NON-PATIENTS NEED A BILL OF RIGHTS
by Mark Weisbrot It was three and A half years ago that Helen Hunt brought cheers from movie audiences across the country when she spat out a string of expletives with the acronym "HMO" nestled in the middle of it. She got the Academy Award for Best Actress ("As Good As it Gets"), and the industry's image has continued to slide downhill.
The system of managed care-getting our health care through HMOs and other large insurers-has failed. For a while in the 1990s it seemed like these organizations could solve the one problem that employers worried about -- containing costs. But now insurance premiums are rising at double-digit rates again. In the meantime the care managers' attempts at cost-cutting seem to have succeeded only in angering millions of Americans, while simultaneously enriching some very highly paid executives. (William McGuire, CEO of United Health Group, led the pack with $54.1 million in compensation last year, adding to his $358 million accumulation of stock options.)
But the exorbitant rewards at the top of the managerial pyramid are only a small fraction of the waste that makes our health care system the most expensive in the world. We spend nearly 14 percent of our national income on health care, while the average for other high-income countries is about 8 percent. And unlike other rich countries, we leave one out of six of our citizens -- 43 million people -- without health insurance.
This result is altogether predictable from a system that has private insurers competing to cover the healthiest prospects and abandon, as much as they can, the sick. You don't need a degree in actuarial science to see that this is the most effective way for an insurer to make money, even if it means devoting enormous resources to these non-health-care goals.
The legislation now slogging through Congress will add another layer or two of oversight-including the court system -- on top of the existing bureaucracy. Despite the additional costs, this will be an improvement, since there needs to be some way under the present system to hold the managed care industry accountable. If the bill makes it through the House without too much amputation, there will be some added rights for at least some of the insured. These include the right to external review when treatment is denied, the right to sue insurers for denial of covered care, and the right to visit the nearest emergency room.
But the Patients' Bill of Rights will not help the uninsured, or tens of millions more-including chronically ill patients paying exorbitant premiums -- that are underinsured. To solve these problems, and to contain costs, we will need a universal health insurance system, with the government as the insurer.
The case for social insurance is a simple one, based on the human condition and some fundamental economic logic. First, we all get old and sick eventually, so it's best to insure against these hardships when we are young, healthy, and working. Second, the most efficient way to do this is to put everyone into one big "risk pool" -- it saves enormously on overhead costs. If you don't believe this, just compare the administrative costs of Social Security -- which provides social insurance for retirement, life insurance, and disability -- to those of the private life insurance industry: 0.8 percent versus 12 percent. And lastly, health care is not a commodity like a DVD player, but a basic human need. A decent society does not let its fellow humans go without it.
Medicare was an attempt to extend the principles of social insurance, which have been so successful in the realm of Social Security, to health care for the elderly. At the time (1965) it was assumed that this would soon be extended to the rest of the population.
The failure to achieve this goal reflects a failure of our political system, a somewhat limited form of democracy in which insurance and pharmaceutical giants purchase -- with their political contributions -- the right to a veto over health care policy. Last year the pharmaceutical companies spent $30 million for a blitz of successful TV ads in order to block President Clinton's attempt to create a prescription drug benefit for Medicare.
Now the insurance industry is deploying its army of lobbyists to gut the Patients' Bill of Rights, as much as it can. But with the economy slowing and health care costs rising at unsustainable rates, it is only a matter of time until real health care reform -- with universal social insurance -- is back on the political agenda.
IMF "RESCUE" WON'T HELP LATIN AMERICA
When I was a child growing up in Chicago, we heard stories of lifeguards who saved pan-icked, drowning beach-goers by first knocking them out with a punch to the face, then hauling them to shore. This seemed like a risky strategy to me, and I never knew if it actually worked.
The International Monetary Fund has a similar "rescue" strategy for countries in financial trouble. Does it work? We are now seeing it tested yet again in Argentina and Brazil.
Fearing "contagion" of the type that spread financial panic from Asia to Russia to Brazil a few years ago, the IMF has offered a $15 billion credit to Brazil. In order to qualify, Brazil will have to cut another $2.5 billion from its budget, even as its economy is slowing and foreign investment is drying up. Argentina is also being forced to cut spending, despite being stuck in a recession for three years.
One problem with evaluating the Fund's policies is that most economies eventually resume growth, and so the architects of austerity, "shock therapy," or any other punishment can always claim success at some point. South Korea eventually recovered from the Asian economic crisis. Brazil grew at a respectable 4.0 percent in 2000, and Russia last year registered its highest growth (over 8 percent) in two decades.
But these growth spurts followed IMF policies that clearly failed to accomplish their objectives. The Fund's $41 billion loan to Brazil at the end of 1998 was to stabilize the Brazilian currency; that currency collapsed a few months later, losing 40 percent of its value. The same was true in Russia: the Fund loaned billions of dollars to prop up the ruble -- but it was the ruble's collapse that allowed the Russian economy to recover.
In both of these cases, the IMF insisted that these over-valued currencies had to be supported, no matter what the cost to the economy. This meant high interest rates that cripple economic growth, budget austerity, and massive borrowing to support the exchange rate.
Their only economic argument was that if the currency were allowed to fall, the country would lapse into hyper-inflation (because of the increased cost of imports). But both the Brazilian and Russian currencies did collapse, and the hyper-inflation never came. Instead, there was growth.
Now Argentina is being put through the ringer to save its over-valued peso. Interest rates on government bonds have risen to 14 percent, and the government has borrowed $40 billion in a deal arranged by the IMF. For comparison, imagine our government borrowing $1.4 trillion (70 percent of our entire federal budget) in order to keep our own, overvalued dollar from falling.
It would never happen here, and it shouldn't be happening there either. Throughout Latin America, the expertise of the IMF's mad scientists -- always standing by with more loans and unpleasant elixirs to swallow -- is falling into increasing disrepute.
In fact, this is the great fear among the US foreign policy establishment right now: that Latin Americans will decide that Washington's cures are worse than any disease that they could catch on their own, and will go their own way. Their nightmare: First, a devaluation of the Argentine peso -- another failed showcase macro-economic experiment. Then Argentina defaults on, or has to renegotiate, its foreign debt.
Then Brazil elects a Workers' Party government in its national elections next year -- something voters came within a hair of doing in 1990. There is enormous public sentiment in Brazil for defaulting on its massive international debt, and little that could be done to punish the country if it did. (Brazil's economy is still fairly closed, with exports amounting to only about 7 percent of the economy).
In short, the whole experiment in "neoliberalismo," as it is regularly denounced among Latin Americans, could go down the drain. And well it should. For 20 years now, Latin America has followed Washington's economic advice. They have slashed their tariffs, swallowed IMF austerity, and sold off tens of billions of dollars of state assets to foreigners.
It's been a lot of pain, and no gain. Over the last 20 years, income per person grew by a mere 7 percent in Latin America. This compares to 75 percent for the previous two decades (1960-1980), when national governments exercised much more control over their economic policies. And the gap between rich and poor has also grown.
Summing up the Russian experience, Putin's economic adviser Andrei Illarionov said recently "We didn't need IMF money before, and we don't need it now. It causes nothing but harm."
Most governments in Latin America could say the same, and they will. The only question is when.
-- Mark Weisbrot E-mail: <weisbrot@cepr.net> Co-Director Center for Economic and Policy Research 1015 18th Street NW, Suite 200 Washington, DC 20036 Phone (202) 293-5380 x228 Fax (202) 822-1199 (202) 333-6141 (home) www.cepr.net