FRFI 211 October / November 2009

Popular demand for healthcare reform was one of the reasons Barack Obama was elected President of the United States last year. Now the time has come to deliver on the promises – and it turns out something rather different from healthcare reform is going on. Anyone in Britain watching the US healthcare ‘debate’ might be forgiven for believing that US politics has become completely mentally unhinged. While the right wing certainly is using some very disturbed and ignorant people, that’s not the root of the problem. Far from the healthcare issue being a battle of sanity versus lunacy, or the people versus Capital, what is happening is largely an argument within the capitalist class.

The failures of the US healthcare system are well known – 45 million people have no health coverage; somewhere between 20,000 and 100,000 people die annually as a result of screw-ups in the ‘care’ they receive; half of all bankruptcies are caused by illness or medical bills. Although the US is first in the world on health expenditure per head, the World Health Organization ranks it 14th in male life expectancy, 23rd in male infant mortality and 37th in overall health system performance.* Today, the US healthcare industry has grown to 16% of the country’s Gross Domestic Product (GDP) – about $2.1 trillion. This is up to twice the share compared to other imperialist countries with universal health schemes. On its own, this would make the US healthcare industry the rival of Italy for seventh largest economy in the world, and amounts to the entire annual income of the combined population of South Asia and sub-Saharan Africa. It is estimated that it will grow to 20% by 2015. At this rate by 2050 half the US working population will be providing healthcare to the other half.

How did things get this way? The modern history of United States’ healthcare begins during the Second World War. In order to help pay for the war, wage rates were frozen for the duration. As a result, in order to attract scarce skilled labour, capitalists competed by offering benefits in kind, notably healthcare insurance. After the war, this became institutionalized in a deal between the better-off unionized skilled workers – the labour aristocracy - and the bigger employers which provided for collectively-bargained health plans. Inevitably, these plans were extended to cover similar non-union workers. These kinds of plans were, at that time, both politically necessary in order to bribe the labour aristocracy and economically possible thanks to high rates of profit for US capitalism which emerged triumphant from the war. This set the trend for healthcare down to the present.

In addition to private healthcare, the US Government Veterans Health Administration provides coverage to past and present military personnel. The other major state health programmes are Medicaid and Medicare, both introduced in 1965. Medicare provides healthcare for over 65s; Medicaid provides healthcare for limited groups of poor people: children, pregnant mothers, parents of eligible children, and the disabled, provided they are US citizens or legal residents.

Contradictions of capitalist healthcare

How come, despite under the supposedly super-efficient discipline of the market, capitalist healthcare is so expensive, compared to state-supplied healthcare? Healthcare constitutes part of the value of labour-power, even when paid by the employer. When healthcare is supplied directly, provided by the state, its value includes the cost of buildings, equipment, supplies and the wages of health workers. But when supplied privately, it also includes surplus-value – the capitalists’ profit – and the charge for private healthcare provision is therefore inherently more expensive.

Under a universal healthcare scheme, the state can pay all the costs directly. But when healthcare is provided privately, it must inevitably be provided via an insurance scheme, in order to even out differences in services used between individual members and over time. This is not just an insurance fund, but capitalist insurance, which, again, must make a profit and is part of the whole mechanism of finance capital. So, on top of the actual costs of healthcare, and the providers’ profits, the profits of the insurance companies have to be included as well.

But the escalation of costs does not end there. The insurance companies, to increase profits, must cut costs by minimizing the provision of services, and maintain an army of workers dedicated to finding flaws in claims so they can be denied. The degree of bureaucracy beggars belief and poisons the healthcare system to its roots: the average doctor’s surgery has a small army of clerical workers to fill out the hundreds of different forms. The system is so complicated that colleges offer one-year courses in medical billing! The result is that administrative costs eat up 30% of healthcare spending in the private sector compared to around 4.5% for the state Medicare scheme.

The inherent waste and expense of capitalist healthcare extends to medicines. The pharmaceutical industry, which under a state scheme would have to negotiate prices with a single buyer, is faced with hundreds of private plans and can largely charge whatever price it wants. For example, a course of Lanzoprasol, widely used as a gastric secretion-reducing medicine, costs $329 in the US and $9 in Europe.

Since there is little interest in preventative healthcare – who is to pay for it? – the system virtually guarantees unnecessary suffering. Conditions which could be prevented or treated quite cheaply early on, are therefore left to develop into full-blown illnesses, the costs of which either have to be met later by a private healthcare plan, or by the state when the uninsured patient finally shows up at the hospital Emergency Room. In the worst cases, of course, disability and death can result.

Healthcare costs are a loss to capitalism in general because they reduce the surplus-value which might otherwise be pumped out of the working-class. In addition surplus-value is diverted away from the capitalists directly engaged in exploitation into the hands of the insurance companies and pharmaceutical industry. This comes at a time when US capitalism is experiencing a severe decline in the rate of profit and needs to cut costs. Yet the same tendency has also led the insurance companies to increase the premiums they charge, and pharmaceutical and medical supply companies to increase their prices.

We have a crisis of healthcare coverage, quality, and costs: everybody agrees that clearly something has to be done about this lumbering monstrosity. The questions are: what? In whose interest?

Phoney Reform

There is strong popular support for reform and the introduction of a government-backed system with broader coverage – though considerable confusion about what precise shape it should take. Universal healthcare is known in the US as a ‘single-payer’ system and there are attempts to introduce a single-payer healthcare bill in Congress. But it’s not going to get anywhere, given that there is no militant campaign to support it. The US left has failed to build a movement in support of healthcare reform. Although it would be demanding reform within the capitalist system, like the demand for an 8-hour day, it would start injecting some class politics into US political life.

Several competing bills are now on the table. What the main ones seem to have in common are:

• Force everyone to purchase private health insurance, except for the very poorest who will receive some kind of second-class coverage.

• Some form of employer mandate

• Cumbersome, ineffective and bureaucratic ‘solutions’ to containing costs

• Exclusion of undocumented  workers

• No coverage of abortion

Without an independent alternative, the legislative struggle has been left to capitalists. And here we see the results of the contradictions of capitalist healthcare. Employers’ organizations are lobbying to avoid an ‘employer mandate’ in the legislation – a provision that would make it a legal requirement that employers pay for health insurance. Healthcare providers are trying to avoid measures that would cut into their profits. The healthcare insurers are trying to ensure that there is no public insurance option to compete with. Industry groups are spending staggering sums of money to ensure that US ‘democracy’ does what’s necessary: they spent $167.7 million in campaign contributions in 2008 and a further $484.4 million on lobbying. The ‘teabaggers’ – the various vociferous right-wingers who have been quite effectively performing their antics on television news – are just part of this lobbying initiative. Other facets have included spreading the most ludicrous distortions about the British National Health Service and other universal care systems.

What we’re going to get, at this rate, is reform of health insurance to force everyone to buy this rotten product, increasing the market by about 33 million new subscribers; no serious reform of the healthcare industry; racist exclusion of undocumented workers. Nothing proposed is going to improve the quality of healthcare; nothing is going to reduce costs; nothing is going to remove the bureaucracy. The only development that can change this is a mass movement for real healthcare reform and the introduction of universal healthcare. So far there are no signs of that happening.

Steve Palmer

US correspondent

* World Health Report 2000, Annex Tables 1 and 2.