In sickness and in health

Since US President Barack Obama's announcement of his intention to overhaul health care in America, the news coverage in the United States has revolved around politicking, human interest, and fear-mongering – the policies themselves have not been deemed newsworthy. Viewers have simply been presented with opinions and arguments based on factoids, without much actual substance pertaining to the proposed reforms.

One thing is certain: whether voters are as angry as the vociferous town hall goers or as vehemently dedicated to the "public option"—setting up of a public insurance company to challenge the private firms—as the campaigners on the left, they probably haven't read the seemingly endless documents.

In a recent interview with Time magazine, Michael Chernew, professor of health-care economics at Harvard University, likened the "public option" to a "Rorschach test — you put the Public Option into the health-care debate, and all of a sudden you see your hopes or your fears, depending on what you believe about the proper role of government". The same can be said of the health care reform debate more broadly. Those who claim they are against the reforms, like pundit Glenn Beck of Fox News, worry about "socialised medicine", while those who are supposedly for them hope for universal health care. In fact, neither are being proposed, and the ensuing arguments are, like those across the country, based largely on personal experience and opinion.

Even Senator Mitch McConnell, leader of the Republican Party in Senate, has admitted openly that he has not read the Senate Health, Education, Labor and Pensions (HELP) Committee's proposal, the Affordable Health Choices Act (AHCA). This is not as surprising as it sounds: the AHCA and its counterpart from the House of Representatives, America's Affordable Health Choices Act of 2009 (HR3200), are well over one thousand pages each.

And yet you would be lucky to find someone without an opinion. Whether it is fear of the infamous "death panels" wrongly asserted by former governor Sarah Palin, or hope for genuine reform of the health-care practice as laid out in a now famous article in The Atlantic Monthly entitled "How American Health Care Killed My Father", the vast majority of these debates are not over the proposals at hand. Neither the AHCA nor HR3200 have anything resembling "death panels", nor do they deal, extensively, with the practice of medicine itself.

In fact a health care reform bill would have little to do with the actual practice of health care. Until the 1920s in the United States, health care costs were so low for most people that the greatest economic effect of illness was the lack of income from being unable to work. This meant that "health insurance" provided by private insurers was more akin to modern day disability insurance, providing a safety net for lost wages. As medical practice was revolutionized in the early twentieth century, however, with regularised medical education by the American Medicial Association (AMA), increased urbanisation—leading to more hospital visits rather than in-home care—and a public perception of a more scientific and efficient medical service, the costs of health care increased.

The precursor to the Blue Cross was founded in 1929 by Justin Ford Kimball at Baylor University in Dallas, Texas as a form of pre-paid medical care. Six dollars per year guaranteed teachers 21 days of medical care. This was paid to hospitals rather than physicians, and eventually spread nationally to other professions. After the Wall Street Crash of 1929 and the onset of the Great Depression, Blue Cross programmes, then organized by the American Hospital Association (AHA), provided a mutually advantageous form of pre-paid medical care: subscribers in already precarious economic conditions were not faced with certain bankruptcy in the event of illness, while hospitals were guaranteed an income during hard economic times.

The Blue Shield developed separately from the Blue Cross. According to Professor Melissa Thomasson of Miami University in Ohio, physicians were worried over a two-fold problem in the 1930s: the popularity of Blue Cross programmes threatened to evolve into hospital-provided health insurance programs that would limit physician autonomy, and President Franklin Delano Roosevelt's emerging social security programmes in the New Deal provided a logical opportunity for national health care. Physicians were reluctant to create a third party system of payment that may lower their incomes, but they feared compulsory or hospital-provided health insurance more than voluntary, physician-offered insurance, and so they developed Blue Shield programs, which were similar to Blue Cross programs but allowed physicians more control.

Originally Blue Cross and Blue Shield acted on a non-profit basis, but their success and evolving medical technology increased demand for health insurance and encouraged private insurers to enter the market. Private insurers had been reluctant to offer medical insurance because of the difficulty of establishing levels of risk and thus the level of premiums. Blue Cross and Blue Shield provided the solution: provide insurance to employed workers, who would invariably be relatively young and healthy. According to the Health Insurance Institute, enrollment in health insurance programs grew from 20,662,000 in 1940 to 142,334,000 in 1960, a veritable groundswell representing the entrance of private insurers on the market meeting dramatically increasing demand.

This is not the only historical reason that modern American health care is typically tied to employers: they were able to benefit from offering medical insurance as a perquisite. During the Second World War, to prevent wartime inflation, Congress passed the 1942 Stabilization act. This prevented employers from using wage increases to attract labor but allowed health benefit packages. According to Prof. Thomasson, this was reinforced by two major rulings. The first was by the War Labor Board in 1945, which "ruled that employers could not modify or cancel group insurance plans during the contract period". The second was by the National Labor Relations Board in 1949, finding that pension and insurance benefits fell under the term "wages", and thus giving unions the power to negotiate benefits packages.

While this cemented the modern form of employer-based health insurance in the United States, there is one more aspect of health care in America that is very particular: Medicare and Medicaid. Medicare is a system of nationalized health insurance for those over the age of 65. Passed in 1965 when Democrats had control of Congress and the Presidency, it has grown from 20 million recipients in 1966 to 40 million in 1999. Medicaid was passed in 1965 as well, with Medicare, as an amendment to the Social Security Act, and was intended to provide medical care for the "indigent". Unlike Medicare, it has no national standard for eligibility. It is means tested and is jointly funded by federal and state government.

According to Mark Twain, "[t]here are three kinds of lies: lies, damned lies, and statistics". A 2009 opinion poll by CNN/Opinion Research Corp. found that more than eight in ten Americans are happy with the quality of their health care. And while 52 per cent are unhappy with how much they pay, and more than 72 per cent are unhappy with the cost of health care in the US overall, over three in four are satisfied with their overall coverage. According to the U.S. Census Bureau of 1999, 47 million Americans are uninsured, and at least an additional 25 million are "underinsured". All this while the United States spends approximately $2,797 per person more than any other industrialized country on health care, according to a study by Guy Clifton at The New America Foundation, but sits at 48th in the world for life expectancy.

There are also systemic problems that do not lend themselves to the numbers: "job lock", a phenomenon studied by academics since at least the early 1990's, is a term describing the situation in which employees are forced to stay in jobs they do not want because they rely on the benefits. Karen Tumulty, correspondent for Time, has detailed through the tragic story of her own brother the way in which temporary insurance packages for individuals provide precious little coverage at all, at a steep premium. This is because businesses negotiate package deals with insurance companies at lower premiums, and the insurers are still risk-averse in insuring individuals.

Furthermore, insurance providers take advantage of their ability to simply drop coverage for people with pre-existing conditions, no matter how trivial, which in at least twenty thousand cases for three insurance companies alone in the past few years occurred right when people tried to make claims. President Obama has regularly referred to "[a] woman from Texas" who "was diagnosed with an aggressive form of breast cancer...[and] was scheduled for a double mastectomy. Three days before surgery, the insurance company cancelled the policy, in part because she forgot to declare a case of acne. True story. By the time she had her insurance reinstated, the cancer had more than doubled in size." These emotional personal stories, compounded with the rising costs of health insurance and Medicare and Medicaid, have left little debate that something must change.

The debate is over what exactly that change is. HR3200 and the AHCA propose compulsory health insurance. This is not a single-payer system as in Canada or socialised medicine like the British National Health Service, but rather a way of maintaining the private health care system extant in America while extending coverage as broadly as possible. There is a mandate for individuals to carry medical insurance and for employers to provide it. Aside from small businesses (and the proposals differ in the definition of small business), companies must provide a certain percentage (the proposals differ, with HR3200 and the AHCA requiring 72.5 per cent and 60 per cent respectively) of insurance premium costs.

Individuals who do not carry medical coverage or companies that do not provide it would be required to pay a tax. This is because the uninsured still need medical care, and when they cannot pay, the costs are shifted onto care for the insured. A recent study found that an average of $1,100 per family or $410 per individual is paid in extra premiums in order to cover the cost of the uninsured. While this may seem a strong-arm tactic, both proposals have in place provisions for subsidies (in the form of tax breaks) to those making up to 400% above the poverty level per year.

The proposals also deal with reforming insurance, so that those who are insured are secure and are not locked into their jobs due to benefits. Last year over half of American bankruptcies were caused by medical bills, and over three quarters of those who went bankrupt in this way were insured. The bills would remove pre-existing condition clauses and arbitrary annual or lifetime limits on claims – limits that take many people by surprise. Additionally, they hope to establish minimum essential benefits. Insurance companies would also be required to show a form of progress report each year, in an effort to increase transparency.

A common flash point has been whether or not to include a "public option". This is an ambiguous term that could mean anything from a government-backed private insurer that runs entirely on premiums, to a tax-money subsidised option, or even a cooperative. President Obama has said that while he strongly endorses such a provision, it is not a dealbreaker. The two proposals have different public options, included in HR3200 but not defined in the AHCA. This has been one of the main points of confusion, and it is still being furiously debated.

Many fear a proposed change in payment for services rendered that would have doctors paid in a "package" for treating an illness, rather than for each individual procedure. Proponents of this change argue that this would encourage doctors, who are currently incentivised to perform as many costly procedures as possible, to provide what they believe is the best and most efficient care – reducing costs and improving care. Opponents argue that it could lead to rationing of possibly life-saving procedures in hopes of making the biggest profit margin from a given package payment.

The question many have, conservative and liberal alike, is how exactly the United States would pay for all of this. The non-partisan Congressional Budget Office (CBO), in a preliminary analysis of HR3200, has stated that it would cost approximately a trillion dollars over the course of ten years. Meanwhile, President Obama has said he will only sign a bill that is "debt-neutral" – ensuring that it cuts enough waste not to affect the budget. The CBO says that HR3200, despite all the waste-cutting measures, would yield a net deficit increase of $239 billion over the aforementioned ten years.

For all of this, it is not likely that HR3200 or the AHCA will pass in their current forms. Many have argued that President Obama, trying to avoid the mistakes of former President Bill Clinton, plans to let congress argue and then move in as a mediator. In fact, this looks likely, with the Financial Times reporting that the White House is considering drafting its own reform scheme. This will likely come after the unveiling of a new proposal this month from the Senate Finance Committee. This proposal will differ from the former two in two main aspects: firstly, the group that authored it on the Senate Finance Committee consisted of three Democrats and three Republicans and secondly, it will have to show how to finance its propositions.

As The Journal went to print President Obama was delivering a speech outlining his ideas for health care reform to a joint session of Congress on 9 September.