we should provide it through the front door, starting with national health insurance. You may disagree. But one thing is clear: Mr. Drucker's age of discontinuity is also an age of anxiety, in which workers can no longer count on loyalty from their employers.

 

Health Economics 101
By PAUL KRUGMAN

New York Times, November 14, 2005
Op-Ed Columnist

Several readers have asked me a good question: we rely on free markets to deliver most goods and services, so why shouldn't we do the same thing for health care? Some correspondents were belligerent, others honestly curious. Either way, they deserve an answer.
It comes down to three things: risk, selection and social justice.
First, about risk: in any given year, a small fraction of the population accounts for the bulk of medical expenses. In 2002 a mere 5 percent of Americans incurred almost half of U.S. medical costs. If you find yourself one of the unlucky 5 percent, your medical expenses will be crushing, unless you're very wealthy - or you have good insurance.
But good insurance is hard to come by, because private markets for health insurance suffer from a severe case of the economic problem known as "adverse selection," in which bad risks drive out good.
To understand adverse selection, imagine what would happen if there were only one health insurance company, and everyone was required to buy the same insurance policy. In that case, the insurance company could charge a price reflecting the medical costs of the average American, plus a small extra charge for administrative expenses.
But in the real insurance market, a company that offered such a policy to anyone who wanted it would lose money hand over fist. Healthy people, who don't expect to face high medical bills, would go elsewhere, or go without insurance. Meanwhile, those who bought the policy would be a self-selected group of people likely to have high medical costs. And if the company responded to this selection bias by charging a higher price for insurance, it would drive away even more healthy people.
That's why insurance companies don't offer a standard health insurance policy, available to anyone willing to buy it. Instead, they devote a lot of effort and money to screening applicants, selling insurance only to those considered unlikely to have high costs, while rejecting those with pre-existing conditions or other indicators of high future expenses.
This screening process is the main reason private health insurers spend a much higher share of their revenue on administrative costs than do government insurance programs like Medicare, which doesn't try to screen anyone out. That is, private insurance companies spend large sums not on providing medical care, but on denying insurance to those who need it most.
What happens to those denied coverage? Citizens of advanced countries - the United States included - don't believe that their fellow citizens should be denied essential health care because they can't afford it. And this belief in social justice gets translated into action, however imperfectly. Some of those unable to get private health insurance are covered by Medicaid. Others receive "uncompensated" treatment, which ends up being paid for either by the government or by higher medical bills for the insured. So we have a huge private health care bureaucracy whose main purpose is, in effect, to pass the buck to taxpayers.
At this point some readers may object that I'm painting too dark a picture. After all, most Americans too young to receive Medicare do have private health insurance. So does the free market work better than I've suggested? No: to the extent that we do have a working system of private health insurance, it's the result of huge though hidden subsidies.
Private health insurance in America comes almost entirely in the form of employment-based coverage: insurance provided by corporations as part of their pay packages. The key to this coverage is the fact that compensation in the form of health benefits, as opposed to wages, isn't taxed. One recent study suggests that this tax subsidy may be as large as $190 billion per year. And even with this subsidy, employment-based coverage is in rapid decline.
I'm not an opponent of markets. On the contrary, I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies.
That system is now failing. And a rigid belief that markets are always superior to government programs - a belief that ignores basic economics as well as experience - stands in the way of rational thinking about what should replace it.

Pride, Prejudice, Insurance
By PAUL KRUGMAN

November 7, 2005
Op-Ed Columnist

General Motors is reducing retirees' medical benefits. Delphi has declared bankruptcy, and will probably reduce workers' benefits as well as their wages. An internal Wal-Mart memo describes plans to cut health costs by hiring temporary workers, who aren't entitled to health insurance, and screening out employees likely to have high medical bills.
These aren't isolated anecdotes. Employment-based health insurance is the only serious source of coverage for Americans too young to receive Medicare and insufficiently destitute to receive Medicaid, but it's an institution in decline. Between 2000 and 2004 the number of Americans under 65 rose by 10 million. Yet the number of nonelderly Americans covered by employment-based insurance fell by 4.9 million.
The