The Neoliberal Model Comes Home to Roost in the United States — If We Let It
By Howard Waitzkin and Ida Hellander
Abundant data substantiate that the failure of Obamacare has become nearly inevitable. Even after the ACA is fully implemented, more than one-half of the previously uninsured population will remain uninsured — at least 27 million people, according to the non-partisan Congressional Budget Office — and at least twice that number will remain underinsured. Due to high deductibles (about $10,000 for a family bronze plan and $6,000 for silver) and co-payments, coverage under Obamacare has become unusable for many individuals and families, and employer-sponsored coverage is headed in the same direction. Private insurance generally produces administrative expenses about eight times higher than public administration ; administrative waste has increased even more under Obamacare, and remains much higher than in other capitalist countries with national health programs. These administrative expenditures pay for activities like marketing, billing, denials of claims, processing copayments and deductibles, exorbitant salaries and deferred income for executives (sometimes more than $30 million per year), profits, and dividends for corporate shareholders. The overall costs of the health system under Obamacare are projected to rise from 17.4 percent of GDP in 2013 to 19.6 percent in 2022.
The overall structure of Obamacare is not new. Similar "reforms" have appeared in other countries over the last two decades.
Such proposals fostered neoliberalism. They promoted multiple competing, for-profit, private insurance corporations. Programs and institutions previously based in the public sector were cut back and, if possible, privatized. Overall government budgets for public-sector health care were reduced. Private corporations gained access to public trust funds. Public hospitals and clinics entered into competition with private institutions, their budgets were determined by demand rather than supply, and prior global budgets for safety net institutions were not guaranteed. Insurance executives made operational decisions about services, and their authority superseded that of physicians and other clinicians.
The Boilerplate Neoliberal Health Reform
Health reform proposals across different countries have resembled one another closely. The specific details of each plan appeared to conform to a word-processed, cookie-cutter template, in which only the names of national institutions and local actors have varied. Six broad features have characterized nearly all neoliberal health initiatives.
1. Organizations of providers. One element of neoliberal proposals involves large privately controlled organizations of health care providers. These organizations operate under the direct control or strong influence of private, for-profit insurance corporations, in collaboration with hospitals and health systems.
2. Organizations of purchasers. A second element of neoliberal proposals involves large organizations purchasing or facilitating the purchase of private health insurance, usually through MCOs.
3. Constriction of public hospitals and safety net providers. Public hospitals at the state, county, or municipal levels compete for patients covered under public programs like Medicaid or Medicare with private hospitals participating as subsidiaries or contractors of insurance corporations or MCOs. With less public-sector funding, public hospitals reduce services and programs, and many eventually close. Although community health centers (CHCs) sometimes enjoy temporary improvements in funding, as in Obamacare, they increasingly serve as the providers of last resort for the remaining uninsured and underinsured. As a result, CHCs remain vulnerable to cutbacks and face an insecure future.
4. Tiered benefits packages. Neoliberal proposals define benefits packages in hierarchical tiers. The national reform provides a minimum package of benefits that experts view as essential, and individuals or their employers can buy additional coverage. Poor and near poor people in the U.S. Medicaid program are eligible for benefits that used to be free of cost-sharing, but since Obamacare passed, states increasingly have imposed premiums and copayments.
5. Complex multi-payer and multi-payment financing. Financial flows under neoliberal health policies are very complex. The costs of administering these flows and other components of neoliberal policies also are quite high (about 25 to 28 percent of total health care expenditures) and keep increasing. Under Obamacare, administrative overhead — also referred to administrative "waste," since the costs do not contribute to direct patient services — grew 10.6 percent in 2014, faster than any other component of health care except medications.
6. Changes in tax code. Partly because they increase administrative costs and profits, neoliberal reforms usually lead to higher taxes.
Many countries have rejected the neoliberal model, and have instead constructed health systems based on the goal of "health care for all" (HCA). Such countries strive to provide universal access to care without tiers of differing benefit packages for rich and poor. For instance, Canada prohibits private insurance coverage for services provided by its national health program. Because Canada's wealthy must participate in the publicly financed system, the presence of the entire population in a unitary system assures a high-quality national program. In Latin America, countries trying to advance the HCA model include Bolivia, Brazil, Cuba, Ecuador, Uruguay, and Venezuela. The inevitable failure of Obamacare may open a space, finally, for even the United States to pursue a national health program that does not follow the neoliberal model.
The Single-Payer Proposal
The following features of a single-payer option come from the proposals of Physicians for a National Health Program (PNHP), a group of more than 20,000 medical professionals, spanning all specialties, states, age groups, and practice settings. According to the PNHP proposals, coverage would be universal for all needed services, including medications and long-term care. There would be no out-of-pocket premiums, copayments, or deductibles. Costs would be controlled by "monopsony" financing from a single, public source. The NHP would not permit competing private insurance and would eliminate multiple tiers of care for different income groups. Practitioners and clinics would be paid predetermined fees for services, without any need for costly billing procedures. Hospitals would negotiate an annual global budget for all operating costs. For-profit, investor-owned facilities would be prohibited from participation. Most non-profit hospitals would remain privately owned. To reduce overlapping and redundant facilities, capital purchases and expansion would be budgeted separately, based on regional health planning goals.
Funding sources would include current federal spending for Medicare and Medicaid, a payroll tax on private businesses less than what businesses currently pay for coverage, and an income tax on households, with a surtax on high incomes and capital gains. A small tax on stock transactions would be implemented, while state and local taxes for health care would be eliminated. Under this financing plan, 95 percent of families would pay less for health care than they previously paid in insurance premiums, deductibles, copayments, other out-of-pocket spending, and reduced wages.
Moving Beyond Single Payer
The coming failure of Obamacare will mark a moment of transformation in the United States, where neoliberalism has come home to roost. For that moment, those struggling for a just and accessible health system will need to address some profound changes that have occurred during the era of neoliberalism. These changes pertain to the shifting social class position of health professionals, and to the increasingly oligopolistic and financialized character of the health insurance industry.
Beyond the changing class position of health professionals, the transition as Obamacare collapses will need to address the oligopolistic character of the insurance industry, alongside the consolidation of large health systems. Obamacare has increased the flow of capitated public and private funds into the insurance industry and thus has extended the overall financialization of the global economy.
In this context, it is important to reconsider the distinction between national health insurance (NHI) and a national health service (NHS). NHI involves socialization of payments for health services but usually leaves intact private ownership at the level of infrastructure. Except for a small proportion of institutions like public hospitals and clinics, under NHI the means of production in health care remain privately owned. Canada is the best-known model of NHI. The PNHP proposal and Congressional legislation that embodies the singer-payer approach are based on the Canadian model of NHI.
The PNHP single-payer proposal emerged from a retreat in New Hampshire during 1986, where activists struggled with these distinctions. Although most participants at the retreat had worked hard for the Dellums NHS proposal, they reached a consensus — albeit with some ambivalence — to shift their work to an NHI proposal based on Canada. The rationale for this shift involved two main considerations. First, Canada's proximity and cultural similarity to the United States would make it more palatable for the U.S. population, and especially its Congressional representatives. Secondly, a Canadian-style NHI proposal could be "doctor-friendly." Under the PNHP proposal, physicians could continue to work in private practice, clinics, or hospitals. The main difference for physicians was that payments would be socialized, so that the physicians would not have to worry about billing and collecting their fees for services provided.
While PNHP has achieved great success in its research and policy work, these efforts, and those of many other organizations supporting single payer, have not yet generated a broad social movement working toward a Canadian-style NHI. Meanwhile, the neoliberal model, with all its benefits for the ruling cl ass and drawbacks for everyone else, has solidified its hegemony. Partly as a result, physicians and other health professionals are becoming proletarianized employees of an increasingly consolidated, profit-driven, financialized health care system. And under Obamacare, the state has continued to prioritize protection of the capitalist economic system, in this case by overseeing huge subsidies for private insurance and pharmaceutical corporations.
Neoliberalism: ideology and policy model that emphasizes the value of free market competition.
Neoliberal ideology and policies became increasingly influential, as illustrated by the British Labour Party's official abandonment of its commitment to the "common ownership of the means of production" in 1995 and by the cautiously pragmatic policies of the Labour Party and the U.S. Democratic Party from the 1990s.
The Washington Monthly
A Neoliberal's Manifesto
By Charles Peters, Founder and Editor
If neoconservatives are liberals who took a critical look at liberalism and decided to become conservatives, we are liberals who took the same look and decided to retain our goals but to abandon some of our prejudices. We still believe in liberty and justice and a fair chance for all, in mercy for the afflicted and help for the down and out. But we no longer automatically favor unions and big government or oppose the military and big business. Indeed, in our search for solutions that work, we have come to distrust all automatic responses, liberal or conservative.
Comment by Don McCanne
The majority of Americans would like to see a high quality health care system that is affordable and accessible for everyone. We do not have that now. Why not?
Progressives/liberals generally recognize that costs and market dysfunctions require a major role of government in financing health care. Conservatives/libertarians believe that free markets can fulfill that role with the exception that those impoverished not by choice need private charity or the helping hand of government. But it is those in the middle - the moderates - who determine policy through the election process. So who are they?
They are both Republicans and Democrats. In health care, they support private financing, primarily through insurance, though they support public tax expenditures to help pay for the most common coverage - employer-sponsored plans. They also support Medicare for seniors and those with disabilities, and most support Medicaid for low-income individuals and families.
In fact, President Obama abandoned single payer in favor of the Heritage Foundation proposal, based on these principles, since it had broad bipartisan support - or so he thought, until the Republicans decided that a political defeat for Obama was more important than improving our health care system.
So what happened to these moderates? The Republicans have retreated toward the right where they would try to tolerate the conservative tea party faction. The moderate Democrats did not move to the left but instead also moved somewhat toward the right into the pro-market neoliberal niche. Foll owing the groundwork laid by President Reagan, President Bill Clinton followed a neoliberal path in which "the era of big government is over" (State of the Union, 1996). The neoliberals then became the establishment force in the Democratic Party. President Obama, whether voluntarily or through political obstructionism, did not change the direction of the party. The likely next president has indicated that she will follow the neoliberal Clintonian path as well and not change direction in health care.
Today's article describes how neoliberalism and its advocacy of using markets instead of the government to control the financing of health care has resulted in our overpriced and underperforming health care system, as if the neoliberals have failed to see the irony of a health care system that is already 60 percent funded through the tax system and that has failed to conform to free market dynamics.
Whatever labels are used, the majority of Americans support Medicare. If we already had an improved version of Medicare that included everyone, the support would be near unanimous. The neoliberals either need to take a reality check on their ideology, or they need to attend the next local tea party function and listen to the voices extolling the virtues of a society without a functioning government.