Health vs. Profits

Like milk and coke, healthcare and the profit motive just shouldn’t be mixed.


The American health system demonstrates just how expensive, unjust and inefficient capitalist medicine is.


Two weeks ago the New England Journal of Medicine released more data that confirms what has already been well documented: for-profit insurance and hospitals are a waste of money. The data shows that, adjusting for population, the U.S. spends $209 billion more every year on extra administrative costs than the Canadian single-payer (government) insurance system. This is mostly because multiple insurers need to have their own bureaucracy and because of advertising expenses. The study didn’t even take into account the additional, 10 to 15 per cent of revenue that is siphoned off as profit for insurance companies and profit-oriented hospitals.


(As an aside, Canada’s two largest circulating newspapers, the Toronto Star and Globe and Mail, both had full articles and the Star even had an editorial on the study. On the other hand, the N.Y. Times had no mention of it, nor could I find anything on the websites of the L.A. Times or San Francisco Chronicle, while USA Today had a small blurb in its business section and the Boston Globe [the city of publication] had an article in its business section. I guess the corporate press considered the information to be either irrelevant or only of interest to the business community.).


The authors of the study believe this extra money is enough to insure the 60 million U.S. residents who find themselves uninsured at some point every year.


This is not much of a surprise considering that, according to the Globe and Mail, “[Canadian] governments spent 7 per cent of GDP on health in 2001, while American governments spent 6.7 per cent.” (04/21/03). Basically, Canadian and American governments spend the same amount on health even though in Canada unlike the U.S, the state provides universal health coverage.


In addition to the system being more costly and unjust, U.S. residents die earlier than those in most other industrialized countries. Life expectancy in the U.S. is only 17th highest in the world. More importantly a World Health Organization study that counted years of good health showed that the U.S. ranked even lower by that measure. “The United States rated 24th under the system, or an average of 70.0 years of healthy life for babies born in 1999.” Christopher Murray, a director from WHO, summarized the findings: “Basically, you die earlier and spend more time disabled if you’re an American rather than a member of most other advanced countries.” (www.who.com)


Of course, it would be wrong to attribute the entirety, or even the majority, of U.S. residents’ reduced life expectancy to the health system. Health and life expectancy are mainly the byproduct of a variety of social and economic determinants including poverty, sewage systems, income inequality, infectious disease control, societal food habits, education and exercise. Capitalist medicine with its focus on cures is only indirectly responsible for exacerbating the problems associated with these determinants by its obfuscation of their importance. (For a more through analysis see: http://zmag.org/content/showarticle.cfm?SectionID=10&ItemID=3926 or




So, what are the reasons for the sad state of affairs in the U.S. health system? According to an editorial that accompanied the NEJM study, but was opposed to the study’s conclusion that the U.S. should adopt a “Canadian style” health insurance and hospital scheme, there are four central reasons why the American system is the way it is. 1. “ Persuasive popular distrust of centralized authority.”


2. “Insistence on individual choice.”


3. “The continuing and unabated power of large economic interests.”


4. “The virtual impossibility of restructuring the nation’s largest industry – an industry as big as the entire economy of France.” (4)


First, any opposition to Canadian-style medicine on the grounds that centralization of medicine would be a danger is nonsense. Health is one area where centralization is often beneficial. Examples are keeping records of child immunizations or to setting hospital infection control standards. In fact, a limitation of the Canadian health system is its lack of central coordination. Currently some increased centralization of the system is being pursued after that was recommended by Canada’s largest ever healthcare commission.


Second, with the rise of Health Maintenance Organizations (HMOs) that often limit people’s “individual choice” of doctors and time to spend with them, this argument makes little sense. Under the Canadian system people are, in the words of Milton Friedman, “free to choose” their doctors.


Third, the “power of large economic interests” is one of the main reasons U.S. citizens have been unable to gain a universal medical system. Obviously, insurance companies are vehemently opposed to the government providing a service they profit from. Likewise, corporations that own for-profit hospitals have little interest in ‘their’ hospitals becoming non-profit, though still private, institutions as they are in Canada. Also pharmaceutical companies are weary of government-paid insurance fearing that it could lead to a regulation of drug prices. Rightfully so, considering that the U.S. is the only industrialized nation without some form of drug price-controls.


(The current negotiations for expanded drug benefits under U.S. Medicare are telling of big pharma’s position. They are viewed both positively and negatively by the pharmaceutical industry. On one hand it will increase the industry’s sales in the short-term because many seniors who are currently unable to purchase their drugs will have the costs covered by the government. Yet it’s viewed as a potential danger to the industry’s long-term prospects since it increases the government’ s role in drug payment, which increases the likelihood of a future government, under budget and popular pressure, regulating drug prices.)


However, the historical linchpin in opposition to universal health insurance, which might be a surprise to some, are precisely those who are supposed to be the guardians of our health, not the bearers of ill health, doctors. Under the current profit-oriented insurance system doctors are private entrepreneurs with an immense amount of control over how much money they bill and over the medical profession in general. Their association, the American Medical Association, has long feared government involvement in insurance could reduce physicians’ profits and influence.


In 1847 U.S. doctors organized themselves into the AMA in a successful attempt to control the number of certified doctors. From early on the AMA demonstrated its opposition to universal health insurance. According to Stan Rands in Privilege and Policy: A History of Community clinics in Saskatchewan, “by 1920 the American medical Association, fearing that public financing would lead to public control of medical practice, had opposed health insurance regulation by any state or federal government. The AMA saw health insurance as a threat to its independence and, like the CMA, proposed that health insurance be carried through private companies.”


Twenty years later, in 1939, the Wagner Bill was introduced federally, calling for $35 million in federal grants to the states to finance health care. A supposedly independent National Committee for the extension of Medical services was formed to kill it. The committee’s relationship to the AMA was, according to Rands, “obvious and intimate” and the “committee’s treasury was aided principally by contributions from the pharmaceutical industry. By 1943 the Wagner bill had died.”


Fifteen years later, once again the AMA’s did what it could to block government involvement in health coverage. According to Rands, “in 1957, legislation was introduced in the United States whereby individuals eligible for retirement benefits from Social Security would be assured surgical and hospital insurance. With the aid of the American Hospital Association and various insurance companies, the AMA managed to defeat the bill, arguing that medical insurance for the elderly should be held privately.”


Considering this history, it’s not surprising then that the insurance companies, with help from the AMA, defeated President Clinton’ s health care reform proposals in 1993.


Still, the most blatant example of doctors’ contempt for universal health coverage involved a strike against universal health insurance in 1962 in Saskatchewan, the birthplace of “Canadian style” medicine. Doctors actually went on strike for 23 days in an attempt to defeat its implementation! They lost the battle to block universal health coverage but defeated the government’s move to reduce their control over medicine in other ways, which has had lasting negative effects on Canadian medical care.


Finally, the “impossibility of restructuring the nation’s largest industry” is a serious concern. In 2001, spending on medicine ate up 14.1% of GDP in the U.S., about a third more GDP per capita than the next highest spending country. By 2012 it is expected to increase to 17.7 of GDP (issues.org summer). The roots of these massive costs are fully intertwined with the inability of U.S. residents to gain universal health insurance and non-profit hospitals, as the inefficiency of the system highlights. As well, the huge amounts spent on advertising by big Pharma and lack of drug price controls results in a U.S. population that pops more pills and pays higher prices for their pharmaceuticals than anyone else.


To better understand the influence of the U.S. ‘bio-medical industrial complex’ we need to trace its roots. In 1909 the Carnegie Foundation supported a proposal from the AMA to review medical education. Abraham Flexner, appointed by the Foundation, proceeded to evaluate medical schools across North America. Ultimately, “Flexner recommended that medical education be based on a uniform scientific doctrine: the germ theory of disease… Corporations used the Flexner report to downplay the need for costly workplace and public health reforms — the cause of worker illness and death, after all, had been shown to be faulty medical practice, not a poisonous environment — and the AMA used the report to close the diploma medical schools.”


“Flexner’s report changed the face of medical education. Based on the germ theory of disease, it became cure-oriented rather than preventive. Medical practice moved from the application of practical skills toward an increasing dependence on technology. Flexner thus helped not only to professionalize medical practices, but at the same time encouraged the development of corporate medical supply industries.”


But the business sector didn’t stop there. According to Rands, “ in 1911 the Rockefeller Foundation began to support the germ theory approach to medical education. It offered endowments to medical schools in the United States and in Canada, conditional on the establishment of full-time clinical professorships. By 1921 the Foundation had spent some $45 million on medical education. The schools were dependent on endowments to upgrade their facilities and to keep their accreditation, and responsibility for health was effectively shifted from industry to medical science.”


Both doctors associations and the broader corporate world had a vested interest in “scientizing” medicine. This alliance has become stronger over the years. The daily news about all sorts of new ‘life- saving’ technology, be it a new drug or machine, is a manifestation of this.


But even if this ‘bio-medical industrial complex’ has hindered the progression of single-payer insurance and non-profit hospitals, at least it has improved people’s health, right?


Even that is not so clear.


At the same time as the Carnegie commission was doing its work the Canadian Liberal government, on the advice of American scientific expert Gilford Pinchot, set up a commission on conservation. Rands explains: “The commission found that the lack of adequate housing, nutritious food, and proper sanitation in urban areas was creating a high death rate from communicable diseases and poverty-related illnesses. In 1910, for example, the death rate from communicable diseases in Toronto was 114 per 100,000 population. The Commission instituted public health programs — including sewage treatment, nursing services, and the distribution of fresh milk among the poor — and by 1914 managed to reduce the death rate to twenty-seven per 100,000.”


While estimates on the issue vary, health ‘experts’ agree that the majority of life expectancy increases over the past century are the result of improved public health promotion not curative medicine. At one end of the spectrum, Laurie Garrett in the Betrayal of Trust estimates that “86 percent of increased life expectancy was due to decreases in infectious diseases. The same can be said for the United States, where less than 4 percent of the total improvement in life expectancy since the 1700s can be credited to twentieth century advances in medical care. ”


Others disagree with her strong enthusiasm for public health promotion. Nevertheless, there is a general agreement that prevention is what works.


So why then, if capitalist medicine is wasteful, unjust and inefficient does it dominate the U.S. health sector so much more than in any other industrialized nation?


The struggle for medical care in Saskatchewan was achieved primarily through an alliance between farmers associations and labor unions.


In all likelihood serious reform of the health establishment is contingent upon broad progressive alliances between groups such as National Organization for Women, National Association for the Advancement of Colored People, National American Association of Retired People and unions. More importantly there is a need for the re-kindling of broad-based class struggle.


I can hear it already “but the U.S. does not have a class divide.” Oh yes it does — just look at the health system.



yves engler is a Montreal activist currently working on a book about student activism at Concordia University. He can be reached at [email protected]

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