Health Care Reform Demystified* 
			  By James O'Connor

				1.
    The American health care industry is expanding at least twice
the rate of the Gross Domestic Product (GDP).  In the past two
decades, the industry has created one-sixth of all new jobs and at
present accounts for about one- seventh of GDP. Almost $1 trillion is
spent on health care each year. While no one knows exactly what
combination of reasons explains the relentless march of the health care
dollar, improvements in the quality of care are one key factor -- a
fact that anyone over 40 or 50 years of age will confirm from personal
experience.  Medical science has advanced; medical personnel are better
trained; hospitals are safer; heart attack and stroke victims stay
alive longer because of bypass operations, new drugs, and other
technological advances; diagnostic techniques and medical technology
have improved, as has the management of chronic illness; and there is a
host of new and improved products and services such as contact lenses,
dental procedures, wheelchairs, and physical therapies.
    Another reason for the expansion of the health care industry is
that incomes of doctors and other medical personnel, hospital
equipment and drug manufacturers, and other sectors of the industry
have increased faster than average income, partly due to better quality
health care products and services. A third reason is that more people
get sick more often, suffer more accidents, workplace hazards, and
environmental illness, and are victimized by more violence, and more
people who do get sick, injured, etc., get more and better medical
treatment.1 The health care industry also may have become more
economically inefficient over the past 20 years or so (although very
recent trends point in the opposite direction).
    The problem with the American health care system is that fewer
workers and their families and others have health insurance,
and more people have more limited coverage or larger deductibles, hence
do not have equal or full access to the wider range of better
technologies and treatments available to those with comprehensive
coverage. Fewer employees have health coverage paid for entirely by
their employers. Full payment for family member coverage by employers
has also fallen. While the "haves" enjoy more access to better health
care, the "have nots" have less access to health care generally and
primary and preventative care in particular. Over one-third of
Mexican-Americans under age 65 lack health insurance, the highest
percentage of any ethnic group.2 The leading causes of death of
African-American women between 15 and 50 years of age are breast and
cervical cancer, mainly for want of early detection. Blacks also have a
proportionately fewer heart bypasses despite the fact that heart
disease is the main killer of African-Americans. The American health
care system is thus two-tiered (or multi-tiered) and is increasingly
regarded by more people as hugely inequitable.3
    Medical progress, which has given the U.S. the reputation of
having the best, if one of the least equitably distributed,
health care in the developed world, would not have been possible
without massive subsidies to the health care industry. The government
picks up the bill for those 65 years of age and older as well as
millions of public employees and their dependents, and over one-half of
all people living in poverty.4 Publicly-financed health care costs have
risen faster than privately-funded costs because Medicaid eligibility
has been expanded and the utilization of services by Medicaid and
Medicare recipients has increased (despite the fact that fewer doctors
accept Medicaid patients and more Medicare patients have to pay doctors
an out-of-pocket premium to get treatment). Americans with good private
insurance (for example, Fortune 500 workers) subsidize those without
insurance (called "cost-shifting"). Young workers, professionals, and
the self-employed with insurance indirectly subsidize the elderly,
working poor, and plain poor, and the healthy gift the sick and
injured.
    The fact that health care spending is rising so fast because of
subsidized improvements in the quality of care and increases in
the quantity of care and incomes of health care providers, while fewer
workers and other Americans have good health care insurance or none at
all, suggests that there is not one, but two, health care "crises" in
the U.S.
    The first might be called a crisis of political legitimation.
The present system is widely regarded as increasingly unfair
and inefficient, particularly so given that the U.S. is the only major
country without universal coverage, hence has to play "catch-up" with
its industrial rivals. The system is financially so chaotic and
organizationally so Byzantine, and so many people have no or poor
insurance coverage (while 220 million Americans have health insurance,
over 200 million are without full coverage), that a sitting President
and the Congress have been seriously considering universal,
comprehensive health care insurance (as well as a number of competing
reform bills that would paper over the cracks in the system without
seriously addressing the problems of inefficiency and equity). However,
universal comprehensive coverage -- either the Clinton "package" or its
rival, the single payer plan, or legislation that would combine
elements from both with those of competing plans -- would be incredibly
expensive without a fundamental reorganization of the industry's
financing and delivery systems, an unlikely prospect.5
    The second crisis may be termed a crisis of capital
accumulation. The same financially and organizationally sick
health care system has multiplied the costs of labor, and the costs of
social consumption and social expenses (e.g., Medicare and Medicaid,
respectively) even more so.6 The system is regarded in business circles
as "too costly" given that the U.S. is the only major country that is
presently restructuring its economic and social policy to favor exports
over production for the domestic market, hence is playing catch-up not
only in terms of political legitimation but also on the
"competitiveness" front. In 1993, according to one survey, the average
health insurance per worker paid by employers was about $3,800, an
eight percent increase from 1992 (which, however, was less than the
annual growth of employer health costs in the preceding five years).
(The Department of Labor puts the growth of health benefit costs at a
significantly lower rate.) In 1992, medical and medical-related
benefits constituted over 25 percent of total benefits (and 10 percent
of total payroll) paid out to employees by American business. Also,
Federal government deficits have soared in large part because of
increases in Medicare and Medicaid spending.
    The Clinton reform package and the single payer plan (as well
as the patchwork plan that Congress is likely to finally pass
into law) seek to solve both the legitimation and accumulation crises
in a single stroke, which most Republicans and many Democrats regard as
flatly impossible. Some observers believe that the solution to the
legitimation crisis is more health care spending, better care, and a
massive redistribution of facilities to oppressed minorities and the
poor, and to preventative and family medicine and community clinics.
The solution to the accumulation crisis is less (and even less
equitably distributed) health care spending, and worse care. As social
policy, health care reform would raise costs and spending; as economic
policy, reform would lower costs and spending.7 

				2.
    The crisis of accumulation is especially acute today given the
new conditions of world capital or the "new global economy."
While Europe and Japan stagnate or suffer recession, the U.S. economy
is changing from a Keynesian or Fordist economy which at one time
maintained a rough balance between domestic production and consumption
to an export-driven economy similar to Japan's since the mid-1970s and
to those of many European countries.8 Exports in relation to GDP have
grown from five percent in the 1970s to eleven percent today. The
fundamental aim of the Clinton administration's economic policy team is
to accelerate this shift from domestic to foreign markets -- in George
Bush's words, to make the country an "export super-power." In a speech
last December, Export-Import Bank Chair and CEO, Kenneth Brody,
emphasized that the U.S. "would seek economic growth through exports."
"The U.S. government," he said, "will act like a trading company and
create an export mentality through the country." Trade Representative
Mickey Kantor and Commerce Secretary Ron Brown reiterate that their job
is to "aggressively expand exports." In the new global economy, "the
economy, stupid!" translates into "exports, stupid!"
    Export-driven economies have to compete with the whole world.
They are obsessed with cutting labor, energy, and raw material
costs, improving product quality, and developing new products for the
world market. Far from being guided by the mythical invisible hand of
the "free market," export-led economies are driven by the strategies of
huge transnational corporations and by neo-mercantilist governmental
"industrial policy" and state and private financial policies that
promote exports at the expense of production for domestic markets.
    The U.S. economy is no exception to this rule. The powers of
the Federal government (and numerous State and local
governments) are increasingly deployed to expand foreign sales of goods
and services that depend on overseas markets for healthy profits. These
include high tech equipment, business and financial services, foods and
raw materials, artifacts of pop culture, upscale armaments, and
large-scale passenger aircraft, to name the more important products,
which also consist of medical equipment and pharmaceuticals in which
U.S. companies presently control over one-half the world market.
    The Clinton administration has given every sign that its
economic policy aims to first and foremost to help business to
cut costs -- despite the fact that, according to Laura Tyson, head of
the President's Council of Economic Advisors, the country already has
achieved the lowest unit labor costs of all major industrial
countries.  The U.S. also remains the world leader in science, R&D, and
new product development. Irrespective of low unit costs, as the country
depends more on exports to deliver it from recessions and propel
economic booms, American business will be forced to continue to
revolutionize technology and the export product mix, develop more
complex patterns of worldwide sourcing, and intensify labor to maintain
and improve its competition position.9
    The significance of these changes, which have created a kind of
"hyper-capitalist" world, is plain to see. Even after twenty
years of stagnating or lower real wages, speed-up, and longer hours of
work, unemployment, and economic sacrifice, American workers can expect
little respite or rest in the global economy of the late 1990s.  This
fact will all but guarantee that occupational health and safety
conditions will deteriorate, environmental and stress diseases will
rise, and other illnesses, accidents, and forms of violence associated
with hard economic times and growing morbid forms of social life will
multiply.10 

				3.
    One key to "seeking economic growth through exports" is to
reduce the cost of wages -- the size, quality, and cost of
producing the average consumption basket. Since health care is the
second largest component of the consumption basket (housing is the
first) and since health care spending has grown faster than any other
major component (including housing), employers have been trying to
reduce the costs of health care for their employees in a number of
different ways.
    Perhaps the most important is the shift from traditional
fee-for-service to managed health care plans, which enroll
eight times as many people today compared with a decade or so ago.
Ninety million Americans (most wage and salary workers and their
dependents) are now enrolled in managed care plans which cost employers
significantly less money than fee-for-service.11 Managed care plans
such as California's Health Net do not give employers or insurance
companies direct control of the labor of doctors and other health care
personnel, but they do give them enormous indirect power over doctor
fees, types of services offered, utilization rates, and so on -- the
more so since the health insurance industry is becoming dominated by
five giant companies, which themselves are purchasing true health
maintenance organizations (HMOs, which put doctors on salary) at a
rapid rate.12 In many States, for example, Blue Cross and Blue Shield
have reduced payments to doctors and hospitals. Increased "efficiency"
has also resulted in U.S. hospitals having lower admission rates for
acute care patients and shorter lengths of stay than hospitals in other
industrial countries. Employers have also reduced benefits for Medicare
eligible retirees and little more than one-half offer benefits for
employees who retire before they reach 65 years of age. Last but not
least, more employers, particular small businesses, have cancelled
health insurance for their workers altogether (more than two-thirds of
uninsured workers are employed by businesses with less than 100
workers).
    Despite business's attempt to economize in these and other
ways, health care spending has continued to expand much faster
than GDP. A consensus thus has emerged within the political and
economic classes that the system is in "crisis" and that "health care
reform" is badly needed -- all the more so given that the U.S. is
poised to exploit what business regards as the booming markets of Asia
and Latin America, hence needs to create economic conditions at home
favorable to American exports of goods and services. At the same time,
the establishment has to try to legitimate any reform by restoring and
expanding "access" to health care providers -- a contradictory
undertaking, as has been noted.

				4.
    The holy trinity of the Clinton administration's reform package
(as well as the single payer plan) is "cost containment,
access, and quality" (with "choice" thrown in for good measure). These
goals or principles add up to "more of the same or better for less," a
politician's promise if there ever was one (a fact made clear during
Congressional debates on competing plans in the early spring, when
everyone denounced everyone else's plans as "unfair," "inefficient," or
pies in the sky).
    The key term for the Clinton administration and "New Democrats"
is "cost containment." Last December, Robert Rubin, Chair of
Clinton's National Economic Council, said that "health care is the
President's most important economic initiative" (italic added). In
March, according to Senator Phil Graham, "health care system [costs]
represent a major competitive disadvantage of the United States." Other
politicians have linked health care reform with American
"competitiveness" in the world market. Their aim, first and foremost,
is to reduce the cost of wages of employed workers, future workers
(children and youth), and retired workers.
    Clinton's reformers have proposed an armory of policy weaponry
to reduce costs, and Congressional sponsors of rival plans,
chairs of various Committees and Sub-Committees seeking consensus, and
individual members with their own axes to grind have followed suit. By
April Fool's Day, the result was a health care reform jig saw puzzle
without a picture on the cover of the box. Clinton's original proposal
for health care "alliances" (compulsory health insurance purchasing
cooperatives) went down in smoke in March. This despite the fact that
large purchasing cooperatives are one way to make sure that insurers
practice "community rating," or underwrite high risk populations. (The
single payer plan would, in effect, prohibit competition among insurers
to cover the healthy while abandoning the sick.) Clinton's concept of
"managed competition" has been attacked from the right and the left --
even though its cost-conscious supporters argue that it would force
insurers to compete for alliance business. (The single payer plan would
largely eliminate private insurers from the health care industry.)
There is an agreement between Clinton's people and single payer
supporters that limits on insurance premiums or price controls and/or
global health care budgets are needed (these are rejected out of hand
by most Republicans and many Democrats).
    Community rating, limits on insurance premiums or price
controls, and global budgets would all reduce the cost of wages
(hence of capital). The former would end "cost shifting," which means
that big employers and others which offer good coverage would no longer
have to pay a higher premium for their workers' insurance in order to
indirectly subsidize the uninsured and underinsured. Price controls
would simply mandate lower insurance premiums (hence incomes of health
care providers). Since most uninsured and underinsured workers labor
for small business, community rating and price controls would shift
health care costs from big to small capital, that is, from companies
that export a relatively large share of their output to those which do
not. Universal coverage per se would permit workers who don't change
jobs because they are afraid of losing health insurance coverage to
become more mobile and also give welfare recipients who don't want to
lose Medicaid eligibility more incentives to seek work. The Clinton and
single payer plans, therefore, would make the labor market more
flexible or resilient. Also, as Labor Secretary Reich explained in
March, the Clinton plan would also improve labor-management relations
by "taking health benefits off the bargaining table." That this would
be no small comfort to management is suggested by an anonymous union
official who was quoted on C-SPAN late last year as saying that "health
care reform achieves for the corporations what they couldn't and can't
win at the bargaining table."
    The Clinton plan, single payer, and provisions of one or two
rival plans would de-emphasize specialty medicine and
strengthen primary care and preventative medicine. This would lower the
costs of wages of future workers. Clinton would make sharp reductions
in Medicare and Medicaid spending (the latter from its present annual
growth rate of 20 percent to four percent by the turn of the century).
This would cut the costs of health services of ex-workers and the poor.
Other elements of the health care system that Clinton's experts (and
those of rival plans) do not regard as cost-effective would be
restructured or tinkered with.
    Whether Congress will support any or most of these particular
measures, and how effective they would be in containing costs,
is anybody's guess. The health care industry is so huge and the
economic stakes for the "special interests" are so great that every
important lobby and health care association in the country has entered
the struggle for and against this or that aspect of Clinton's plan.
Media campaigns generated an incredible volume of misinformation;
members of Congress introduced new "compromise" bills every month or
so; the Clinton team quickly shifted from the political offensive to
the defensive. The First Lady and her husband concocted a complex and
unwieldy package designed to please practically everyone. It appears
that, in the last analysis, it will please no one. Thus, Congress is
likely, finally, to produce "an emaciated...plan that will do more for
the lobbies than those who need care."13
    One safe conclusion is that to the degree the Clinton (or any)
plan's cost containment features work, the result will be an
increase in the average rate of profit on capital as a whole,14 and the
availability of more money capital to private business directly and
also indirectly through lower budget deficits and long-term interest
rates, hence an improvement in the U.S.'s ability to compete in the
world market. Industries that export a sizable share of their output
will particularly benefit from lower labor costs and interest rates,
first, because they are under more competitive pressure than industries
that have the domestic market to themselves, and, second, because
export-led industries are growing faster, hence have a greater need for
capital, than other industries.  

				5.
    "Cost containment" without "improved access" would be quickly
rejected by most Americans and members of Congress. The
legitimacy of Clinton's government and the Democratic Congress rests in
some large part on whether most voters regard health care reform as
"fair." Unfortunately for both Clinton and single payer advocates,
"most voters" include the millions of workers who are presently happy
with their insurance coverage -- not just those without insurance or
with limited coverage. Clinton (and the single payers) have thus taken
the bold step of modeling a benefits package on the lines of elite
Fortune 500 company plans. This would result in greater total health
care spending and also more spending "per unit" of health care. In
short, the Clinton package -- universal, comprehensive coverage via
employer-mandated health insurance -- is quasi-New Deal legislation the
likes of which haven't been seen since the booming 1960s (the single
payer plan is pure New Deal legislation).
    Both the Clinton and the single payer plans would address the
health care needs of over 38 million Americans who have no
insurance, most of whom are among the 39 percent of workers employed by
small business who are presently uninsured (a disproportionate number
of whom are oppressed minorities and the working poor). Clinton would
also expand coverage for workers and their families who are presently
insured: 53 million more people for prescription drugs; 121 million
more for dental care; 139 million for vision care; and 153 million for
mental illness and substance abuse programs.
    Clinton's experts once believed that universal coverage would
not only be politically acceptable (always a dubious premise)
but also economically rational in the long-run. The idea is that a
healthy work force, secure in the knowledge that medical care of high
quality is available to all workers when and where they need it, would
have a positive effect on labor productivity hence help the country
compete better in the new global economy -- a questionable proposition
given that universal and comprehensive coverage would cost a lot more
money than the present health care system (unless, of course, effective
price controls and global budgets are in place and enforced).
    The administration's reform package would require all employers
to purchase health insurance for their workers and pay 80
percent of the insurance premium (up to a certain percentage of total
payroll). (Single payer proposes a new payroll tax.) Small and
medium-size employers have strongly opposed this scheme on the grounds
that even with managed competition and alliances, unit labor costs
would rise, not fall. Eighty-five percent of the members of the
National Federation of Small Business polled late last year stated that
they would cut wages or lay workers off if the Clinton plan became law.
Some have predicted that employer-mandated insurance would also slow
down the rate of formation of new small business.
    The attempt to place new cost burdens on small and middle
business is one of the main contradictions of Clinton's
proposal. It demonstrates just how beholden the President is to big
business and the four or five insurance giants with the financial clout
necessary to bargain effectively with Clinton's alliances. Despite his
pledge to subsidize small business that could not absorb increased
costs, it is probable that any employer- mandated system would
eliminate many inefficient companies, prevent other businesses from
starting up, lower money wages in the most competitive sectors of the
economy, or lead to a deterioration of working conditions.  Small
businesses that survive would have to become more competitive, which is
precisely the result that Clinton doubtless wishes to achieve. A policy
dressed up as an exercise in political legitimation also looks
suspiciously like a spur to increased economic efficiency and capital
accumulation in the economy as a whole.  

				6.
    No one has satisfactorily explained how expanded and less
costly health care will be paid for without a decline in the
quality of services -- "quality" being the third leg of Clinton's and
single payer's reform triad. Some argue that managed care would improve
quality on the grounds that these systems make fewer mistakes in
diagnostic work and treatment ("mistakes cost money," said one Clinton
defender; presumably, they also cause pain and travail). At present,
doctors who belong to some managed care organizations make more money
the fewer referrals they make to specialists or other providers.
Managed competition would intensify the labor of many medical personnel
and also limit their incomes, which would lead many to work less or
retire early (as did some Blue Cross doctors in Tennessee when Medicaid
payments were cut). Improved and more equitable access would increase
quality defined in global terms, but cost containment would have the
opposite effect, except in so far as family and preventative medicine
receive a much larger share of the health care dollar -- a political
long shot. To the degree that specialty medicine and a lower rate of
growth of innovation in the pharmaceutical industry are discouraged by
cost containment schemes, new drugs and diagnostic, surgical, and other
technologies which health planners do not regard as "cost effective"
would be scarcer.
    Then there is the whole problem of the increase in illness and
disease and accidents accompanying the further intensification
of labor, and more virulent forms of social and environmental
morbidity, that can be expected as the U.S. becomes a more
hyper-competitive super-power. It is often said that the American
health care system is grossly inefficient because the U.S. spends a
higher proportion of its GDP for health care without obtaining
significantly different morbidity rate than the country's main
industrial rivals. This line of argument presupposes that the
production of illness, disease, accidents, and so on in other countries
is similar to that in the U.S. The facts seem to be, however, that
American individualism and hyper-capitalism, labor mobility, workplace
stress, racism and crime, environmental pollution, and morbid forms of
social life generally produce more illness and injury than in other
countries. The U.S. spends relatively more on health care with roughly
the same results partly because the overall production of bad health is
higher -- a fact obscured by simple comparisons between how much we
spend and, for example, how long Americans live. This will become even
more the case when Clinton and his successors are finished redefining
the American economy as little more than a part -- albeit the largest
part -- of global capitalism as a whole. The intensification of labor,
growth of part-time and temporary work, home work, and so on will
result in more injuries and spending on physical therapy, pain killers,
and the like. The most common surgical procedure today is said to be to
correct carpal tunnel syndrome, a workplace disorder. The demand for
drugs such as Prozac will rise, as depression costs employers an
estimated $23.8 billion annually in lower productivity and lost work
time.15 Morbid forms of social life will multiply, with all attendant
bad effects on personal and community safety and health. For these and
other reasons, the demand for health care will probably rise at least
as fast as the supply is restructured or increased.
    As we have noted, the rise in health care spending has been
largely due to better quality services and an increase in the
number of people receiving these services. (Waste, fraud, inefficiency,
and "inappropriate services" are definitely problems, but if they are
the primary culprits, there is no obvious way of eliminating them,
short of planned medicine.) This means that inflation in health care
spending is more apparent than real. Costs and prices are higher in
some significant part because the product is better and more people use
the product. We have also noted that health care spending has risen
because it has been delinked from worker income (as conservative
critics of Clinton's plan constantly harp on). Most who are sick,
injured, disabled, chronically ill, or otherwise in need receive
upscale treatment because they (and the health care industry) are
subsidized by the rest of society.
    It is precisely this system of subsidies that Clinton's reform
package seeks to rationalize. Employers pay for health
insurance partly by passing costs forward to consumers in the form of
higher prices, thus inhibiting exports, or backward as lower wages,
hindering recruitment of top workers and technicians. The government
pays for Medicare and Medicaid and health insurance for public
employees by raising taxes and borrowing money, which keep savings
lower and long-term interest rates higher than they would otherwise be.
Since the majority of consumers are workers and since most individual
income taxes are collected at the base rate -- that is, from working
people -- wage and salary earners as a whole pay for the health care of
private and public sector workers and the elderly and poor. In other
words, health care subsidies to those in need largely come from
"consumers" (workers in the supermarket and shopping mall) and
"taxpayers" (workers in their roles as citizens).
    The present health care system thus amounts to a redistribution
of income within the wage and salaried classes. It is as if the
working class as a whole "decided" by ballot that good and improving
health care services are more important than new cars and expensive
vacations. Workers in their roles of consumers and taxpayers, in
effect, want those in need -- oppressed minorities and the poor
excepted to date -- to get the best health care possible. This
sensibility is behind the popular support for those parts of the
Clinton plan that would insure the uninsured and subsidize drugs and
nursing home care for the aged. It is also why millions of people with
good health insurance oppose Clinton's agenda to further redistribute
income within the wage and salaried classes in order to increase access
to equal care for minorities and the poor. The Clinton package (and the
single payer plan) thus, in effect, seek an even more equal
distribution of income within the wage and salary earning classes,
broadly defined.  

				7.
    The problem for American capitalism is not that the present
health care system works so poorly but that it works so well --
for those with good health insurance and access to the technological
wonders of modern medicine. Most health care consumers, the vast
majority wage and salary earners and their dependents, don't have to
pay anything approaching full price for medical care.16 Hence they
choose the best insurance plan available and see doctors, physical
therapists, and other providers who insured workers believe will go out
of their way to give them the best care, for example, make available
the best technology and latest drugs. The effect is to drive up the
cost of wages in the economy as a whole, at a time when American
capital is trying to become even leaner and meaner.
    The position of the political right is that if health care
insurance were individually-based (rather than
employer-mandated) consumers would purchase less and cheaper insurance,
simply out of economic necessity. In a purely market-driven system, the
costs of health insurance would not fall on employers, the cost of
wages would be lower, and U.S. exports would be more competitive.17 The
right also believes that an individually-based system would provide
incentives to the health care industry to become more efficient -- as
consumers shop around for the best cheap plan (as many shoppers seek
out the best cheap housing or clothing).
    The right has tried in the past without success to get its
brand of health care reform into law. There is no reason to
believe that "conservatives" will have better luck this time around.
Liberals and the left have no chance of passing their single payer
system. Nor can the original Clinton plan, as originally constructed,
win anything like a majority in Congress. In late March, Congressional
Democrat Pete Stark's compromise proposal seemed to have the best
prospects.18 Clinton himself said at a press conference on March 24th
that he would not veto the Stark plan, assuming Congress enacted it (a
highly dubious proposition given the opposition of Congressional
centrists and right wingers).
    In the final analysis, as with all consequential Federal
domestic policy, neither capital nor labor, right nor left,
will get what they want. Neither will big and small business, health
insurers and physicians, nor workers with good insurance and those with
no or poor insurance. When all the compromises are hammered out and
deals are made, the Clinton government will have little more (if any)
political legitimacy than it now enjoys and capital will still have to
pay relatively high insurance premiums for worker health benefits.
Unlike its main rivals, Japan and Germany, the U.S. political class is
incapable of developing a socio-economic policy based on its perceived
idea of the interests of capital as a whole. American individualism,
interest group pluralism, and plain political and economic stupidity
will sabotage any systematic effort to install good universal coverage
or to reduce the cost of wages19 -- and the present political, social,
and economic crisis of American capitalism will deepen.  
							(April 1, 1994)

* I am grateful to M. Edith Rasell, MD of the Economic Policy Institute
for her criticisms of an earlier version of this article.  

1A deep analysis of the rise of health care spending would focus on the
economic and social causes of disease, illness, etc., and of the ways
that they are treated, and the increasingly capitalistic structure of
the health care industry.  None of the reforms proposed in the late
winter and spring of 1994 addressed the social causes of health,
disease, and death, except in so far as personal behavior puts
individuals at risk. But even smoking, bad diets, and lack of exercise
have social, as well as individual, causes. The most radical reform
proposal, the single payer bill, is largely silent on the production of
health and disease, accidents, and the rest (although both the single
payer and Clinton plans do call for some reallocation of resources in
favor of preventative care).  Single payer proponents seem to be
concerned less with producing more health per se than with improving
and equalizing access to health care by providing good comprehensive
insurance coverage to everyone.  

2According to a study by demographer
David Hayes-Bautista, cited by Roberto Rodriguez and Patrisia Gonzales,
Health Cares Big Losers, San Francisco Chronicle, March 31, 1994.  

3Any health care reform worthy of the name, therefore, would massively
reallocate diagnostic and other technologies, personnel, and other
resources to the ghettos and barrios of American cities and towns, and
to districts that are the homes of the working and non-working poor.

4The latter statistic is courtesy of Dr. Rasell, who also noted
(communication, March 2, 1994) that Medicare rates are below the actual
cost of services, which (in my opinion) means that government (i.e.,
taxpayer) subsidies to the elderly and poor are less than they would be
if Medicare and Medicaid paid for full costs.  

5Such a reorganization,
for example, would result in greater subsidies from workers with good
insurance packages to those without insurance as well as greater
out-of-pocket expenditures by the former. According to Governor Mario
Cuomo, the Clinton plan would force public workers in New York to join
state health care alliances (giant purchasing cooperatives), which
would almost certainly offer fewer benefits and require higher premiums
that these workers presently receive and pay (New York Times, March 7,
1994). Thus, while workers and others presently without good health
insurance politically support Clintons reforms (or the single payer
plan), more public employees and others with good insurance do not. The
problem of legitimation is thus displaced to those in the work force
with health insurance that they are presently happy with, namely, most
wage and salary earners.  

6For definitions of social consumption and
social expenses, see James OConnor, The Fiscal Crisis of the State (New
York: St. Martins Press, 1973), Chapters Five and Six.  

7The
alternative view of Dr. Pasell and others is that the inefficiency of
the present health care system can be turned into a plus in the sense
that financial and organizational rationalization would reduce the
contradiction between the legitimation needs and accumulation
imperatives to manageable proportions.  For example, Dr. Pasell writes
that up to one-third of medical tests and procedures may be unnecessary
(Pasell, op. cit.). This argument may have much or little merit,
depending on how one interprets unnecessary. In any case, its validity
would seem to depend on evidence that inefficiencies have increased
fast enough over time to explain most of the rise in total health care
spending.
	There is no doubt that if doctors incomes were reduced,
	administrative waste eliminated, malpractice insurance
reformed, duplication of facilities done away with, monopoly power in
the health care sector broken up, and so on, and if thousands of
non-profit community health care centers were heavily subsidized by the
government, huge sums of money could be saved (exactly how much, no one
can know). But these are big ifs given that the politics of the
capitalist health care industry cannot be separated from its economics.
The view presented here that quality improvements are arguably the key
factor driving up health care spending presupposes the current politics
and economics of the system. However, if all the inefficiencies you
list were eliminated (which I regard as totally unrealistic given the
nature of U.S. economy and society), I think I would change my tune
(Communication to Dr. Pasell, March 15, 1994).  

8A simple model of an
export-driven economy is that the rate of accumulation in the home
country depends on the rate of growth of its export surpluses with
other countries (i.e., import surpluses in other countries). The
latter, in turn, depend on the rate of growth of credit money available
to finance import surpluses. This includes the inflow of foreign
capital. For example, the export- driven Japanese economy in the 1970s
and 1980s depended on the rapid growth of consumer, business, and
Federal government credit in the U.S., which ran large import surpluses
during this period. These import surpluses were financed by a
combination of Japanese loans and the rapid expansion of domestic
credit.  

9When the Japanese shifted from a more balanced economy to an
export-led economy during the mid-and-late 1970s, labor was
continuously intensified, despite low unit labor costs.  

10Therefore,
whatever health care reform Congress ultimately enacts, it is likely
that the demand for health care services will rise faster than
increases in their supply  with the effect of raising prices in the
industry and building up more pressure for price controls in the
future. Inflation in the industry will be intensified to the degree
that reforms give more people access to better care, given that the
supply of doctors, diagnostic machinery, etc., is relatively inelastic.
Price inflation will be mitigated by the fact that there is significant
excess supply of hospital beds and equipment in the industry; however,
excess supply is to some unknown degree a problem of inequitable or
irrational distribution of health care capacity.  

11According to Robert
Winters, Chairman and CEO of Prudential Life Insurance Company, managed
care plans cost employers $700 less per worker than fee-for-service
plans in which individuals are completely free to choose (and change)
doctors, get second opinions, and so on. I note that Dr. Pasell
disagrees with this judgement.  

12Only 15.5 million people are enrolled
in true HMOs today. It needs to be added that definitions of what HMOs
in fact are widely differ; e.g., The Group Health Association of
America, a trade group for HMOs, claims to have enrolled 45 million
people. The managed health plans that enroll 90 million Americans
(noted above) are thus defined in much looser terms.  

13Amitai Etzione,
How to Transform Society: The Health Care Example, Tikkun, 8, 6, 1994,
p. 14. The same note is sounded in Victor Fuchs The Future of Health
Policy (Cambridge: Harvard University Press, 1993).
	Few if any observers have pointed out that a contradiction
	exists not only between universal, comprehensive coverage, on
the one hand, and cost reduction, on the other (broadly speaking,
between labor and capital), but also between individual capitals (e.g.,
drug manufacturers) and States (or regions) (e.g., New York) and
capital as a whole. For example, expanding family medicine at the
expense of New Yorks teaching hospitals would reduce employment in the
hospital industry, negatively impacting New Yorks economy. The Clinton
plan was designed to reduce the cost of wages (capital) as a whole.
Hence, at the start of his reform campaign, he attacked those fractions
of capital with a big stake in the health care industry which were
reluctant to go along with his plan. This strategy backfired when
special interests came out against his reforms. Subsequently, Clinton
lowered the sound level of his anti-special interest rhetoric.  

14Dr.  Rasell argues that, since health care costs are paid by workers through
lower wages, cost containment may have the effect of increasing wages.
However,  health insurance costs are also shifted to consumers (which
is one reason why Clinton wants to reform the system, as higher
consumer prices adversely affect exports). Some costs are also
absorbed by business. Perhaps more importantly, with current loose
labor markets and weak unions, it is unlikely that workers will benefit
in the form of higher money wages if health insurance costs business
less money.  

15Milton Freudenheim, The Drug Makers are Listening to
Prozac, New York Times, January 4, 1994.  

16Another reason for this is
the estimated $75 billion tax subsidy for employer- paid health care,
which means that consumers have less incentive to choose cost-effective
health plans.  

17The right plays down the fact that employers shift
much or most of the health insurance costs to consumers. The
conservatives plan also contains its own contradictions. One is that
because consumers would purchase poorer quality insurance, the rate of
growth of innovation in the health care industry would slow down, which
would adversely affect profits and exports. Another is that, as a salve
to their conscience, the right would subsidize those too poor to buy
insurance, thus undermining the formers philosophy of responsibility,
perhaps even inadvertently opening the way for new demands for
subsidized housing and so on.  

18The bill reported out of Starks House
health subcommittee in late March would provide a smaller benefits
package, replace Clintons compulsory alliances with voluntary health
purchasing cooperatives, and double the population covered by Medicare
(low-wage workers and the poor). Costs would be controlled by a
national limit on health care spending (as under Clintons plan) and
also by Medicare, which would enforce controls on prices that it would
pay for hospital and doctors fees and drugs.  

19James OConnor,
Accumulation Crisis (Oxford: Basil Blackwell, 1983), Chapter Seven.