City Services: As a way to save money, many small towns and cities are considering turning their basic services such as water, trash and sewer over to private companies. This has not always worked out well.  As an example, Coatesville, Penn decided to sell off its drinking water and wastewater infrastructure in 2001 and invest the money in a trust fund to be used for city services. But privatization hasn’t been the economic boon the city hoped.  The residents have seen their water and sewer rates jump 85 percent since American Water, the largest water corporation in the country, took the helm. Last year the company proposed a 229 % rate hike for sewer services, forcing the city to cobble together money for legal fees to fight back. (1) Privatization doesn’t always promote efficiency. The trash in Wichita, Kansas is collected by several private trash companies, and customers in any part of town can contract with any of the companies. The result is that several large trash trucks navigate most streets of Wichita each week, resulting in increased noise, wasted energy, more exhaust fumes, and damage to the streets, which of course, the city repairs.  Even though residents of Wichita pay 30 to 50% more than residents of comparable cities with public trash services, a measure to franchise the trash system was defeated amid criticisms of “government control” and “loss of freedom to choose”.

CompSource. The state of Oklahoma gave its wealthiest citizen a nice tax cut in 2004, which, with the economic downturn,  has left the state government strapped for cash. One proposal to raise money was to sell CompSource Oklahoma, which has been providing workman’s comp to state workers for 76 years – apparently successfully. State Rep. Dan Sullivan pushed for privatization of CompSource because: “It’s a fundamental issue of what is the proper function of government . Is it to compete with private enterprise? We think not.”  He also claimed the increased competition would lower rates. That sounds good, except an expert in comp insurance pointed out it would cost more to insure state employees and 40% -70% more to insure workers in high risk categories, such as volunteer firefighters, oil field workers, and farm workers. The plan fell through, for the time being, when it was discovered that the state might not get the proceeds from the sale and that the politicians pushing the matter had ties to the insurance companies who would profit from the sale. (2)

Medicare and Social Security. Privatization of Government services for ideological reasons often fails as a practical way to lower costs. While privatizing Medicare was ostensibly done to reduce costs, the Medicare Advantage Plans created have increased the cost to the government by 14% and decreased the long term stability of the program. Also, to reduce costs, the plans created the infamous “donut hole“ that costs seniors an additional $25 billion annually. (3) The cost created by privatizing is not a mystery, as the VA and Medicare  have a 3-5% overhead while private insurance companies have an overhead of 15% or more. That is something that should be considered when thinking of health care reform.

Social Security is one of the most effective and popular government programs. It provides a safety net so that no matter how fortunate or unfortunate people are in their choices and investments, they will not be destitute when they retire.  The recent attempts to privatize SS would have been a boon to the financial services industry and money poured in for promotion and campaign donations. After the recent economic downturn, we should all be grateful that the plans to privatize Social Security failed. Some private pension accounts lost as much as 40%, while Social Security paid reliably. The idea that SS is going broke, part of the PR created to try to justify privatizing SS, still lingers on. (4)

Public Service: Our public servants, teachers, firefighters, police, military personnel, and the myriad employees that run our country, actually serve us well. Their pay is usually determined by their responsibilities, experience, and education, as in the GS ratings of federal employees that determine their compensation. Public servants seldom receive bonuses and sometimes little appreciation for doing their job well. The government does not make a profit so their services can be provided at lower cost. And, while we have little say about what goes on in the boardroom, our elected representatives are in charge of public employees.  While it may not be the role of government to compete with private industry, it is certainly not the role of government to make policies that favor private companies over the needs of our citizens. Certainly, privatization for purely ideological reasons is a bad idea that should not override practical considerations.

(1) http://www.alternet.org/story/149725/vision:_how_small,_mostly_conservative_towns_have_found_the_trick_to_defeating_corporations

(2) http://jcmooreonline.com/2009/10/01/will-privatizing-compsource-lower-costs/

(3) http://www.cbpp.org/cms/index.cfm?fa=view&id=2917

(4) http://jcmooreonline.com/2010/08/04/is-social-security-going-broke/

(C) 2011  J.C. Moore

V  Share this

Social Security was created by the Social Security Act of 1935 in the midst of the Great Depression to provide for retired workers who had lost their life savings. Congresses right to create Social Security was established on the general welfare provisions of the Constitution and by  Article 1, Section 8 which establishes Congresses power to collect taxes and provide for the general welfare of the United States.  It says, “The Congress shall have power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and General Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”

Several challenges to the Social Security Act of 1935 were decided in its favor by the Supreme Court. The most notable of these was U.S. v. Butler (1936) that held that the Spending Power Clause of the Constitution gave Congress broad power to tax and spend for what it determined to be the general welfare of the country. Because Congress has discretion to determine what is the general welfare, no court since Butler has ever invalidated a federal spending program on the ground that the general welfare of the country was not being promoted.¹ Also, in Helvering v. Davis ( 1937), the Supreme Court defended the constitutionality of the Social Security Act of 1935 requiring only that the welfare spending be for the common benefit as distinguished from some mere local purpose. It affirmed a District Court decree that held that the tax upon employees was constitutional. ²

Social Security is certainly a government manage retirement program but it has not put private retirement funds such as AG Edwards out of business. Social Security provides a safety net so that no matter how fortunate or unfortunate you are in your choices and investments, you will never be destitute. Congress has the authority to create a government managed health care safety net for Americans. It would likely not put private insurers out of business but it would certainly provide a safety net for health care.

We are now in the midst of an economic downturn that has cost millions of Americans their jobs and their health insurance. What better time to enact health care reform.

(1) http://qanda.encyclopedia.com/question/butler-decision-428463.html

(2) http://en.wikipedia.org/wiki/Helvering_v._Davis

One of the red herrings popped up dramatically in the President’s address to Congress. When President Obama pointed out that the Health Care Reform Bill would not provide coverage for illegal aliens, Senator Joe Wilson (R-SC) shouted out “You lie.” Clearly someone had planted a red herring as the health-care bill specifically says on page 146: “Sec 246 — NO FEDERAL PAYMENT FOR UNDOCUMENTED ALIENS: Nothing in this subtitle shall allow Federal payments for affordability credits on behalf of individuals who are not lawfully present in the United States.”

The problem with illegal immigrants arose from a truly bipartisan and humanitarian effort.  In 1986, two major pieces of legislation were passed by the Democratic Congress, approved by the Republican Senate, and signed into law by President Reagan. The 1986 Immigration Reform and Control Act provided amnesty for 1.5 million undocumented aliens. Its purpose was to halt illegal immigration, but we now have 12 million illegal immigrant so it has apparently failed. The connection to health care came also in 1986 with the passage of the Emergency Medical Treatment & Labor Act which ensured public access to emergency services regardless of ability to pay. Those without money or health insurance now use the emergency room as their primary healthcare provider. The cost of that is staggering, and much of the cost is eventually paid by citizens in the form of higher taxes and more expensive medical services. Illegal immigrants have become a serious problem, but it is not one that can be corrected by the health-care bill.

There are strong feelings on both sides of the abortion issue. Health care reform is too important to those on both sides to let it become a battlefield for ideological differences. The Health-care Reform Bill does not provide public funds for abortions. The bill does not mention abortion. There are those who wish to insure that public funds are not used for abortion and their wishes should be respected. There are those who think providing health care to women who are now uninsured would surely reduce the number of unintended pregnancies and they are right. There are methods of birth control acceptable to every religious faith. Certainly, providing health counseling to women, good prenatal care for expectant mothers, and excellent health care for babies are goals that everyone can share.

 Tort reform is another red herring. The malpractice system is clearly broken. Doctors are afraid to admit error for fear being sued, malpractice insurer will not pay a claim without an admission of error, and an injured patient has little recourse but to sue.  A University of Michigan¹ study has shown that malpractice lawsuits could greatly be reduced if doctors would admit their errors, apologize, and compensate the patient fairly for their mistakes.  It has been estimated that litigation costs and malpractice insurance add about 1-1.5 % to total health-care costs.² The malpractice system needs to be fixed but doing so will not substantially reduce medical costs or help the uninsured. Perhaps malpractice insurance co-ops for doctors should be considered.

 Unfortunately, the cost of health care reform is not a red herring.  Most estimates put the cost at slightly less than $1trillion over 10 years. To put that in perspective, that is about the amount spent in seven years on the Iraqi war; the amount spent in one year to bail out the banks, insurance companies, and the auto industry; or half the amount spent over 9 years to provide tax cuts to those in the highest income tax brackets.^{3 (See note below.)} Healthcare reform could easily be paid for by letting the 2001 tax cuts expire . The United States has a graduated income tax scale based on the idea that those who profit the most from the resources and opportunities our country offers should pay more in taxes. Perhaps seeing that every citizen has health care would let us feel good about paying more in taxes.

(1)   See: http://www.msnbc.msn.com/id/32011837/

(2)   http://www.upenn.edu/pennnews/sourcesheet.php?id=529

(3) Citizens for Tax Justice, using data from the Congressional Budget Office, calculate  that  the 2001 tax cuts have cost  about $2.1 trillion in lost revenue and another $0.4 trillion in  interest  on  the deficit created. Letting the tax cuts expire would  save about  $2.5 trillion over the next 10 years which would pay for Health Care Reform twice over.    See  http://www.ctj.org/pdf/bushtaxcutsvshealthcare.pdf  for their figures.

Research Credit:  Barbara Moore

The advantages of health care reform have been lost in the politics and arguments about the Health Care Bill.  Here are some advantages :

Productivity. We would have happier and more productive citizens. Most people receive health care insurance from their employer.  There is a good reason for that. Healthy people are happier, perform better, are less likely to be hurt on the job, and miss fewer days of work  Offering healthcare benefits lets companies attract and retain better-qualified employees, shows that management cares about the workers, and is a great morale builder.  Couldn’t the same principles work on a national level?

Jobs. It would create job openings. One great way to create jobs would be to provide health benefits to those who wish to retire early. There are about 45 million baby boomers who are now between 55 and 65.  Many of them have the resources to retire early but feel they must continue working to retain their health care benefits.  Health care reform would let them retire early, opening up more jobs.

Bankruptcies could be  reduced by better health coverage. A Harvard study found that about 50% of all bankruptcies in the United States are caused by illness and unpaid medical bills. Bankruptcies affect everyone because the health providers, banks, businesses, and credit card companies who lose money in the bankruptcy pass the cost on to the rest of us. Bankruptcies were a big factor in our recent housing crisis that negatively affected us all.

Reduced Insurance Rates: The health care bill, as passed, requires that 80% of the premiums collected by insurance companies be paid back in benefits. Currently, the overhead for private insurance companies ranges from 15% to 35%. Those companies with high overheads will have to find ways to reduce their rates or be replaced by the more efficient companies.  Companies that pay back less than 80% will have to give refunds to their policy holders at the end of the year.

Healthier Americans. Your family’s health depends on the health of everyone. Unless you are a hermit, you will likely come into contact with thousands of people during this next winter. People without health care are less likely to receive immunizations and are much more likely to have untreated communicable diseases.   This is particularly important since a Swine Flu epidemic is a possibility.

The advantages of health care reform are obvious to those with no health insurance.  Remember, except for the Grace of God, that could be you.

 During the depression, the Farm Security Administration encouraged the development of rural health cooperatives, and at one point, they had about 600,000 members. Unfortunately, few co-ops survived after the FSA removed its support in the late 1940s. One that did is the Group Health Cooperative in Washington State and it is an example of a successful co-op. It has its own hospitals, hires its own Doctors at salary, and tightly manages its costs and membership. It took eighty years for the co-op to get where it is today and it is unlikely that a start up co-op could achieve the same success in a short time. When the seed money runs out, new co-ops would likely disappear and we will have spent $6Billion with little to show for it. Many health care co-ops have gone bankrupt. An example is Sunkist Growers , once a licensed insurance co-op that covered about 23,000 people. It fell into insolvency because claims outpaced income in 2001 and it left employers and medical providers holding the bag for about $11 million in unpaid medical claims.

Some healthcare co-ops negotiate with private insurance companies to provide insurance for their members. Their advantage is that they provide group insurance rates to small businesses, farmers, and individuals who might otherwise have difficulty negotiating favorable insurance rates.  Their disadvantage is that their rates, co-pays, network providers, and pre-existing condition policies are very much like any other private insurer. One such company is the Farmers Health Cooperative in Wisconsin which cooperates with Aetna and functions much like a PPO.  It has been successful because its members are reasonably healthy people. Co-op health care has mostly been successful in such small demographic niches. Jamie Court, president of Consumer Watchdog, says that “if co-ops attract high-risk people, who would otherwise go uncovered, it could bleed the co-op’s funding dry.”

Government is already providing health care. It is a strange spectacle to see Medicare recipients, Veterans, Congressional Representatives, and Senators decry socialized medicine when they, in fact, benefit from public subsidized health care. Would they be willing to put aside their present health coverage and go on a co-op system? I think not!  The Health Care Reform Bill, H.R. 3200, is a reasonable bill and it should not be replaced by a health co-op system unlikely to be successful.

Research Credit: Barbara Moore

  Medicare may be socialized medicine, but those on it pay about $120 a month and most of their medical bills are covered. An unemployed person or someone who retires before 65 may pay $400 for full coverage up to $800 for family coverage.  It is very difficult to change companies or coverage because of pre-existing condition clauses.  The alternative is a catastrophic health care plan which costs about $200 a month and covers 80% of all costs over $7,000. A major illness really hurts, both physically and financially.  I was recently charged $6,300 for a CAT scan but the provider wrote off $5,500 for my insurance company.  If someone on catastrophic coverage or an uninsured person had the same procedure, they would pay the full $6,300.  It doesn’t really seem fair.

 There is also a concern that there is going to be very few general practitioners in the future unless something is done about their compensation.  Many medical students choose specialties because that’s where the money is. The general practitioner pool is now  being made up more and more of foreign educated doctors. That brings me to the health-care bill before Congress.  It may have a few warts but it certainly appears better than what we now have and it would certainly correct a lot of the problems. The main arguments against the bill seem to be a little ill conceived:

 1) it will lead to socialized medicine.  Medicare, Medicaid, the VA, the Army, the Navy, the Air Force, the Marines, all federal employees, your congressional representatives, and your senators are all on socialized medicine. You don’t see them scrambling to get off.

  2) it will ration health care services. The services are already effectively rationed by the high costs and by insurance providers.  Poor people with no insurance have no healthcare at all which is about as severe as rationing can get.

 3) it requires end of life counseling.  Ministers, lawyers, doctors financial advisors, tax consultants, and hospice worker all do end-of-life counseling.  It is irresponsible to your family for you to die without planning for your demise. The bill requires that you be provided information about this counseling but does not require that you die.  To his credit, Senator Johnny Isakson (R-GA) proposed this reasonable idea and he has really taken it on the chin for it.

 4) it will run doctors out of business. We now have a shortage of general practitioners and it is getting worse. The bill provides for increased compensation for general practitioners and incentives to get more medical students to go into general practice.

5) passage of a reasonable bill will hurt the Republicans in the next election.  Possibly! Sen. Jim DeMint (R-SC) said that if Republicans can defeat health care reform it would be President Obama’s “Waterloo” because it would “break him.”  Sen. Jim Inhofe (R-OK) thinks that if the GOP can ‘Stall’ or ‘Block’ Health Care Reform, it will be ‘A Huge Gain’ for the 2010 Elections. Hmmm! Statesmanship at it’s best.

 The Health Care Bill is available at http://edlabor.house.gov/documents/111/pdf/publications/AAHCA-BillText-071409.pdf  (1018 pages). There is a Library of Congress summary at http://thomas.loc.gov/cgi-bin/bdquery/D?d111:1:./temp/~bdwSmj:@@@D&summ2=m&|/bss/111search.html