Begin with "the market." When you come down to it, Galbraith explains, "the market" is a fiction. In theory, "it is the broker, the means of detached and dispassionate interaction between parties with opposed interests. . . . Buyers want a low price, sellers wants a high price. The market works out the price that exactly balances these desires, a price that is fair because it is the market price." Even liberals believe in this mythy "market"--a higher intelligence that hovers over transactions ensuring that, as long as you let "the market" work its magic, everything will work out for the best

Yet who dares to say there is no wizard behind the curtain? "Can anyone in modern American politics . . . deny [the market's] existence, or even its relevance?" Galbraith asks. "To do so would be political suicide--precisely like denying the existence of God." The best that a liberal economist can do is to "hedge and qualify, at the margins." One can say that the market "may be imperfect, that under certain conditions it may fail."

Meanwhile, take a look at the last quarter-century of this country's economic history, and you have to acknowledge that Reality offers what Galbraith calls "an overwhelming critique of the very concept of the market."

Supposedly, the consumer stands at the very center of the market, and supply responds to his demands. With, of course, certain exceptions. Such as Detroit, where, for some reason, the consumer's plea for affordable, safe automobiles has fallen on stone-deaf ears. Or the pharmaceutical industry which, for reasons of its own, persists in turning out newer, better allergy medications when what we would really like, please, is something that might delay the onset of Alzheimer's. But Alzheimer's research is expensive. Moreover, there is a saying in the drug industry: "a pill that cures is good; a pill that you take every day is better."

To be fair, consumers embraced the mammoth, exorbitantly expensive, gas-guzzling cars that 'the market," in its wisdom, offered us--even after we learned that sometimes these cumbersome vehicles tip over.. Maybe we didn't "demand" the SUV, but when Detroit told us that this is the vehicle we needed to feel safe, affluent, and well--above it all--we lined up. And we keep on buying the allergy medications, paying more for them each year (even though medical research shows that half of all Americans who take these pills do not suffer from allergies.)

Supposedly, consumers hold sway over the market because they are savvy shoppers. They refuse to overpay. They always wait until competitors come in and drive prices down. They insist on quality--and results. They learn from the past, and remember what they learned. In short, as Galbraith puts, it market enthusiasts believe that "economic man is a machine to whom whimsy and evolution are unknown."
But "in practice," Galbraith observes, "man is inconsistent; changeable; sometimes, though not consistently, irrational; his judgment biased and distorted and influenced by his peers."

The bull market of the 1990s proved just how irrational humans can be. Ignoring every sign that the market was over-priced--from spiraling price-earnings ratios to a Fed chairman talking about "irrational exuberance"-- investors piled on, buying companies that, in some cases, didn't even have a product. Thenm when technology stocks began to dive, many individual investors kept on buying, like gamblers who believe that if they just stay long enough in the casino, their luck will turn.

At the height of the frenzy, supposedly sober journalists talked about how stratospheric stock prices represented "the collective judgment of millions of people around the world." The New York Times' Thomas Friedman celebrated the democratization of the financial world: "One dollar, one vote." The market, Friedman declared, had "turned the whole world into a parliamentary system . . . [whose citizens] vote every hour, of every day, through their mutual funds, their pension funds, their brokers and more and more, from their own basements via the Internet."

The metaphor fueled faith in "the wisdom of the market." Who could question prices set by millions of voters? According to the received wisdom, in 1999 AOL was worth 305 times its previous earnings, while IBM was fairly valued at 28 times earnings, because more people had voted for AOL.

If investors actually picked stocks while seated in sealed voting booths, one voter might be able to correct for another's mistakes. But people who buy stocks are social creatures, and be they pros or fledgling 401(k) investors, they are influenced en masse, by the spirit of the times.

In short, they talk to each other. Galbraith explains: "modern behavioral economics has begun . . . to show that the actual behavior of presumptively competent people" does not "correspond to the predictions of rationalist theory." Whether they are picking stocks or deciding to buy a car, "ordinary, intelligent people appear consistently unwilling, or unable, to calculate the consequences of their decisions in a manner predicted by the view that they are responding purely to the market. Instead, they act as social beings, concerned about their standing with their peers, about the fairness of the deal they are being offered, and other matters quite irrelevant to the utility of the object or money on offer."

There goes another piece of conventional wisdom : "The wisdom of crowds," it turns out, is just a catchy title for a book.

For, as every Wall Street veteran knows, in our competitive free markets, stocks, (and other products) are not "bought" they are "sold."

"In the real world," Galbraith writes, "the autonomous individual is not the active agent who matters most. . . Advertising is propaganda . . . and markets are controlled by large organizations that have the capacity to decide what will be produced (i.e. SUVs); "the capacity to adjust the presentation of such products to what research and experience indicate the public will actually buy" (i.e. allergy medications) and "the capacity to influence the public's buying preferences through advertising."

But what about the consumer's "freedom" in a free market--our freedom to say "yes" or "no"? Galbraith explains that we are "free to choose only among a menu of items set out for sale." Large corporations with "substantial political power" have control over "the design of products . . . the pricing and the distribution" and "the planned obsolescence" of those products. Galbraith explains: "The freedom to shop is, for the rest of us, an incident to this freedom."

Finally, of course, our freedom to shop is constrained by how wealthy we are. Whenever anyone, liberal or conservative, talks about the importance of Choice in a free market, and how Americans like to be able to Choose from a menu--beware. This is especially true if they are talking about something important, such as health care or education.

Too often, "choice" means that we are "free to choose"--in fact forced to choose--what we can afford. When it comes to health-care "menu" is code for a tiered system If you are middle-class, even if you are upper-middle-class, you may find that reformers who promise "universal coverage" are, in fact, offering an array of "choices to fit every pocketbook." And unless you happen to be perched on the top step of a five-step economic ladder, you may well discover that the only insurance policy that fits your purse really shouldn't be called "insurance." Either the co-pays and deductibles are so high that you can't afford to use it--or when you do use it, you'll be told that the treatment you most need isn't "covered." So-called "Swiss cheese" policies are filled wiht holes that open, like trap doors, when you most need protection.

As for education, Galbraith notes "he concept of a freedom to shop has been extended insidiously . . . into the realm of careers where it plays even greater havoc with the normal use of words. In a 'free' capitalist society with private schools and universities free to admit whom they please and charge what the market will bear, the freedom to choose one's profession becomes, in part, the freedom to become what one can afford to become."

Does Galbraith have a solution? Yes. The rule of law. This is why we have government--to pass laws and regulations, and to enforce them, with an eye to the public good. The predator state is a state of anarchy where lobbyists have persuaded Congress that they own government.

But all of the campaign contributions in the world will not help a legislator if his constituency has decided that he doesn't deserve to remain in office. Lobbyists don't yet own our government. Voters still have power. They just need to remember what the world was like before 1980. It wasn't perfect. But it wasn't ruled by predators, either..
.

Reading about the battle, I couldn't help but think that HHS Secretary Mike Leavitt may be correct when he suggests that Medicare reform could require "a degree of bipartisan statesmanship" that a highly polarized Congress just doesn't posses. Health Care reform may be too hot to handle. Perhaps Congress should delegate the job to someone else.

The legislation at hand could have serious consequences for Medicare recipients The 10.6 percent hit is only the first in a series of planned cuts Medicare is scheduled to slice doctors' fees by another 5 percent January 1, 2009. Some physicians have threatened that they will stop taking Medicare patients

And the truth is that, in the face of a 15 per cent cut many primary care physicians might well decide to retire early. As I've explained in the past, primary care physicians, family doctors, gerontologists, and palliative care physicians who practice "thinking medicine" (listening to and talking to the patient) are not well-paid.

Yet, these are the very doctors who seniors need to co-ordinate their care.

Who to Cut: Physicians or Insurers?

At the same time, Medicare does needs to find a way to save money. It cannot keep shifting costs to seniors. A Nov/Dec 2007 article in Health Affairs reveals that between 1997 and 2003, the average Medicare beneficiary watched his out-of-pocket spending climb by 50 percent while median income for seniors rose by only 15 percent. By 2003 the average beneficiary was spending 15.5 percent of his or her income on health care--and 25 percent of beneficiaries were forced to lay out nearly 30 percent of their Social Security and other income to pay health care bills.

This is no longer your grandmother's Medicare. Yet Medicare is being as generous as it can be. The fact is that the program's financial outlook is "shaky" according to the Medicare Payment Advisory Committee's March 2008 report.

For example, MedPac notes, "expenditures for the Hospital Insurance (HI) trust fund, which funds inpatient stays and other post-acute care, began to exceed its annual income from taxes in 2004. Since then, HI has remained solvent due to existing trust fund balances and interest income--but the fund is projected to be exhausted in 2019."

Overall, MedPac reports, "The Medicare trustees and others warn of a serious mismatch between the benefits and payments the program currently provides and the financial resources available for the future."

Concerned, progressive legislators recognize the need to trim waste in the Medicare system. But rather than slashing physicians' fees, they would rather raise the money Medicare needs another way--by bringing an end to the private fee-for-service version of Medicare Advantage by 2011. This is what the House voted to do, 355 to 59. According to the Washington Post, the legislation could result in $14 billion less for insurers over five years, though an estimate by a conservative House Republican caucus put the tally at $47.5 billion over 11 years.

As you may remember, when Congress originally voted to let private insurers offer Medicare through a program called "Medicare Advantage," it agreed to pay insurers a huge premium --13 percent more than traditional Medicare lays out to provide care for similar seniors.

Then as the program unfolded, some insurers began setting up private fee-for-service (PFFS) versions of Medicare Advantage that do not rely on provider networks and are even more expensive, costing Medicare 17 percent more than it would spend if it provided the care directly.

In December, I wrote about these fee-for-service Medicare Advantage programs, explaining that they are not providing the quality of care that the Medicare Payment Advisory Commission (MedPac) had envisioned. When the panel reviewed data on quality, MedPAC Commissioner Jack C. Ebeler called it "disappointing."

"I'm struggling to get to 'disappointed" said MedPac chairman Glen Hackbarth. "I'm more depressed."

The problem is that while the fee-for-service Medicare advantage plans are becoming more popular than plans that use networks, doctors providing the services are not co-ordinating care. "I feel like we're going backward,'" said Hackbarth.

"Since PFFS was only supposed to be a transitional product to real network plans when it was first created in 2003, it's hardly seems unreasonable," to suggest that insurers phase it out by 2011, Laszewski observes.

But insurers didn't see it that way. Nor did President Bush, who made it clear that he would veto any legislation that squeezed insurers.

In response, the progressive Senators caved, and the Senate Finance Committee worked out a bi-partisan compromise that would freeze 2009 physicians payments and forget about making any changes to Medicare Advantage. "Everyone was ready to be happy with that--Democrats and Republicans--and go home for the week-long holiday recess," reported Robert Laszewski , one of the most astute observers of health care politics in Washington, on Health Care Policy and Market Place Review .

The End of a Bi-Partisan Compromise

Until last Tuesday, when the Senate saw the House vote 355 to 59 to save the physicians, and throw the insurers under the bus. Many thought this could never happen.

After all, Medicare Advantage insurers have been very successful in marketing their plans--even if they're not as good at delivering the promised care. By signing up so many seniors, they created a strong group with a vested interested in giving the insurers as much money as they demand. In the past, Laszewski observes, people often asked him: "'Would Congress really cut private Medicare with almost 10 million seniors in it?"

Last week-end, he offered his reply: "355-59--any other questions?"

Even the AARP is backing the docs, Laszewki notes, "giving members political cover with seniors to vote against the private Medicare plans.

Astonished by the landslide in the House, Senate Majority Leader Reid and the Senate Democrats decided to shelve the bipartisan compromise and bring the bill that had just passed the House to the Senate.

Late Thursday night they did just that and missed getting the necessary 60 votes by only one Senator.

This led to what Laszewski describes as "a very undignified scene on the Senate floor . . . Republicans felt betrayed," he explains, "thinking they had an amicable deal to get past the cuts and go home."

The Washington Post provides some of the gory details: "The roll call vote was held open for an additional 25 minutes so Sens. Barack Obama (D-Ill.) and Hillary Rodham Clinton (D-N.Y.) could make it to the chamber from their fundraiser at the Mayflower Hotel.

"Sen. Jim Bunning (R-Ky.) grew irritated about waiting for Clinton, the last to arrive, and called for 'regular order' to shut down the vote. That led to a shouting match with Sen. Robert C. Byrd (D-W.Va.), who yelled 'Who are you?' and mockingly called his colleague a 'great baseball man.'

"Bunning, a Hall of Fame pitcher in the 1950s and 1960s, shouted back that he has the same rights on the floor as Byrd, the longest-serving senator in history and the chamber's leading parliamentary expert. The exchange ended with Byrd loudly laughing . . 'That display last night on the floor is something I've never seen,' said Sen. Arlen Specter (R-Pa.)."

This is Probably Not How You Achieve Meaningful Reform

This is the sort of behavior--on both sides of the aisle-- that makes one wonder how legislators will ever manage to pass serious health care reform.

Let me be clear: what happened last week had less to do with health care policy (my main interest), than with partisan politics (which could ruin any chance of achieving true reform by sidetracking discussions.) There is a real danger than rather than focusing on what would be the best public policy legislators will become caught up in political strategy--i.e. how do we score points?

Granted, I don't expect bi-partisan compromise will come easily or quickly--not if we want serious reform that provides equitable, high quality, sustainable care for everyone.

Compare the current climate to the somewhat easier situation that the Clintons faced in 1993. Back then, compromise seemed possible. Keep in mind, 23 Republicans, including then-Minority Leader Robert Dole, co-sponsored a bill introduced by Senator John Chafee that sought to achieve universal coverage through a mandate that would require that all individuals buy insurance.

Today, by contrast, progressives and conservatives are so polarized on the issue that anyone who talks about "bipartisan compromise" is talking about health care "reform" in name only.

Perhaps those willing to sell out the middle-class could cobble together legislation that gives every American access to a piece of paper called "health insurance." But this would not mean that they had access to "health care." In some cases, exorbitant deductibles and co-pays would make the insurance too expensive for median-income Americans to use. In other cases "Swiss cheese" policies would be filled with holes that open, like trap doors, when the customer becomes sick.

Recently, I heard UCSF political scientist Jacob Hacker say that if we are going to have meaningful reform, conservatives will have to be "dragged kicking and screaming" into the plan. I agree.

This is why I believe that, before we strive for national health reform, we may need to overhaul Medicare. Medicare gives us a manageable project that everyone in Congress knows is necessary--Medicare is running out of money.

Even lobbyists can be held at bay if legislators stand firm, insisting that neither taxpayers nor the elderly can afford to continue to be gouged by drug-makers, device-makers and those health care providers who over-medicate and over-treat elderly patients.

Politics Trumps Policy

In this case, Senate liberals should have not compromised in the first place. They should have stuck to their guns, and insisted on cutting the corporate welfare that Medicare Advantage insurers are receiving. Medicare cannot afford it. And, as the House vote shows, many independents and conservatives understand that the windfall is unwarranted. Medicare is not getting good value for its dollars.

But the Democratic Senators didn't stand on principle. It was only when they saw an opportunity to embarrass the Republicans that they did a 180-degree turn: "Compromise? What compromise?"

As Laszewski explains, the Senate Democrats set the compromise aside because "they saw a huge election-year opportunity--stick the Republicans out on a limb and start sawing it off."

Republicans are left with a politically unpalatable choice: either vote against their party's sitting president--or vote against the doctors and the AARP. For legislators who will be up for re-election in November, this is a lose/lose proposition

"At one point during Thursday's debate," the Washington Post reports, Senate Majority Leader "Reid literally hopped around the chamber, predicting Democrats would hold 'at least' 59 Senate seats next year because Republicans toed Bush's line.

"'I don't know how many people are up here for reelection, but I am watching a few of them pretty closely,'" Reid said, staring at the GOP side of the chamber. "'I say to all those people who are up for reelection: If you think you can go home and say, 'I voted no because this weak president, the weakest political standing since they have done polling, I voted because I was afraid to override his veto' -- come on.'"

Friday, Congress left town for its recess, and the Bush administration did the only thing it could do. Mike Leavitt, Secretary of the Department of Health and Human Services, announced a reprieve for the thousands of doctors expecting to be hit tomorrow with a 10.6 percent cut in Medicare payments. The freeze is scheduled to last 10 days. This will give Congress three days to resolve the matter when it returns on July 7.

Maybe Congress Should Hand the Job Over to Someone Else?

This brings me to the head-turning suggestion that HHS Secretary Leavitt recently made on his blog: (http://secretarysblog.hhs.gov/ )

Making it clear that he expressing his own views, not those of the administration, Leavitt wrote: "In our country we maintain special facilities called 'Level Four Laboratories' for handling lethal biologic agents. It would be unreasonable to expect anyone to handle lethal bio-agents without special protection.

"To members of Congress, fixing entitlements like Medicare is lethal. Persuading them to accept the inherent risks will require a system of special political protection. Without it, Congress is unlikely to ever deal directly with Medicare's problems."

Leavitt goes on to propose that: "In an era where Election Day marks the beginning of the next campaign season, the degree of bipartisan statesmanship needed to solve the entitlement problem will be hard to come by . . ..

"What if leaders of both parties in Congress met privately and acknowledged that while they could not agree on how to fix Medicare, they could agree that the approaching Medicare insolvency has to be dealt with. Both would likely be motivated by an understanding that it was in their party's long-term interest because solving such a problem would be especially costly in political terms to the party in power at the time the dilemma matures."

Leavitt suggests that Congressional leaders might agree on legislation "that would establish measurable trigger points for action. For example, if Medicare currently constitutes 3.2% of GDP, when the government actuary declares Medicare expenditures to have exceeded 4% of the GDP, a special decision-making process would be triggered.

"The special process could resemble the one Congress has used successfully for military base closure," he suggests. "A special bipartisan committee was established to assemble a proposal. The proposed plan is submitted to the President for review. Within a time certain, the President is required to approve or disapprove the entire plan. Once the President approved a plan, it was submitted to Congress, where they could not amend the proposal, but were forced to vote the proposal up or down within a specific time frame. It worked."

You know, it's not a bad idea. There are many details to be worked out, of course. But the truth is, we have a model for such a panel: the Medicare Payment Advisory Commission. But MedPac can only make recommendations. It can't force anyone to implement them. What we need, as someone in Washington said recently, is MedPac with teeth.

Meanwhile, a new Commonwealth Fund Report shows that while two-thirds of low-income adults (earning less than 200 percent of the federal poverty threshold) were uninsured or underinsured in 2006, just 17 percent of those earning more than 200 percent of the federal poverty level (FPL) were either underinsured or uninsured at some point during the year.

In other words, the people with political clout are pretty well covered.

 The fact that 83 percent of those earning more than 200 percent of the FPL are well insured explains why polls show 80 percent of Americans saying  they are happy with their health insurance—and, by and large, don’t want to see it changed.  This is why they are afraid of single payer plans; they don’t want to be forced into something new.Of course, their insurance may not be as good as they think it is, but as long as they don’t become seriously ill, they won’t know that there are gaps in their coverage. And most of the time, most middle and upper-middle-class people are not seriously ill.

Meanwhile, low-income workers don’t have enough political power to push Congress to stand up to the lobbyists who will fight national health reform tooth and nail.

Here, then, is the crucial question: how many middle-class and upper-middle-class Americans will join the ranks of the uninsured or seriously underinsured between now and 2009? If you believe, as I do, that we’re heading into a serious recession, a fair number could lose their benefits. But will it be enough to reach a tipping point? 

This is why I think that the next president should have a back-up plan for his or her first term. True national health reform will have powerful enemies.  For, as defined by the progressive candidates with the most detailed plans (Clinton and Edwards), creating a sustainable, affordable, high quality health care system for all will require:

 ·         tightly regulating private insurers while forcing them to compete, on a level playing field, with public sector insurance (something like Medicare for all),  and then letting Americans choose whether they want to keep private insurance or sign up for the government plan

If the votes aren’t there to accomplish this goal, too much compromise could be disastrous.

This is the problem with Obama’s approach to health care. He thinks he can sit down with the for-profit companies that have a financial stake in preserving the status quo, and persuade them to give up a fair share of their profits.

 That won’t happen. Drug-makers and device-makers will not willingly slash prices. For years, their shareholders have enjoyed double-digit earnings growth and companies that don’t deliver will watch their share price plummet. The executives sitting at the table with Obama own millions of those shares.

Meanwhile, the best-paid specialists are not going to be happy about proposals that we cut into their income stream by eliminating the kickbacks (in the form of consulting fees) that they receive from drug and device makers--while raising the fees that we pay for primary care. Yet that’s what we need to do.

 Our nation’s healthcare bill is spiraling by more than six percent a year—two or three times as fast as incomes are growing. The reason it is climbing so fast is because we pay too much for everything, and because we do too many unnecessary, and often unproven tests and procedures.

 Private insurers are only part of the problem. Even if we eliminated the private insurance industry and moved to single payor tomorrow, the amount that we pay private insurers to cover their advertising, marketing, exorbitant executive salaries, underwriting, and other administrative costs plus profits for their shareholders represents only 4 ½ percent of our national health care bill. In other words, just one year of rising health care prices would wipe out the savings that we would realize by moving to single payor.  (Granted, we would also cut administrative costs for doctors and hospitals that would no longer have to fill out thirty different forms for thirty different insurers, but as the price of healthcare continues to skyrocket even that savings would disappear very quickly.)

The bottom line is that unless legislators are willing to stand up to the lobbyists and put a brake on health care spending, we simply won’t have enough money to subsidize universal coverage.   We’ll end up where Massachusetts is today: offering insurance that is too expensive for many—and/or fails to provide adequate coverage.

There is no point in pretending we have national health insurance if we let insurers sell “Swiss Cheese” policies (filled with holes) to the middle class. And if we don’t rein in the cost of over-priced drug, devices and treatments, tax-payers will not be able to afford the subsidies that low-income and middle-income Americans will need in order to buy full coverage.

This is what has happened in Massachusetts—which I’ve written about here and here on www.healthbeatblog.org. And Massachusetts is much wealthier than many states.

 This is  why I think the next president should have a back-up plan for his or her first term. If he or she doesn’t have the votes for full reform, overhauling Medicare would be an outstanding first step, paving the way for national health insurance in his or her second term.

 We need a good model for national health insurance and Medicare could serve as a prototype—if we cut the waste.

Right now Medicare is too expensive because it’s paying for so many unnecessary, unproven and over-priced tests, drugs and treatments. Even though Medicare keeps hiking co-pays and deductibles, it’s headed for serious financial trouble.

But there is a blueprint for reform.  The Medicare Payment Advisory Commission (MedPac), an independent committee composed of intelligent, well-informed people, has made excellent suggestions which include: pursuing comparative effectiveness research; encouraging primary care by raising fees for family doctors and  other generalists; lowering fees for some specialists; moving away from paying health care providers “fee-for-service” (which encourages overtreatment) and refusing to cover products and services unless we have medical evidence that they are effective. (See www.medpac.gov ).

Both Clinton and Edwards have incorporated many of their recommendations into their health care proposals. If either one is elected I suspect that, at the very least, they will begin trying to implement some of these suggestions as they lay the groundwork for full scale national health reform.

 Make no mistake: I’m not giving up on national health reform in the next president’s first term. Everything will depend on how many votes a reform-minded president has in Congress—which in turn will depend on how many voters are pushing, and pushing hard, for change. But I'm afraid that things will get better only if, first, they get worse.  

New York Times columnist Paul Krugman stirred controversy Friday by defending Edwards, and criticizing Barack Obama: “Under Obama’s health care plan, healthy people could choose not to buy insurance—then sign up for it if they developed health problems later,” Krugman observed. “As a result, people who did the right thing and bought insurance when they were healthy would end up subsidizing those who didn’t sign up for insurance until or unless they needed medical care.”

On Sunday former FCC Commissioner Reed Hundt called Krugman out  here on TPM Cafe in a post headlined “Ease up, Dr. Krugman.” According to Hundt: “The very idea of government mandates directed to individuals evokes a command-and-control model that disturbs citizens who want to enjoy certain freedoms in choosing health care.”  His post (below) is drawing many comments--some on point, some muddying the waters.

Begin with one of the most serious inequities in our current system. Today, laws in many states, including California, allow insurance companies to refuse to cover anyone applying for an individual policy who suffers from a “pre-existing condition”--including common conditions such as asthma or pregnancy. As a result, if a person loses her group coverage—either because she changes jobs or because her employer no longer offers health benefits—and then discovers that she’s pregnant, she may find that she is uninsurable.

Moreover, even if you manage to secure coverage, in many states the insurer can jack up your premiums if you become sick and actually begin using your policy. A small business also may find itself penalized if one or more of its employees become seriously ill; in some cases employers have had to cancel insurance for the entire group because they couldn’t afford spiraling premiums.  

In addition, the Los Angeles Times reports (see a 1/08/07 story by Lisa Girion, available by subscription), in states like California private insurers can –and do—refuse to insure entire categories of workers who they deem “too risky” to cover, including roofers, pro athletes, dockworkers, migrant workers and firefighters , even if they are in good health and can afford coverage. The LA Times looked at confidential underwriting guidelines of three health plans: Blue Shield of California, PacifiCare Health Systems Inc. and Health Net Inc. which all said that “actuarially speaking,” certain workers pose too big a risk.

A last resort for people turned away by the private market is a state's high-risk pool, in which the state assumes the financial risk while paying private insurers to administer coverage. But in California, enrollees must lay out as much as one-third of their income on monthly premiums that cost up to $796 (see 12/21/06 story by Lisa Girion, also in the L.A. Times). Meanwhile, annual benefits are capped at just $75,000. If your child is diagnosed with cancer, it’s likely that you’ll run through that $75,000 in less than six months.  Then what do you do?

 In each case, insurers are penalizing people for being sick, or because it seems likely that they might be injured. Those who most need insurance are excluded.  It is one thing to raise car insurance premiums if a driver has a series of accidents (suggesting that he might well be a reckless driver). But most people become sick through no fault of their own, No matter how careful we are, unless we die in an accident, each of us is going to become seriously ill at some point in our lives. We just don’t know when. This is why we all need insurance.

To prevent insurers from shunning the sick, some states, including New York, have passed “community rating laws” which say that insurers must charge everyone in a given community the same price for the same policy, regardless of age or health status. Moreover, insurers are not allowed to hike rates because a business or an individual has made claims.

In states like New York, where community rating applies, no one is left out in the cold.  If an individual wants to apply for a new insurance policy, he does not have to report pre-existing conditions. But he does have to show that he was already insured with another carrier; you cannot just wait until you’re diagnosed and then decide you want coverage.

Insurance in New York is much more expensive than it is in California because the pool includes sick people who would have been excluded in California. (The percent of premiums that insurers pay out to provide care is roughly the same in both states. Insurers don’t make higher profits in New York. If anything, they prefer to operate in states like California where they can hope to avoid patients suffering from serious, debilitating diseases).

If you are young and healthy, you might prefer to live in a state like California, where insurance is cheaper—assuming you don’t mind living in a state where your mother can’t get insurance because she has had breast cancer and your best friend can’t afford insurance because she’s a diabetic.

Progressives believe-- rightly, I think-- that most of us don’t want to live in such a society.  So the three leading Democratic candidates, including Obama, are calling for community rating. Their proposals for reform offer citizens a choice between public sector insurance (that would be much like Medicare) and private sector insurance, and under their plans, both public and private insurers would abide by community rating, insuring everyone in the community, young or old, sick or healthy, at the same price. 

 And to make sure that everyone can afford the price, the government would offer subsidies, based on income. Thus, only upper-income twenty-somethings would wind up paying the full price. The subsidies are key. As The American Prospect’s Paul Starr points out:

“The secret power of the mandate is that it is as much a mandate on government as it is on individuals. It is a mandate on government to make coverage available and affordable. For it would be patently unacceptable to demand that people have coverage and then provide no practical way for many people to get it.” But the government (i.e. taxpayers) will be able to afford those subsidies only if the healthy and wealthy participate in the pool.

Why Insuring Everyone Means That Everyone Must Be Insured

If we want community rating, Edwards and Clinton realize that we also must mandate that everyone sign up. Otherwise, no one would buy insurance until they were sick or elderly; then they would enroll, secure in the knowledge that insurers had to cover them, and couldn’t charge them more.  Meanwhile, the insurance pool would be comprised mainly of people who are expensive to insure, and premiums would skyrocket.

Put simply, mandates are the flip side of community rating. If you want to say insurance must cover everyone—even if they are suffering from a slow, progressive disease like Parkinson’s—then you have to insist that everyone gets into the pool. This is the only way we can afford universal coverage. If you think about it, this is precisely what Medicare does: no one over 65 is excluded, but everyone—even the young and healthy-- must pay the same percentage of their paycheck in Medicare taxes.

In the end, Harvard economist David Cutler, Obama’s health care adviser, agrees that for national health reform to work, we will need to bring everyone in under the tent. But he says that, rather than forcing people to buy insurance, Obama believes “a better approach is to do everything possible to make it affordable and available. When it is, almost everyone will have it.”

 Will everyone sign up? Many young people look in the mirror and feel immortal. Meanwhile, young libertarians just don’t believe that they have a responsibility to help cover others. In Massachusetts, where there is no mandate, over 200,000 of the Commonwealth’s uninsured have refused to sign up. Roughly one-fifth of the refuseniks earn more than $50,000 a year; many are under 35, but choose not to buy coverage even although under the Massachusetts plan,  a 27-year-old can buy insurance for as little as $176 a month.

Cutler’s idealism is sincere. He, like Obama, would prefer to soft-sell reform. But it’s telling that, in the interview with Sentinel Effect last Friday. Cutler went on to acknowledge that: “If there are free riders [people who don’t sign up but expect to receive care if they’re in an accident], Obama is open to mandates.  . . . He hasn’t ruled anything out. It’s a matter of priorities. The fact is the policy differences on the mandate issue aren’t that large at all. Sen. Obama believes they’re an option down the road, if other approaches don’t work.”  [emphasis mine].

In other words it seems that Obama, like Edwards and Clinton, realizes that in the end mandates may well be needed. But right now, Obama is targeting younger voters, and this isn’t what they want to hear.Edwards, on the other hand, says he wants to be honest: “I’m going to tell people what I’m going to do and how I’m going to do it.”

 As a matter of political strategy, I would say that Edwards may be honest to a fault. It’s probably not necessary to talk about “enforcement” now.But if Americans want universal, affordable insurance, they need to understand that, to achieve that goal, everyone must help. Insurance, when it works, is all about spreading risks.

Still, when Edwards talks about enforcing the rule that everyone purchase insurance, people like Reed Hundt become anxious.  “Could an employer fire an employee for not adhering to a mandate?” he asks. “Could the police arrest those who fail by accident, confusion, or even negligence not to sign up? Could a hospital decline to treat those who did not comply with a mandate?”

The answer is ‘No.’ As Paul Krugman explains, “If individuals don’t have insurance, they won’t be penalized, they’ll be automatically enrolled in an insurance plan.  That’s actually a terrific idea,” he adds, “not only would it prevent people from gaming the system [by becoming “free riders”] it would have the side benefit of enrolling people who qualify for S-chip and other government programs, but don’t know it.

”How will the government know whether or not you have insurance?   At TNR, Johnathn Cohn has weighed in with a long discussion of just how many people Obama’s plan might leave uncovered—and suggests that one of Obama’s advisers has information showing that under Edwards’ plan, even more Americans would be left “going naked.”

 I don’t see how this could be the case.  Under Edwards’ plan, every time you come in contact with the government or a health care provider (filing income taxes, enrolling your children in a public school, showing up at an ER or a doctor’s office) you would be asked for your insurance policy number, just as you are routinely asked for your social security number. If you didn’t have one, your name and social security number would be typed into the system, automatically enrolling you in a public sector plan. 

Then, if your income is too high to qualify for a full subsidy, you would be billed for your fair share, either as part of the payroll tax you now pay for Social Security and Medicare, or ( if you are self-employed) through your income taxes. (There are, of course people who don’t earn a salary and don’t file income taxes, but the majority are very poor, and would qualify for the full subsidy anyway).

Forcing Americans to pay their share of health insurance may sound Draconian, but again, this is exactly what Medicare does, and very few people object. Yes, the tax takes a chunk out of their paychecks, but the vast majority feel secure knowing that when they are 65, they can count on receiving health care no matter how sick they are. And there is every reason to believe that a public sector program modeled on Medicare would be just as popular as Medicare itself.

Which brings me to Kevin Drum’s question. In Washington Monthly, he writes: “a Rube Goldberg enforcement program like [Edwards’] does nothing except highlight the absurdity of individual mandate healthcare plans in the first place. If you're really this serious about getting every man, woman, and child in the country enrolled, why go through all this? Why not just do it like Medicare, where the funding mechanism is the existing tax system and everyone is enrolled automatically? It amounts to the same thing and it's cheaper, easier, and less intrusive.”

There are four reasons: First, in the recession we’ll be facing in 2009,  it will be much harder to persuade Congress to pass a tax increase than it will be to persuade legislators that everyone should have  health insurance—just as we now require everyone to sign up for auto insurance.

The second reason is closely connected to the first: many of the taxpayers who elect those Congressmen don’t want to pay taxes into a single Medicare –for-all system. A 2007 poll shows that while 76 percent of Americans favor offering a government subsidized plan to Americans who don’t have employer-based insurance, only 26 percent favor paying more income taxes to expand either Medicare or Medicaid. Seventy-four percent are opposed.  In other words, just as in Massachusetts, everyone favors universal care, but the majority of voters do not want to pay higher taxes to support it. 

Moreover, as I’ve written recently on HealthBeat  the polls also reveal that 80 percent of Americans like the private insurance they have now—or at least they like it better than an unknown alternative. Their main worry is that they will not be able to afford what they have in the future.  They do not want to be told that we are all going to be funneled into a brand new government-funded Medicare-for-All System.  They want the choice of keeping the devil they know (i.e. their private-sector insurance).

Finally, in order to afford universal health care, we will have to be more careful about wasting health care dollars. This means that we can’t cover every pill or product that someone decides to advertise on TV. All three Democratic candidates have called for independent research comparing just how effective new products and procedures are when tested, head to head, with existing products. (This is something that we don’t do now. A new product can win FDA approval simply by showing that it is better than a placebo).

If we have only a public sector plan, everyone will blame “the government” or “socialized medicine” when they are told “No,” their insurance won’t cover the pink pill that is twice as expensive as existing products because medical research says it is no better.

 If we have both public sector and private sector insurance, private insurers will usually follow the public sector’s decisions about what the cover—if they don’t, private insurers will have a very hard time competing on price.  Thus, those who fear “socialized medicine” will begin to understand that even private insurers cannot cover every pill, product or procedure that comes down the pike—at whatever price the manufacturer chooses to charge. Premiums would be unaffordable.

 Over time, if private insurers are forced to compete with public sector insurance on a level playing field (which means that all insurers offer community rating and that all offer benefits that are, at a minimum, as rich and comprehensive as Medicare), I think that the majority of Americans will wind up picking the public sector plan.  The public sector plan should be able to offer better value for our health care dollars because it doesn’t have as many extra expenses: Medicare doesn’t have to return profits to investors; it doesn’t have to advertise and lobby Congress, and it doesn’t pay its executives the seven-digit salaries that for-profit insurers feel they must pay in order to compete with each other. 

 But right now, many Americans are nervous about health insurance. And they don’t trust government. They need time to decide whether they feel more comfortable with for-profit insurance or a public program. In the meantime, we need to ensure that everyone is covered, and that everyone helps weave the safety net. That’s why we need community rating and mandates. It’s all about solidarity.   

The Bloomberg piece on the dollar's decline begins by reminding us just how cavalier the U.S. was in 1971 when President Richard Nixon, in a stopgap move to cope with the inflationary financing of the Vietnam War, announced that the dollar would no longer be backed by gold: ``It may be our currency, but it's your problem'' was Treasury Secretary John Connally's taunt when the U.S. unhooked the dollar from the gold standard in 1971, unilaterally rewriting the rules of world business in America's favor.

Now Bloomberg notes, “the world is taunting back. Almost four decades after the U.S. tore up the monetary arrangements that governed the post-World War II international economy, the dollar's fall from grace amounts to a tectonic shift in the global hierarchy. This time, the U.S. currency is on the losing side.

 “After declining in five of the last six years, the weakest dollar in the era of floating currencies reflects a period of diminished U.S. political and economic hegemony. Whoever wins the White House next year will confront two unpopular choices: Accept the fall in U.S. clout and the rise of new rivals, or rein in record public and consumer debt that the rest of the world no longer wants to bankroll.”

Stepping back and surveying what has happened both at home and abroad in recent years, some observers doubt that the dollar will ever recover: “For the first time,” Bloomberg reports, “economists are raising the once-improbable specter that the dollar's monopoly as the world's dominant reserve currency is under threat. "'Part of the depreciation is permanent,’ Harvard University professor Kenneth Froot, who has been a consultant to the Fed, told Bloomberg:  `There is no doubt that the dollar must sink against periphery currencies to reflect their increase in competitiveness and productivity.’''

Meanwhile, for years, we have depended on foreigners to buy our dollars (by investing in Treasuries) in order to finance our trade deficits and a national debt of more than $9 trillion.  When other countries use their surpluses to buy Treasuries, they are lending us money at a very low rate. If they buy a 10-year U.S. Treasury Bond, we pay them just 4.5 percent.  Yet we need them to keep on buying those bonds: the U.S. still requires $2.1 billion a day of other people's money.

 But now even our allies are beginning to feel less confidence in the dollar as the world’s reserve currency, and  many are beginning to move away from the greenback.Consider what is happening in the Middle East: “Kuwait, freed by the U.S. from Saddam Hussein's army in 1991, unhinged its currency from the dollar in May, and pressure is building for Gulf Arab neighbors to follow suit.”  Bloomberg notes. “Qatar's prime minister, Sheikh Hamad bin Jasim bin Jaber al-Thani, complained Nov. 11 that the dollar's drop is cutting oil and gas income, leaving less to invest abroad. The United Arab Emirates may drop the dirham's peg to the dollar, analysts said.” Even “The central bank in Iraq, last month said it, too, wants to diversify reserves away from mostly dollars. “

As for countries that are less fond of us: Just five days ago, Iran and Venezuela proposed discussing an end to the practice of pricing crude in dollars at an Organization of Petroleum Exporting Countries summit in Riyadh, Saudi Arabia. Bloomberg reported that Saudi officials rejected the suggestion.

The Iranians were not happy. "'They get our oil and give us a worthless piece of paper,' complained. Iranian President Mahmoud Ahmadinejad on Nov 18 in Riyadh. 'The dollar has no economic value.’'' That day the dollar touched down at $1.4814 per Euro—a low for the dollar since the Euro was started in 1999.

Meanwhile, cash-rich countries like China—which has piled up the world’s largest stash of foreign currencies-- are looking for investments that pay more than the current 4.25 percent return on 10-year Treasury Bonds.   “A warning by Cheng Siwei, vice chairman of the National People's Congress, that China will invest its $1.4 trillion in stronger currencies triggered a recent stampede out of the dollar,” Bloomberg notes, quoting economists at UBS AG who say that China doesn’t have to dump dollars to depress the greenback. Accumulating dollars at a slower pace will have the same effect.

Finally, Bloomberg cites economists at Merrill Lynch & Co. estimating that as much as $1.2 trillion in dollar holdings will shift to other currencies in the next five years. ``The global reserve system is fraying; it's falling apart,'' Nobel-laureate economist Joseph Stiglitz told  a Bloomberg seminar last month in Tokyo. ``The change in mindset about the use of the dollar in reserves and the movement of the dollar out of reserves will continue to exert downward pressure.''

The flight away from the dollar is feeding on itself. This is a crisis that few presidential candidates want to talk about, but it is something that the next administration will be forced to address. 

I don't have an answer to the crisis, but I will say this: we will need an absolutely brilliant Fed Reserve chairman (something we haven't had in a very long time) and a team of financial advisors  in the White House capable of standing up to the various special interests that will have a financial stake in how the White House reponds to the crisis. 

 My own sense is that we are going to have to accept the fall of the dollar--and find ways to make sure that the rising price of oil, gasoline, food, and everything that WalMart imports doesn't put  more pressure on famlies living on the bottom half of our economic ladder.

P.S.--The good news, of course, is that a weaker dollar makes our products more enticing. A young friend who manages an American Eagle (clothing) store in a mall in Queens ( not too far from the airports) tells me that this week-end, tourists from abroad were buying suitcases at the mall, then coming to American Eagle. W

When they got to the check-out counter, they just opened their empty suitcases, and let the cashier fill them.. .

I’m no longer as optimistic as I was six months ago. Recently, I spoke at a Massachusetts Medical Society Forum where what I heard about the Massachusetts plan made my heart sink. While everyone in Massachusetts wants health care reform, no one wants to pay for it. Those who are receiving state subsidies to buy insurance are enthusiastic. But uninsured citizens earning more than 300% of the poverty level are expected to purchase their own insurance. The state hoped that 228,000 of its uninsured citizens would sign up; as of last month, just 15,000 had enrolled. Many have decided that they would rather pay the penalty than buy health insurance.

At the forum, Robert Blendon, professor of health policy and political analysis at Harvard’s Kennedy School of Government, talked about what Massachusetts’ experience might mean for the national health care debate: “Massachusetts is the canary in the coal mine,” Blendon, who is also a professor at Harvard’s School of Public Health, declared bluntly. “If it’s not breathing in 2009, people won’t go in that mine.” If the Massachusetts plan unravels, he suggested, Washington’s politicians will say “If they can’t do it in a liberal state like Massachusetts, how can we do it here?"

Last week, I decided to ask Blendon some follow-up questions: Just what would it take, politically, to achieve national health care reform sometime in the next two to four years? How many seats would reformers have to capture in Congress? Is this likely?

Some observers say that if a reform-minded president hopes to succeed, he or she will have to ram a plan through Congress sometime in 2009. But health care is complicated; wouldn’t it make more sense for a new administration to take its time and explain what it is doing to the public, while trying to create a sustainable, affordable, high quality health care system?

Finally, what are the biggest barriers to reform? If major change proves impossible, what more modest back-up plans should a new president have in mind? What other health care legislation could he or she hope to pass?

I went to Blendon with these questions because he has had extensive experience plumbing the Mind of the American Public while conducting polls for the Washington Post, the Henry J. Kaiser Family Foundation and Harvard. And what he has learned is that, beneath the seemingly uniform surface of the polls, “the public’s views on health care issues are often more complex and conflicted” than they appear.

Moreover, while some people have immersed themselves in the intricacies of health care policy, and others are well-versed in the intrigue of American politics, Blendon knows both--as his cross-appointment at the Kennedy School and the School of Public Health suggests. And when I heard him talk in Massachusetts, I was persuaded, even though what he was saying was not what I wanted to hear.

Blendon understands “the political process.” And he knows that it is not rational. Democracy is messy. Success depends on winning hearts as well as minds; an emotional appeal can trump the most logical argument. And unlike the legal process, there is no guarantee that the political process will resolve disputes or end in agreement.

When I talked to him this week, Blendon began by elaborating on why he believes that in 2009, any new administration will face a “poisonous” political climate, making compromise on health care difficult.

“Whether we decide to stick it out in Iraq, or whether we pull the troops out—which I think we will—we’re going to go through a very painful period, like the period that followed Vietnam. Rather than returning to domestic politics,” Blendon predicts that the country will be mired in a debate about “who lost the war. Whoever wins the White House, there will be a huge split in this country about how the war ended.”

In the best-case scenario this could lead to a search for an issue that we can agree on. Couldn’t healthcare be that issue? Maybe. “But if the debate over SCHIP is any model,” Blendon warns, “it shows that it is not easy to find compromises on these issues.”

If Democrats win the White House, they are committed to doing “something large,” Blendon observes. But even if they win, he says, they won’t have much time to forge a grand compromise. In an ideal world, reformers would spend the first year of a new administration studying the problem, educating the public, and forging alliances that lobbyists wouldn’t be able to fracture. In the past I have written about going slow, and doing it right.

But Blendon is convincing when he argues that “there is no relationship between how you would think, analytically, about health care reform and how the political process works. That first year you’ll have six to eight months to get something done. By the second year, legislators start to worry about getting re-elected” (which makes them exceedingly risk-adverse.)

During that six-to–eight-month window, a wily president should meet with the leaders of the major committees, Blendon advises, to see if, behind the scenes, they can begin to strike a bargain. “Reformers need to ask ‘what are the points that are absolutely critical to various interest groups if we want them to find reform acceptable?’ You want many people to feel that they have had a major say. Then they should develop a very general plan.”

“This is what Mitt Romney did when he forged a plan for Massachusetts,” Blendon points out. “This is what Johnson did with Medicare. Of course, Johnson had the advantage of having grown up in the Congress. He had a sense of everyone there, and what was most important to them. And Johnson was pragmatic.

”Reformers should forget about finding a perfect solution," Blendon warns. “The very best plan for reform would be polarizing. Every interest group would oppose it, and it would never pass. What reformers need to do is to decide which groups they can bargain with. In Massachusetts they decided they could make a deal with the insurers. But reformers will need to work quietly behind the scenes,” he argues, finding concessions they can live with—or fix later. In other words, the operation needs to be covert, and it needs to be quick.

The critical issue will be how many seats progressives are able to win in Congress, he adds. “If Democrats took a dozen seats in the Senate and 20 in the House, that could give them a Johnson-like landslide,” says Blendon, referring to the historic plurality Johnson enjoyed in 1964. “It would be very difficult,” he adds. “Possible, but very difficult.”

Meanwhile, reformers need to remember that, beneath the polls saying that everyone wants a change, “the public’s view is more complicated. Middle-income people with insurance are risk adverse,” says Blendon. “Legislators need to be very careful about how they try to re-arrange coverage for the middle-class. Even if these people say they are dissatisfied with the present system, they think they have a lot to lose—especially if they haven’t been seriously sick and tried to actually use their insurance.”

Blendon is convinced that if a Democrat wins the presidency, he or she will attempt major reform. But, if that first strategy fails, a new president will need a back-up plan. Offering subsidies to states willing to experiment with reform could be a fall-back. “In the short term, if six states could show that it can be done, that might be a way to push the idea forward,” he suggests, “while at the federal level, Congress could vote to cover more kids under SCHIP and Medicaid.”

Looking for a second opinion, I asked American Prospect co-editor Paul Starr to comment on Blendon’s suggestions. In an e-mail, Starr wrote: “Blendon’s assessment of the prospects for reform seem basically right to me. If we could contrive to get universal coverage for kids out of an enlarged SCHIP, that would be a morally and politically significant step, which the new administration could legitimately claim as an accomplishment by 2010.”

Author of The Social Transformation of American Medicine, Starr understands what is wrong with our corporate health care system. And he remembers the last attempt at reform: “What has to be avoided is making a big proposal and coming up with nothing as in 1994.," he warns. "That would be demoralizing and humiliating for any Democrat; it would be crushing for Hillary. Which is why Republicans will do all they can to try to ensure that happens.”

That is my greatest fear.

Make no mistake I’m not giving up on national reform: I’m still hoping progressives may sweep Congress. But if they don’t, it could be easier to forge compromises at the state level where, as Blendon points out, the political pressure is “more diffuse. State legislatures are less politically polarized. They’re more pragmatic. In Washington, you have a huge set of ideological barriers.”

Moreover, when Congress passes legislation, it must, by law, provide a ten-year forecast of how it will fund the new law. In Massachusetts, they only had to show how they would pay for it over two years.

Still, a state solution is at best a short-term solution. And since states cannot run a deficit, funding will remain an enormous problem. Blendon reports that in California, reform is currently “stalled” on the question of how to pay for it.

In Massachusetts, he is more hopeful that the state may be able to overcome resistance. “But it will take time. You need targeted advertising. Young adults don’t think they need insurance: ads should remind them that they could be in a car accident. And you need moral suasion. You need signs in doctor’s offices saying, ‘by this date, you are supposed to have coverage.' I’m optimistic primarily because of the quality of the leadership in Massachusetts backing the plan,” Blendon adds.

If we don’t get national health reform in 2009, will progressive leadership emerge in, say, five other states ready and able to show that reform can work—without simply letting the lobbyists run the show? Time will tell.

And we are not talking about a small clutch of physicians: close to 25 percent of U.S. doctors are foreign-born. According to JAMA, “These unchecked flows of health workers leave regions with the greatest health care needs the fewest workers…37% of the world’s health care workers live in the Americas, predominantly in the United States and Canada , yet these countries carry only 10% of the global disease burden. In contrast, Africa is home to only 3% of the world’s healthcare workers, yet it has 24% of the global burden of disease.”

Yet as the American Medical Association points out, we don’t have enough home-grown physicians to serve our needs here. Some 35 million Americans live in areas where there are not enough doctors. Nationwide, primary care doctors are in short supply, in large part because they are paid so much less than specialists. Medical students who know that they are going to be graduating with $100,000 in loans report that that they just can’t afford to become internists or family doctors.

Thirteen years ago, the federal government began issuing J-1 visa waivers which allow foreign physicians to work in rural areas like Appalachia and the Mississippi Delta for three to five years and then seek permanent residency. But since, 2001, the government has hiked fees for the waivers, made tests that foreign doctors must take harder, and tightened rules determining what counts as an “underserved area.” According to the Government Accountability Office, the number of physicians in training with J-1 visa waivers declined by nearly half over the last 10 years, from 11,600 in the 1996-1997 academic year to fewer than 6,200 in the 2004-2005 academic year. In addition, in 2003 HHS took control of a Department of Agriculture foreign doctor program and has approved only 61 J-1 waivers since that time, according to the AP/Inquirer. The visa program is set to expire in 2008.

We sorely need those doctors, advocates of the program say. Moreover, those who support opening our doors to more foreign physicians contend that by welcoming these doctors to our shores we might begin to curb runaway health care inflation. TPM Cafe contributor Dean Baker has argued, on more than occasion, that “increased competition from foreign professionals could lead to dramatic reductions in the salaries of workers in the highly paid professions.”

In a 2003 study Baker, who is co-director of the Center for Economic and Policy Research, estimates that by adding roughly 100,000 physicians to our current pool of about 760,000, we could pull doctors’ salaries down from an average of $203,000 to somewhere between $74,000 and $126,000. For the average middle-class American family of four he reckons that would lead to savings of $2,200 to $3,700 per year

What he ignores is that, by and large, foreign doctors who work in the U.S. practice in a separate market. Indeed, an analysis of where these doctors work shows they are likely to be found in geographic areas where the physician-patient ratio is low and the rate of infant mortalities is high. Typically, they are found in rural areas where their visas have sent them and in inner cities where they treat the Medicaid patients that many American doctors refuse to see because Medicaid reimbursements are so very low. The fees Medicaid pays vary state by state, but Princeton health economist Uwe Reinhardt gives an example of just how parsimonious the government can be: “federal and state legislators may be willing to pay pediatricians $10 to see a poor child covered by Medicaid, but to pay the same pediatrician $50 or more to see these legislators’ own children in the commercial corner of the market.”

As we noted recently on The Century Foundation's healthcare blog, Health Beat, even when foreign and American doctors practice in the same area, “medical apartheid” is the rule (see the relevant posts here and here.)

In New York City, for example, well-insured white patients see one set of doctors, while minority and poor patients see another group, many of them foreign-born. Typically those doctors charge less (or are paid less by their employers.) In the late 1990s, when it seemed we had a surplus of physicians in this country, the AMA fretted that doctors emigrating from other countries might pull down physicians’ salaries. Not to worry. While Medicare has put a brake on some doctors’ incomes in recent years, foreign doctors have had little effect. What they charge low-income patients ultimately has no influence on what the market will bear at the high end—and that’s the end that feeds health care inflation.

Moreover, even if a flotilla of foreign docs could bring down medical fees—is it fair to poach physicians from countries where tens of thousands of children are dying of treatable conditions? To put it as bluntly as possible, how many children are we willing to let die each year so that the average middle-class American family can save $2,000 to $3,700?

Baker recognizes and addresses the ethical problem. His solution is to pay for the doctors we are taking: “it would be reasonable to expect that developing countries would want to recoup the costs of educating professionals who have left the country,” he writes, “and it would be reasonable to expect that a rich nation like the United States would be willing to share some of the economic gains that it receives as a result of an increased supply of highly educated workers from poor nations. “

But money won’t replace able-bodied phsyicians. And in developing countries there are a very limited number of individuals who have had the necessary educational opportunities as children to prepare them to study medicine as young adults. Keep in mind that, in Africa, AIDS has wiped out tens of thousands of children and young adults who might have become health care workers.

Moreover, as Laurie Garrett pointed out in Foreign Affairs earlier this year, thanks in part to Bill and Melinda Gates and Warren Buffett, “there are now are now billions of dollars being made available for health spending” in the developing world. “But much more than money is required,” Garrett observes. “Decades of neglect have rendered local hospitals, clinics, laboratories, medical schools, and health talent dangerously deficient, much of the cash now flooding the field is leaking away without result. [my emphasis]

“The fact that the world is now short well over four million health-care workers s all too often ignored” she continues. “As the populations of the developed countries are aging and coming to require ever more medical attention, they are sucking away local health talent from developing countries.”

Garrett offers stark evidence of the "brain drain.” For example, 604 out of 871 medical officers trained in Ghana between 1993 and 2002 now practice overseas. Zimbabwe trained 1,200 doctors during the 1990s, but only 360 remain in the country today.

She also discusses how other developed countries are arranging short-term exchanges of physicians that could help train doctors from developing countries. And she describes a World Health Organization program designed to “eliminate recruitment of physicians in poor countries without the full approval of host governments. . . No such code exists in the United States,” she adds, “but it should.”

For more detail on the death of doctors in developing countries and programs that might work see this post on Health Beat

Why? It’s not the lack of universal access to healthcare, says Schroeder, though that’s important. And it’s not just that we don’t exercise enough and eat too much—though that is a major cause. But there is one factor undermining the nation’s health that we just don’t like to talk about in polite society: Class. When it comes to health, as in so many other areas of American life, class matters. In fact, it matters more than whether or not you have access to medical care.

Schroeder, who is the Distinguished Professor of Health and Health Care at the University of California San Francisco (UCSF) underlines how poorly even white Americans stack up when compared to the citizens of other countries by pointing to maternal mortality. When you look at “all races” you find that in the U.S. 9.9 out of 100,000 women die during childbirth. Focus solely on white women, and the number is still high—7.2 deaths out of 100,000 –especially when compared to Switzerland where only 1.4 women out of 100,000 die while giving birth.

Statistics on infant mortality and life expectancy reveal the same pattern. For example: white women in the U.S. can expect to live 80.5 years, only slightly longer than American women of all races (who average 80.1 years). Both groups lag far behind Japanese women (who, on average, clock 85.3 years). “How can this be?” asks Schroeder. After all, as everyone knows, the U.S. spends far more on health care than any other nation in the world.

The answer is a stunner: “the path to better health does not generally depend on better health care,” says Schroeder. “Health is influenced by factors in five domains — genetics, social circumstances, environmental exposures, behavioral patterns, and health care. When it comes to reducing early deaths, medical care has a relatively minor role. Even if the entire U.S. population had access to excellent medical care — which it does not — only a small fraction of premature deaths could be prevented.” [my emphasis]

Schroeder goes on to emphasize the importance of behavior, and talks about smoking and obesity—problems that most of us aware of. Then he turns to the causes of poor health that we tend to ignore: socioeconomic factors.

Here (and here and here) Schroeder points to an overwhelming amount of research which confirms that people living on the lower rungs of the socioeconomic ladder die earlier and suffer from more disabilities than those who are wealthier, better educated, have a better job and live in a better residential neighborhood (the four components that Schroeder uses to define “class”) . Moreover, he notes, “the pattern holds true in a stepwise fashion from the bottom of the ladder to the top.”

But isn’t the difference really a function of individual behavior? After all, as Schroeder acknowledges, “people in lower classes are more likely to have unhealthy behaviors, in part because of inadequate local food choices and recreational opportunities.” In poorer neighborhoods, fresh and organic foods are usually unavailable or exorbitantly expensive; public recreation is often nonexistent, and exercising outdoors can be dangerous.

"Yet," Schroeder points out, "even when behavior is held constant, people in lower classes are less healthy and die earlier than others.^" [my emphasis]. For example, a 1996 study published in the American Journal of Public Health which focuses on white American men –and takes smoking and other risk factors into account-- reveals that men earning less than $10,000 were 1.5 times as likely to die prematurely as were those earning $34,000 or more. A similar study of British civil servants shows that those with lower-middle class jobs were far more likely to die of heart attacks than those on higher rungs of the ladder.

Why? Schroeder points to a combination of “material deprivation” (in terms of housing, environmental pollution, acess to education, access to trasnportation and many of the other amenities of life) as well as “psychosocial stress.” Being poor generates terrible anxiety, not just about money, but about safety, your family’s safety, and the fact that catastrophe—in the form of losing your job and losing your home—is always just around the corner.

Within the world of medicine, while some attention has been given to racial disparities in health and health care, the importance of class, and “the wide differences in health between the haves and the have-nots are largely ignored,” Schroeder observed in a 2004 NEJM article that he co-authored with Stephen L. Isaacs J.D. Clearly, he stresses, addressing racism should be a priority. But he argues “concentrating mainly on race as a way of eliminating these problems of premature death, illness and disability among the poor downplays the importance of socioeconomic status on health.^”

“Class disparities draw little attention” Schroeder suggests, “perhaps because they are seen as an inevitable consequence of market forces or the fact that life is unfair. As a nation, we are uncomfortable with the concept of class. Americans like to believe that they live in a society with such potential for upward mobility that every citizen's socioeconomic status is fluid. The concept of class smacks of Marxism and economic class warfare.” [my emphasis]

But how does class explain why the U.S. lags so far behind other developed countries when we look at the health of our citizens.? After all, the U.S. is not the only country where class matters. Here, Schroeder points to an uncomfortable fact: “nations differ greatly in their degree of social inequality.” [my emphasis] And in the U.S., in recent decades, the gap between the haves and the have nots has widened, to a point that we have become a divided nation.

Granted, inequality has been growing in most of the rest of the world, “but the United States led among the richer nations; and unlike most others that offset market inequality though government intervention, the United States has not done so,” observes William K. Tabb, author of Economic Governance in the Age of Globalization.

For a full discussion of class and health in America, how we spend our health care dollars, how class can trump race, and whether the status quo is, in fact, “an accurate expression of the national political will,” see my longer post on this topic on www.healthbeatblog.org.

Hillary's plan is out. As I discussed in the post below, it does require all Americans to buy insurance, but it also mandates that insurers must offer insurance to everyone, regardless of whether they are healthy or sick:

"End to Unfair Health Insurance Discrimination: By creating a level-playing field of insurance rules across states and markets, the plan ensures that no American is denied coverage, refused renewal, unfairly priced out of the market, or forced to pay excessive insurance company premiums"

Moreover, the plan guarantees that working families will receive a refundable tax credit designed to prevent premiums from exceeding a percentage of family income.

Clinton doesn't specify the percentage, but she does seem to understand that if the government is going to mandate that everyone buy insurance, it must be affordable.

The Clinton plan emphasizes choices: Americans can a) keep the insurance they have now, b) buy a new plan from a for-profit insurer, c) pick a plan from the same menu of quality private insurance options that their Members of Congress receive through a new Health Choices Menu, OR d) choose a public plan option similar to Medicare.

This is the exceiting news: under Clinton's plan Medicare would be competing with for-profit insurers.

For profit insurers won't be able to "cheat" by sellling "Swiss Cheese" plans (filled with holes in the coverage): "The new array of choices offered in the Menu will provide benefits at least as good as the typical plan offered to Members of Congress, which includes mental health parity and usually dental coverage." (Clinton also says that she would fill the holes in Medicaid and Schip. )

When it comes to reining in costs, drug companies are expected to do their part by offering "fair prices and accurate information." I doubt that Clinton expects drugmakers to voluntarily reduce prices. Recently, she has talked about having an unbiased government institute compare the "effectivness" of various drugs and treatments--something that drugmakers have long resisted. Presumably such testing would be used to weed out over-priced drugs that are no better than less expensive competitors. (Clinton understands that, in some cases, the more expensive product may be more effective for a few patients who, for one reason or another, are not helped by the less expensive rival. All "comparative effectiveness" proposals take that into account.)

Employers also will contribute to the plan: "Employers: will help financing the system; large employers will be expected to provide health insurance or contribute to the cost of coverage: small businesses will receive a tax credit to continue or begin to offer coverage."

To ensure quality at an affordable price, Clinton expects health care providers to become more efficient: "Over half the savings [in this plan will] come from the public savings generated from Senator Clinton’s broader agenda to modernize the heath systems and reduce wasteful health spending."

Past speeches suggest that by "modernization" Clinton is talking about introducing more healthcare technology. Electronic medical records can reduce redundant tests and drug mix-ups while also provide a database that allows physicians to assess which treatments work best.

When it comes to wasteful healthcare spending, the work done at Dartmouth by Dr. Jack Wennberg and Dr. Elliot Fisher does the best job of exposing how much money we spend on unnecesary, unproven, and sometimes unwanted treatments and hospitalizations. (I have written about their research here http://dartmed.dartmouth.edu/spring07/html/atlas.phpT

Their work shows that Medicare spends twice as much per patient in some parts of the country than in others (after adjusting for age, sex and race as well as differences in local prices.) Yet in regions where Medcare spends more, outcomes are no better--and often they are worse. (Unncessary hospital stays, for example, can be hazardous to your heatlh).

Why do patients receive more care in some places? Wennberg's research suggests two reasons: First in areas where there are more specialists and more hospital beds, patients wind up seeing more specialists and spending more time in the hosptal. In other words,"build the beds and they will come." Secondly, often regional variations in care are based on local custom, particuarly when it comes to elective surgery like knee replacements. In some areas, doctors are more likely to recommend physical therapy; in other cities they favor replacing the knee.

Last week, I was at Dartmouth interviewing Dr. Jack Wennberg, and he confirmed what Clinton's speeches have suggested: she is very famliar with all of his work and understands it in detail. Clinton visited Dartmouth a couple of weeks ago and had a long talk with Wennberg. So when she talks about reducing waste, I'm quite certain that is talking about curbing overtreatment while protecting quality. Wennberg's work shows that efficiency and high quality go together:hospitals that have the best outcomes and the best patient satisfaction tend to be hospitals like the Mayo Clinic, that avoid overtreatment. In fact, the Dartmouth Reserach shows that the Mayo Clinic patients treats suffering from chronic diseases with half the number of doctors that UCLA hospital uses when treating very similar patients. More care is not necessarily better care, and it's clear that Clinton understands this.

Finally, her plan emphasizes that providers s"will work collaboratively with patients and businesses to deliver high-quality, affordable care.." Here she is talking about "shared decision-making"--a process that Dartmouth has pioneered and that Clinton praised in a speech that she gave during her recent trip to Dartmouth. "Shared decision-making" means that, when it comes to elective surgery, the patient is actively involved in choosing what treatment to puruse. The goal is not to cut costs, but evidence shows that when patients are given a full chance to consider their choices 20% to 30% will decide not to have surgery. (In general, surgeons are more enthusiastic about surgery than patients are.)

I'll write more about "shared decision making" here and on my blog (www.healthbeatblog.org) but suffice to say that Hillary's plan is impressive because she has such a clear, in-depth vision of how we can rein in health care inflation while improving the quality of care.

I should add that, in many ways, Edwards plan is similar--which is good news for the future of healthcare.

Although the mandate will be controversial, I think it is key to creating a sustainable, affordable system that can offer high quality care to everyone. To achieve that goal, we need everyone in the same pool--young and old, sick and healthy, all making an equal contribution to the fund.

I wrote about this on my blog (www.healthbeatblog.org) last week, in a post where I asked "If We Mandate Insurance, Should Twenty-Somethings Pay Less?" My answer was "no" in part because if younger people pay less, premiums for older citizens could become rise beyond the reach of many. (This is now happening in Massachusetts.)

Here I think everyone needs to understand that when you write a check to an insurer, you are not paying into a savings account to cover your own care. You are contributing to a pool to cover care for whomever (young or old) is unfortunatel enough to need it. We can predict that as a group, younger people will have fewer medical bills. But we can’t predict which individual 25-year-old will be in a car accident, run into serious problems during pregnancy or develop a brain tumor. That’s why there is no “fair” way to decide how much any individual should pay. And because we can’t predict how much any person will take out of the system, the best solution is to charge everyone the same amount—while providing subsidies for anyone (young or old) who earns too little to afford insurance.

This is what we do with social security. If you die at 67, you will never get as much out of the system as you put in. But your money is needed to cover those who are fortunate enough (or unfortunate enough, depending on your point of view) to live to be 104.

The other argument for mandates is that, unless everyone is required to buy insurance, younger, healthier people are likely to wait until they are sick to pony up. After all, if we have universal healthcare, insurers won't be able to turn anyone down--even if they have cancer. And most reform plans are likely to call for "community rating" which means that insurers must charge people in a given community the same rates for a particular policy, regardless of their health status. So a twenty-something might well say to himself: "If something bad happens, I'll buy insurance then. They can't say "no" and they can't charge me more. So why start paying now? "

If the young and healthy postpone buying insurance, we could wind up with an insurance pool filled with the oldest and sickest people in a commuity. This, in turn, would drive premiums higher, which means that more and more 20-somethings would put off buying insurance. This is why a mandate is necessary.

But mandates won't work if premiums continue to spiral. People cannot buy what they cannot afford. We are seeing this in Massachusetts where insurers are allowed to discriminate by age, charging a 60-year-old $352 a month for a policy that wiould cost a 27-year-old $176. For many sixty-year-olds, $352 a month is more than they can scrape together--especially if they have been forced into early retirement and no longer have a steady income. Meanwhile, many middle-class and lower-middle-class 60-year-olds don't qualify for the state's subsidies.

To "solve" the problem, Massachusetts is now giong to "exempt" roughly 60,000 of it's citizens from the mandate. Thus many of those who most need health insurance—people 55 to 65-- won’t have it. So much for universal coverage.

Of course Massachusetts could change its law, go to full community rating, and insist that insurers no longer discriminate by age when pricing their policies. But to make up the difference, insurance companies would no doubt then boost rates for younger policy-holders. Unless someone decided to regulate premiums--and how much of a profit insurers are allowed to rack up.

There is an argument to be made that increases in health insurance premiums should be regulated, just as we regulate how much a gas and electric company can charge. Healthcare, after all, is a necessity, just like heat and light.

This year, premiums rose by 6.1%--far faster than either inflation or income per person in the United States. Next year, some health care economists predict that premiums will jump 10 percent. Meanwhile, Well Point, the nation's largest insurer reported profits were up 11 percent in the most recent quarter. UnitedHealth, which is No. 2 in the insurance industry, saw earnings rise 22 percent.

In the same story where Bloomberg News reported the glad tidings about earnings, it quoted a UnitedHealth spokesman saying that "premiums are rising becuase of the increasing cost of hospitals stays, and people's desire for costly, new state-of-the-art equipment." But doesn't Wall Street's insistence on ever-higher earnings also play a role?

Face it, Wall Street is hooked on growth. But should the insurance industry--an industry selling a necessity that we can barely afford---be striving for double-digit earnings growth?

In the early 1990s, the Clinton healthcare plan called for a cap on insurance premiums. But this time around, the Journal reports, there are no limits. Yet there are rumors that the new plan is tough on insurers.. I look forward to seeing the details.