Issue #63

Last Update April 30, 2009

National Health Care – A Utility by David Katz July 19, 2008  As the two major candidates begin to refine their campaign messages, it is clear that health care is one of the major policy issues that each must address. There is general agreement that our health care system is broken: many people are not covered by any health insurance at all; those that have coverage through their employers are at risk of losing it or having benefits reduced; health care outcomes, particularly in child mortality and average life span, are inferior to almost all other developed nations; our manufacturers are burdened with costs that their European competitors do not have, which reduces the competitiveness of our goods and services on the world market; and costs are through the roof. The McCain plan and the Obama plan (and the Clinton plan as well) differ from each other in significant respects, but all miss the most salient fact: we will not be able to cure our health care system until we eliminate insurance companies from the equation.

Economic conservatives have two arguments in favor of private health care financing: too much government control is bad, and competition in the provision of health care is good. Both of these arguments are irrelevant to any serious consideration of single-payer health care. The single payer concept envisions a single body that will collect healthcare premiums and dole out health care payments, while leaving doctors, hospitals and other health care practitioners as independent actors. This is different from socialized medicine, with which the economic right often confuses it, in that, in a socialized system all health care providers work for the government. The insurance companies, and especially HMOs, claim to be health care providers, but in fact they are not – they are merely high priced collection agencies who cannot succeed economically unless they deprive at least some patients of adequate care.

Leaving these companies in the health care loop under the rubric “competition” is like saying that the success of our automobile manufacturers depends on retaining competition among their auditors. The competition that must be sought properly belongs among the real providers of health care: doctors, physical therapists, lab technicians, hospitals, hospices, diagnostic labs and so on. These can compete on price, on services, on convenience, and most importantly, on outcomes. HMOs can only compete on bookkeeping.

Since one of the issues we face is cost, it is instructive to compare the Medicare single payer system, already in effect for the elderly, with private plans marketing to the same population. A tipoff is that the HMO senior plans are heavily government subsidized, indicating that under their current cost and profit structure HMOs can't make a living from this group. Part of the reason is that the HMOs reserve thirty to forty percent of all revenues for profit and overhead, including the advertising necessary to maintain their “competitiveness”. Medicare, in contrast, has a overhead of about three percent, and no profit consideration. To expand medical coverage using HMOs wastes an enormous number of dollars – without them, we could afford to cover one and a half times as many people, or give the same number of people far greater resources. HMOs succeed by attracting the healthy and limiting expenditures on behalf of the sick (it is instructive that the industry term for the premium dollars spent in actual health care is known as the “patient loss ratio”). Expecting them to be the vehicle for universal health care is just plain nuts.

We don't expect our police department to be a private, for profit corporation. We don't expect our fire department to be one either. Neither do we expect a private company to take over the role of the IRS in raising the money our government disburses. Why should we put the collection and disbursement of health care funds in the hands of entities fundamentally inimical to the goal of a health care system – providing the best and most efficient medical care to those who need it?

New York Stringer is published by For all communications, contact David Katz, Editor and Publisher, at

All content copyright 2009 by