Boons for Business


In a 219-212 vote this week, the House of Representatives approved, and President Barack Obama signed into law a new round of national health care reform.  The bill is the subject of celebration in the liberal corporate press, with the editors at the New York Times framing it as “a triumph for countless Americans who have been victimized or neglected by their dysfunctional health care system.  Barack Obama put his presidency on the line for an accomplishment of historic proportions.”  As the Times reports, “the uninsured are clearly the biggest beneficiaries of the legislation, which would extend the health care safety net for the lowest-income Americans.”  Paul Krugman, a columnist for the Times, supports the bill as “a victory for America’s soul.”

There is good reason to dispute the liberal narrative on health care reform provided above.  Before doing so, however, we must fully understand what provisions are included in health care reform.  Major changes to the national health care system – the vast majority of which will become legal by 2014 – are described briefly below.

Major Reform Provisions

– Private health insurers will be prohibited from denying health care to children and adults with pre-existing conditions.  Lifetime limits for payouts to those with serious and costly illnesses will be prohibited.  Additionally, children will be allowed to remain on their parents’ health care plans until they are 26, as opposed to the previous 19 year old cutoff.

-Most Americans are now required to have health insurance, and will be assessed penalties by the national government if they fail to purchase it from private corporations, as there is no public option or single payer, Medicare-for-all system established in this bill.

– Employers with more than fifty employees may face fines from the national government if they refuse to provide health insurance coverage.  Small businesses will be eligible for tax credits to assist them in providing insurance to their employees from the private market.

– Discounts will be provided for those on Medicare to help them afford prescription drugs – particularly those who fall victim to the “Medicare Part D Coverage Gap” in which no portion of pharmaceutical costs are covered for those who pay between $2,700 to $6,154 for their drugs.  Those on Medicare who fall in the coverage gap would immediately be eligible for a $250 subsidy, and eligible for a 50 percent discount on their drug costs by 2011.

– An additional 16 million people would be added to the Medicaid program, which would help subsidize low income individuals with problems paying for health care.  Families with household incomes up to 133 percent higher than the national poverty standard (of nearly $30,000 for a family of four, for example) will be eligible for Medicaid coverage.

– State-level “exchanges” – which are essentially marketplaces to sell private insurance to consumers – will be created.  As the New York Times reports, these exchanges are “meant to provide much more competitive, consumer friendly online shopping for people who are not able to obtain coverage through an employer.”   Those who are ineligible for the expanded Medicaid program – individuals earning more than 133 percent of the federal poverty level but less than 400 percent – will be able to receive payments from the government to help them pay for their health care premiums.  Additionally, the federal government will prohibit health insurance companies from charging individuals more than between 3 to 9.5 percent of their income for health care premiums.

– An executive order issued by Obama also accompanies the bill, and prohibits the use of federal health care funding for abortions, with the exception of cases involving rape, incest, or danger to the life of the mother.  The order was deemed necessary to convince pro-life Democrats to vote for health care reform.

There should be little doubt that many of the reforms listed above will benefit the more than 40 million Americans who are without health care.  Few progressives, for example, would disagree with legal initiatives designed to outlaw the abhorrent practice of denying coverage based on preexisting conditions.  Additionally, the expansion of Medicaid and federal subsidies for poor and middle income Americans will certainly aide many who have difficulty in paying for health care.  Having made these concessions, the central questions I am concerned with are: 1. what constituency is primarily served by this bill; and 2. could Congress have passed a more expansive, meaningful reform package.  On the second question, the answer is clearly yes.  The rest of the first world is able to provide socialized medicine, and there is little reason to think that the wealthiest country in the world can’t, or shouldn’t do the same.

A Corporate Health Care Victory

On the first question of who this bill primarily serves, the answer is clearly the business community, rather than needy Americans.  The New York Times’ framing of these reforms as “historic” and primarily benefitting the poor are strongly exaggerated upon examination of the bill’s provisions.  The New York Times’ own reporting admits that Congress “would be giving the health care industry as many as 32 million additional paying customers in the next five years…final legislation was shaping up as much kinder to the industry than many initially feared.”  Among the strongest supporters and beneficiaries of reform – the Times reports – are pharmaceutical companies, hospitals, doctors, and manufacturers of medical equipment, all of which as private actors will benefit from a massive increase in their clientele.

“Hospitals,” the Times concludes, “have little to fear.  The number of newly insured is expected to decrease significantly the amount that hospitals now lose each year when they provide care to people with no means to pay.”  Health insurance corporations are the strongest opponents to the bill, due to requirements that they cover the uninsured.  It’s not entirely clear, however, that the insurance industry is going to be hurt by the reforms.  In a way this bill is a tremendous victory for the insurance companies – whether they acknowledge it or not – because of the Democrats’ refusal to implement Medicare-for-all, or even a public option that would compete with private insurers.  Insurance companies will surely face some profit loss due to rules relating to preexisting conditions and requirements that they cover the poor, but they will also gain due to the estimated 16 million new customers who will be required to purchase private health insurance, and will be provided taxpayer subsidies to do so.  Insurance opposition to reform, then, is likely due to the fact that the industry was forced to make even limited concessions on a bill that provide “boons” as the New York Times admits, to pharmaceutical companies and hospitals.

The pharmaceutical industry looks to be the biggest victor in health care reform.  Pharmaceutical companies have long benefitted from Congress’s intentional neutering of itself (via legislation in 2007) that prohibits the government, as the largest national purchaser of pharmaceuticals under Medicare, from negotiating discounts on drug prices or from importing cheaper drugs from Canada.  Factor in the subsidies pharmaceutical companies already receive in the form of massive government research and development funding and monopoly copyright protections granted to brand name drugs, and one begins to see why they are such enthusiastic supporters of the forced expansion of the pharmaceutical market.  The pharmaceutical industry has long benefitted from abusing Medicare by gouging consumers, and it will continue to do so under Obama’s reforms, which largely fail to regulate pharmaceutical drugs in favor of ensuring lower prices.

Contrary to the propaganda on the right, health care reform did not pass because of the “socialist pressures” of a “big government” that’s intent on dismantling the private health care system.  This bill is largely a victory for pharmaceuticals, medical professionals, and insurance lobbyists.  Health care lobbyists have long maintained an incestuous relationship with the government, with three of every four health care firms retaining at least one former official on their lobbying payroll.  Incredibly, half of the health care industry’s lobbying representatives are former government officials, and the industry spends on average $1.4 million a day lobbying the government for benefits and protections.  In other words, members of the private health care industry are not only closely linked with officials – the two are one and same in light of the revolving door that exists between private industry and government.

Pharmaceutical and hospital/health professional lobbyists were successful in gaining corporate welfare subsidies, largely as a result of their more privileged position in the private health care system when compared to the health insurance companies.  Pharmaceutical companies have historically been more profitable than health insurers.  Pharmaceutical companies such as Johnson & Johnson, Bristol Meyers Squibb, Pfizer, and Merck averaged between $2.1 to 10.5 billion in profits in 2008.  In comparison, private insurers such as United Health Group, Humana, WellPoint, Aetna, and Cigna averaged from $833 million to 4.6 billion in yearly profits.  Pharmaceutical companies rank near the top ten of the fastest growing industries on the Fortune 500 list, with health care insurance providers ranking closer to the mid-twenties.  The pharmaceutical industry ranks as the third most profitable industry in the U.S., with those producing medical products and equipment (representing hospital and professional interests) ranking 4th, and the health insurance/managed care industry ranking a distant 28th.  Regarding campaign contributions, pharmaceuticals lobbies, health care professionals, hospitals, and nursing homes far outspend the health insurance industry.  Health professionals and hospitals gave a combined $118 million in contributions during the 2008 election, and pharmaceuticals groups provided nearly $30 million.  In contrast, all HMOs and managed care providers combined contributed approximately $14 million – less than half that given by pharmaceuticals and about 12 percent of that contributed by health care professionals, hospitals, and nursing homes.  In short, this bill is a historic victory – but one for the private health care system, with the biggest benefits concentrated in the wealthiest sectors of that system.

The Right-Wing Backlash

It’s a strong sign of how far our intellectual culture has deteriorated that the “debate” over health care revolves around support for market-managed reform on the one hand, and conspiratorial warnings about “death panels,” “rationing” and “government takeover” of health care on the other.  Right-wing challenges to the Democrats’ reform efforts are characterized by paranoid misinformation and manipulation.  Nowhere in this spectrum of acceptable opinions – promulgated by officials and corporate media – is a progressive alternative in support of socialized medicine allowed.

Outside of the erroneous and ill thought out criticisms of government authoritarianism and socialism, the most targeted attack on this bill comes from the largest representative of the insurance industry – American Health Insurance Plans – which promises that its members will increase the cost of health care plans in order to compensate for being forced to cover those who are poor and/or sick.  Rates will increase – the argument goes – because companies will need to compensate for the added costs they will accrue after paying for costly medical services for those who would otherwise be excluded due to pre-existing conditions.  There is little sincerity in, or coherence to, this argument.  Insurance premiums have been increasing dramatically in recent years, and spiraling health care costs are a problem originating from a for-profit health care system, not from a government seeking limited regulation of that system.  Under private health insurance, premium payments for family health plans grew by 78 percent from 2001 to 2008 – an increase of 11 percent a year – according to the Kaiser Family Foundation.

The average deductible for family plans grew from $2,760 to $3,128 – an increase of 13 percent – from 2008 to 2009.  Costs for health care were projected to increase another 9 percent from 2009 to 2010 according to Price Waterhouse Cooper’s Health Research Institute.  To adjust for this latest increase, 41 percent of employers are expected to transfer the costs to employees in the form of increased co-payments and deductibles (remember that health insurance rate regulations won’t go into effect until 2014).  In short, the gouging of consumers is endemic within the private health care system, and private insurers are likely to radically increase rates in anticipation of the regulations on insurance costs that will take effect in 2014.

Why should conservatives, if they are sincerely interested in providing health care for the disadvantaged, make such an issue of rising premiums after having ignored it for so long?  It’s hypocritical and disingenuous for those who oppose health care reform to complain about escalating costs at a time when the government is finally taking limited action to regulate increasing rates.

While opposing regulation of the private health care industry, conservatives support “tort reform” as an alternative means of controlling health care costs.  As the argument goes, greedy trial lawyers are succeeding in inflating damages awarded to patients in cases of alleged medical malpractice.  By capping damages in legal cases that allege malpractice, the government can ensure major savings in national health care costs.  There are many flaws with this argument.  Tort reform caps on medical malpractice damages take decision making over medical and corporate malfeasance away from community members (who decide on damages and criminal negligence through the jury system) and puts power into the hands of government and corporate elites who are more interested in limiting damages awarded to criminal companies that produce unsafe products and doctors who fail to protect their patients.  Furthermore, even proponents of tort reform admit that it will not reduce health care costs.  The insurance group GE Medical Protective, for example, announced that it would raise premiums by nearly 20 percent just six months after Texas implemented a cap of $250,000 for damages stemming from medical malpractice.  The non-partisan Congressional Budget Office also issued its own report in 2009 concluding that tort reform – including a $250,000 cap on pain and suffering damages and a $500,000 cap on punitive damages – would “reduce total national health care spending by about 0.5 percent.”  Such “savings” will not go to the victims of malpractice, but will benefit negligent doctors and corporations.

The American Society of Anesthesiologists concludes that only a small number of malpractice lawsuits are frivolous.  Furthermore, only seven percent of doctors thought to be guilty of malpractice are ever punished by state medical boards, as a report from Public Citizen in 2009 found that hospitals rarely report medical incompetence.  Finally, it is for local communities and juries, rather than big business, to decide whether malpractice awards are needed in order to deter doctors and corporations from engaging in behavior that threatens patients and consumers.

There are certainly good reasons to criticize corporate managed health care reform as pursued by the Democrats.  Congress’s bill will not cover all Americans, and it still leaves health care under the control of for profit insurance and pharmaceutical companies with a vested interest in denying coverage to the poor and gouging consumers.  But we should also be careful to oppose the fear mongering and distortions of conservatives intent on denying meaningful reforms – some of which are included in this bill – for those in need.  Opposition from conservatives stems not from phony arguments about death panels and government socialism, but from the fact that under this bill affluent families making over $250,000 a year will be forced to pay a 3.8 percent tax on their investment income in order to help cover increased coverage for poor and middle income Americans.  In other words, conservatives oppose health care reform primarily because they believe the well off shouldn’t be forced to support health care as a common good.

Meaningful reform is desperately needed to improve national health care, as the National Academy of Sciences estimates that 20,000 people die per year because they lack health insurance.  Democrats view the limited reforms they’ve undertaken as a culmination of their efforts to promote health care reform, but we as progressives need to understand that these reforms, in and of themselves, are inadequate as we seek to promote universal health care.

ANTHONY DiMAGGIO teaches American and Global Politics at Illinois State University.  He is the author of Mass Media, Mass Propaganda (2008) and the forthcoming When Media Goes to War (2010).  He can be reached at adimagg@ilstu.edu


Anthony DiMaggio holds a Ph.D. in Political Science from the University of Illinois, Chicago.  He has taught U.S. and global politics at numerous colleges and universities, and written numerous books, including Mass Media, Mass Propaganda (2009), When Media Goes to War (2010), Crashing the Tea Party (2011), and The Rise of the Tea Party (2011).  He can be reached at: anthonydimaggio612@gmail.com

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