Marshall Auerback: Plan B for Health Care Reform – It’s Called ‘Medicare for All’

By Marshall Auerback, a portfolio strategist and hedge fund manager who writes at New Deal 2.0.

If we’re forced back to square one by the Supreme Court, why not get it right?

My colleague, Bo Cutter, has noted the likelihood of continued challenges to health care reform in the wake of the recent Florida State Supreme Court decision to invalidate the entire health care bill. Frankly, the legal attacks on the bill, even if driven by highly suspect and selfish motives, are unsurprising. They represent the inherent flaws of a bill that entrenches private insurance as the basis for our health care system.

Randy Wray and I have argued previously that the health care reform plan represented primarily a huge and unprecedented mandate to benefit private insurers. Under the new “reform,” 50 million people are being told they must turn over their paychecks to private companies. Of course this was bound to lead to court challenges. And it is hard to fault the Virginia and Florida courts for rejecting the mandate. The auto insurance analogy that has been deployed in favor of the mandate is flawed because NOBODY is forced to drive a car.

If we had wanted incremental improvements to HEALTH CARE there are nearly infinite combinations of small policy changes we could have pursued — without involving insurers at all. And Dems celebrating this great victory by Wall Street were both laughable and hugely disingenuous. After TARP and the Dodd-Frank “financial reform” bill, health care reform represents yet another huge giveaway to large businesses whose 13 percent share of GDP (and the corresponding economic rents they extract) should have been vastly curtailed. (But hold on, it’s only a matter of time before they turn Social Security over to Wall Street.) The Obama administration’s health care reform plan is largely a Private Health Insurers Bailout Bill (HIBOB).

As radical as the Florida State Supreme Court decision appears, there is some merit to the decision given the fact that, perhaps through sloppy drafting, the “severability” clause was not included in the final bill, making it much easier for a court to strike the whole thing down. In fact, US District Judge Roger Vinson made precisely this point in his decision: “Because the individual mandate is unconstitutional and not severable, the entire act must be declared void.”

The alternative of simply banning the individual mandate is a death spiral for the insurance companies’ profit which, given the complexion of this corporatist administration and Congress, would probably mean yet another industry bailout. I would argue that was the whole intent behind the current health care reform plan in the first place. Health insurers were losing premiums because employers were dropping coverage (in part because they could not compete, since no comparable country uses private insurance to provide health care). Healthy individuals were dropping out because no reasonable calculation could show insurance to be good value for the money.

And not just healthy young Americans: If you are single and have no chronic conditions, you are far better to pay out-of-pocket (UNLESS your employer pays most of the premiums and will not give you wages instead). Eighty percent of health care costs are due to the 20% of the population that is unhealthy and perhaps unlucky. If you can make it to age 65 without chronic conditions (you don’t smoke, are not obese, were not born with too many preexisting conditions, and so on), it is quite rational to avoid health insurance. And if you get extremely unlucky, you do not have to have health insurance to get some kind of health care. Sure, it is probably going to be inferior — but it could well be adequate. And in any case, you might not have that much faith in traditional medical approaches, anyway.

But insurers were terrified. They could see the writing on the wall. Hence, they went after Obama to get a HIBOB. Force healthy people to pay premiums. Yes, they knew there would be a trade-off; they’d have to take some unhealthy people. But giving them insurance IS NOT THE SAME THING as paying for their care. So they agreed to accept some pre-existing conditions but never agreed to actually pay for treatments for those conditions. And they won’t.

Don’t be surprised if the Roberts court throws the whole bill out. This is probably the most pro-corporate Supreme Court in decades and the Florida decision has effectively opened the door politically for the Supremes to do precisely that. That will create a huge political uproar, probably not unlike the political reaction engendered when much of FDR’s New Deal legislation was ruled unconstitutional by the Supreme Court. Roosevelt’s subsequent threat to pack the court does seem to have focused the minds of the Supremes, who mysteriously proved considerably more pliant in subsequent years.

There are obvious and vastly superior alternatives: Medicare for all has been suggested and that would represent a good start. Medicare is not really an insurance program, but rather a universal-payer, pay-as-you-go system (there is no way to stockpile medical services for future use).

An earlier version of the Senate’s proposed health care legislation featured a Medicare buy-in for people under 65 — a feature that remains doable despite today’s political constraints. This “public option” would provide more cost control (by competing with the private insurance companies), generate additional savings in Medicare (because you would be “risk pooling” younger and healthier Americans with the most aged and infirm, who traditionally absorb the highest proportion of our medical costs). It also would help to solve the problem of denying treatment based on preexisting conditions, expands the risk pool of patients, and enhances the global competitiveness of U.S. corporations (because why, in contrast to every other country in the world, should US corporations have health care as a marginal cost of production?). Thus, a Medicare buy-in would bring the U.S. health care system closer to the “ideal” low-cost, universal (single-payer) insurance plan. Highly unlikely to occur, but if the Roberts court does force us back to square one, shouldn’t we try to get it right this time?

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  1. Paul Tioxon

    This would seem the only alternative after a reasonable, trying to unite us all kind of guy wanted to do what most people could come to agreement over. That apparently is illegal so universal government program here we come. We tried to be true to the culture of private enterprise, but they just don’t want to hear about. Medicare can simply scale up. We know how to run it, it is not illegal. Sounds like a plan.

    1. alex

      Who’s “we”?

      And having a public option wouldn’t preclude having private options (admittedly on the wild assumption that those private plans were properly regulated to avoid cherry picking, recission, etc.). Give people a tax credit for having a private plan. You can get tax credits for putting better insulation in your home, so what’s to object to there?

      As Dean Baker likes to point out, if private industry is always more efficient, let them prove it by competing with a public option.

      1. Jerry

        This is the path to reigning in medical and drug costs too which no one will touch. We tried to do it in Wisconsin…our Medicaid was going to buy drugs in bulk from Canada but the Fed government refused to let us do it….

        1. rd

          We are not allowed to import cheaper drugs from Canada because they have not gone through the rigorous inspection process by the FDA when they have staff and travel budgets to do it. The proof is in the thousands of Canadians dropping dead in the streets every year from bad drugs which is much worse than the thousands dropping dead in the US from a lack of drugs. Thank God we don’t live in a Third World country like Canada that imports cheap drugs from factories in places like China unlike the US that imports expensive drugs from the same factories.

          Besides, its for our own good as it reduces the likelihood of over-dagnosis by doctors:

          1. KFritz

            That explains Soylent Green and why the long Monday morning lines queuing up in Windsor @ the Ambassador Bridge to reach the great health care in Detroit disappeared.

      2. Dan

        well, you send your kids to private school, you don’t get a tax credit on your property taxes. why should private, add-on, health insurance be treated any differently?

  2. Joe Firestone

    Hi Marshall, I agree there’s a good chance the Court will overturn the bill and uphold Vinson, because they’re quite partisan.

    But I think their overwhelming pro-corporate stance may pull them in different directions on this one. You said:

    Don’t be surprised if the Roberts court throws the whole bill out. This is probably the most pro-corporate Supreme Court in decades and the Florida decision has effectively opened the door politically for the Supremes to do precisely that.

    But, if so, why would the Court want to throw out a HIBOB, which is exactly what the insurance companies need?

    1. Doug Terpstra

      Good catch. I celebrate Marshall’s values and optimism, and keenly hope he’s correct, but this is an illogical non sequitur:

      “Don’t be surprised if the Roberts court throws the whole bill out. This is probably the most pro-corporate Supreme Court in decades…”

      If only! For a split-second I even entertained the silly notion that this was Obama’s clever progressive scheme after all, a fatal design flaw to force universal health care. But the HIBOB is the most pro-corporate Trojan horse POS forged and belched from the pits of hell. The Supine Court will surely uphold it or, if such a thing were even possible, make it worse for the people by stripping out patient rights. Scalia and Thomas, especially, no longer bother pretending that they are not there expressly to serve the kleptocracy.

      1. Jennifer Lee

        I think you might be wrong because the penalty is too low.

        I think it is $695 a year or 2.5 percent of income. Even if you make $100K that would only be $2500/year! That would be thousands less than the cost of premiums for most people. So I think a lot of people would choose to pay the penalty if they know they can sign up if they get sick. The only problem would be an accident — can you sign up for insurance while you’re in back of the ambulence?

        If the penalty is too low it could if fact be a “trojan hourse” that could destroy the industry via adverse selection.

        I bet the insurance industry is already scheming to somehow increase the penalty.

        1. Bill

          But like Marshall says, even though the bill requires them to accept people with preexisting conditions it doesn’t mandate that they pay for any ailments stemming from those conditions. (I’m not sure I believe this by the way) What would be the incentive to not carry insurance if doing so just left you uncovered in the event of illness. Unless you feel as if the rates charged for the insurance far exceed the benefit delivered. That’s understandable but risky.

  3. Hugh

    The one thing we can be sure of from this Administration is that if it is something for the people, like Medicare for All, rather than for the benefit of corporations, they aren’t interested.

  4. Audible

    I never understood the opposition to universal health care. The biggest complaint was not wanting to pay for other people’s health care. I found that sad. Not just because it’s the humane thing to do, but because the argument was, “why should I work hard and pay for some slackers health care” when they already were paying for it. These slackers don’t pay for their health insurance. They go and get taken care of in the emergency room and then avoid debt collectors. Which in turn drives up health care costs for those who do pay since that lost revenue must be recouped somewhere. Then on top of this it is more expensive to treat someone in the emergency room than it is to use prevantative care. Their ignorance and hate is costing them more than their understanding and compassion would. Furthermore, there are plenty of people who work extremely hard and still can’t afford health care. I’ve met them, I know them, they are good people who make an honest living. Don’t confuse minimum wage with a livable wage, and don’t let hate overcome compassion.

    1. alex

      Excellent point. It’s somewhat analogous to opposition to publicly financed campaigns. People complain “I don’t want to pay for that idiot’s campaign with my tax dollars”, and I can sympathize. But the alternative is to pay for it many times over indirectly.

    2. rd

      Logic has no place in this debate. This is purely a philosophical and political matter, similar to supply-side economics.

      May the scariest statements win!

    3. John Locke

      Heathcare is and always will be rationed. The point for debate is how does healthcare is rationed, and the degree of government involvement. I do not believe government should influence the how, where, or when associated with an individual’s healthcare consumption. This necessitates an imperfect system where the indigent and irresponsible have less access to care. To use a good liberal term, call it social Darwinism.
      Under mandated universal healthcare coverage, government influence is inevitable in the form of ‘progressive’ taxation, ‘optimization’. Imagine a voice from the TV set telling you to exercise in the AM, how much cholesterol to ingest at breakfast, and to remind you me to schedule a colon exam. Police could issue citations for engaging in anonymous consenting unprotected anal sex, recreational drug use, and excessive salt/beer consumption. Mandatory organ donation would be logical, and perhaps sperm/egg donation for research. In short, the US would stop being the land of the free.

  5. petridish

    It isn’t as if the US needs to reinvent the wheel. ALL other industrialized nations have perfected systems of single-payer healthcare that are far less expensive, more accessible and more effective. What’s so objectionable about actually establishing the system with the qualities we say we want?

    There must be something else going on here.

    1. sgt_doom

      Audible: “I never understood the opposition to universal health care.”

      petridish: “There must be something else going on here.”

      Definitely, and great blog post, Mr. Auerback, BTW.

      The way this is structured, and I’m sure I’m not the only one besides Ms. Lieberman over at CJR who has figured this out (????), is the legislation is riddled with financial chokepoints which, once said financing can be and is halted by congress, will yield only a bill which legally mandates the purchase of private, substandard insurance policies, with all the negatives in place.

      And please, let us not forget that within 48 hours of passing this Trojan horse legislative crap, the Obama administration hired Liz Fowler, former VP of health insurance giant, Wellpoint, to sign waivers for all those HI corps to get around their “pre-existing condition” nonsense scams.

      Either way, the health insurance and pharmaceutical industries profit; keeping things the way they are, or the final outcome as outlined above, with those “insurance exchanges” created by Enron, to push their latest “shadow banking” faux money creation: mortality derivatives, q-Forwards, etc., etc., ad nauseum.

      1. sgt_doom

        One final point I neglected to mention:

        this also sets the precedent for the privatization of taxation, as the citizen is mandated to purchase from private corporations, and when doesn’t do so voluntarily, is penalized by the IRS.

          1. sgt_doom

            You didn’t comprehend my comment, so either you misread it or are completely unfamiliar with the law and American jurisprudence, and the tax codes and law, etc.

            Privatization of taxation has a specific meaning which you unfortunately didn’t grasp.

    2. rd

      It is obvious. The other countries’ approaches are unacceptable because they are all socialist with total tax burdens of over 25%, run large fiscal deficits that are unsustainable, and manage their seniors’ health care with government medical plans and “death panels” that limit health care and make decisions on what will be covered under that plan.

      None of these conditions apply to the US and, therefore, our system is the best.

  6. Sam

    Even better than Medicare, just make everything GI Bill. If you walk on a sidewalk where a veteran has walked, or if you have any relative who was a veteran, you automatically inherit the health care. Republicans couldn’t object. The military already has health care in place.

    1. John Locke

      VA hospitals are consistently ranked at the bottom of the nation in terms of quality of care. As a healthcare industry analyst, I would rather go to the free clinic than a VA hospital. The US can’t balance its budget – a ‘free’ heathcare for everyone scheme would enrich a few stakeholders, while diluting care quality for a lot of Americans. But don’t worry, the rich will still get great out-of-pocket care. And the indigent will get lower quality care than they currently receive at the ER.

  7. Kiste

    “because why, in contrast to every other country in the world, should US corporations have health care as a marginal cost of production?”

    The author has no idea how the health care system in other countries works. It’s usually not, or only partially, tax funded. The employer pays a large share of it.

    1. abelenkpe

      Employers in other countries pay far less than here in the US which is why the business I work for loses work to countries in England, Canada and New Zealand….that and tax subsidies. See some countries want to encourage work unlike the US which encourages work to leave the states then scratches it’s head wondering why unemployment is so high.

    2. Yves Smith Post author

      I suggest you not come here and make sweeping and inaccurate generalizations. Health care most certainly is not employer paid in the UK, it comes out of general taxation, nor in Australia, where there is a surcharge on individual taxes.

      1. Kiste

        Fine. The ” in contrast to every other country in the world” part is still utterly wrong. Germany, Austria, France, Switzerland (IIRC)…

        1. Marshall Auerback

          Actually, my view is not Anglo-centric, and the fact is that the funding in places like France is very different to the US and, most importantly, NOT TIED TO EMPLOYMENT. Employees and employers both fund a payroll tax into Sécurité Sociale, the social safety net program which spends most of its money on health care. Employers pay 13.55%, individuals pay 0.75%, and then there’s a 5.25% general income tax that goes to the cause as well. All in all, it’s a tax on about 18% of a person’s income, although each individual is only paying 6% — and yes, those who are unemployed and cannot get on their parent or spouse’s plan is floated by the government, as are those making less than 6,600 Euros a year. There’s a main government plan, and a number of industry-specific plans. Between them, 99% of the population is covered.

          With that, the patient has access to any of the public hospitals (over 60%) and nearly any doctor – 97% of doctors in the country will accept Sécurité Sociale compensation. You’re covered for everything at the public hospitals – primary care, emergency care, surgery, pharmaceuticals and especially pre-natal care through early childhood care – a level of coverage that makes France the model system for young mothers and mothers-to-be. And yes, the doctors nearly all make house calls.

          There are no deductibles in France, but there are co-pays, usually about 30% or less, similar to what we discussed for Japan and Switzerland. In the majority of cases, the patient pays the whole fee at the time of treatment and is reimbursed for 70% by the government within 10 days. But there’s never a concern that co-pays or total costs will bankrupt the patient because of “solidarity.” Have diabetes, heart disease, cancer, another chronic disease, or particularly complicated surgery that requires a long hospital stay in recovery? You pay nothing.

          Sounds straightforward single-payer, yet there’s a flourishing private insurance industry. This is for complimentary insurance. Doctors in public hospitals will charge you the government-set rate, but any private doctor is free to charge whatever he or she wants. They’ll accept public coverage, but you owe the difference between 70% of the standard rate and what your doctor is charging. That’s where private insurance comes in, and it covers the rest of the cost or, if you’re using a public hospital doctor, the cost of your co-pay. It’s also your ticket to private hospitals – those run for-profit or as part of a religious not-for-profit. Private insurance is so popular that 92% of the French have it, usually through their employer, BUT IT IS AN OPTIONAL EXTRA FOR ADDITIONAL TREATMENTS. The core health care is covered via this social insurance tax. Very different than the situation which pertains in the US.

          1. Kiste

            Most countries appear to have some sort of co-payment model where the cost is shared between employers, employees and sometimes the taxpayer. That’s why I think your “in contrast to every other country” statement is inaccurate and misleading. For example, in Germany, the employer pays roughly 45% of the health insurance premium, 50% of the pension insurance and 50% of unemployment.

  8. Jim

    What you all are missing is there is a concerted effort on the part of the elites to keep people sick. That’s right. Anybody who cares to read about it, just go ans ask in the forum below, or read. Their are references and anything you want to verify.

    The CDC(centers for disease control) for the past 25+ years, has released bogus research on the real causes of diseases. Diseases like autism, CFS/ME, and certain cancers. All this cleverly executed with the help of the newspapers and reporters like Trine Tsouderos of the chicago tribune.

    Even with the findings by the Whittemore petterson institute and verification by the FDA. The CDC and the puppetts from the UK continually release false science to cover up the truth about these newly found viruses. They use tricks like using dried blood for very sensitive blood tests, or use different type of special “primers” that won’t react properly.

    Don’t belive me? go ask on the forum below.

    If you want to help kids with Autism get REAL cures, or REAL cures for cancers. Support the Whittemore Peterson Institute in Nevada. They can use donations to help do research that finds cures, and simply doesn’t create bogus studies that says people are depressed. Support the WPI and work around the government/Elites roadblock.


    1. Yearning to Learn

      The Whittemore Peterson Institute site you linked to is interesting.

      however, I would start by perhaps reminding you that they have an unproven hypothesis that is intriguing but in extremely early stages of research. (their own website states that they’ve only tested 200 patients).

      If I were you I might try to tone down your post a bit…
      “They can use donations to help do research that finds cures, and simply doesn’t create bogus studies that says people are depressed”

      what does that even mean? your statement doesn’t even pass the smell test. If mental health researchers were just creating “bogus studies that says people are depressed”, then you wouldn’t see a huge interest in rolling out anti-depressants as example. The central tenet behind anti depressants is that there is a pathophysiological problem with a patient’s brain. (I agree the data behind depression med efficacy and safety is sketchy at best, which is why I don’t use them ever in my practice).
      nor would you see ADHD medications. (many of which work VERY well)
      nor would you see the emerging neuroimaging research for autism as example.

      there are competing theories for why people have behavioral and mental problems, and it has been a clusterfrack trying to figure out what the “true” trigger is.

      The WPI believes many of these diseases may be due to retroviruses. it is possible. they have data on 200 patients which is an extremely small sample. many other groups have also hypothesized the same (retroviral cause). I’ve seen other early research where people think the problem might be prions. or bacterial. or viral. Or chemical exposures. or various types of waves (given all the increased transmission out there).

      most likely we’ll find that the answer is more complex than one thing. Perhaps it might be a retrovirus PLUS an exposure to a chemical PLUS a chromosomal change making you susceptible as example. (the so called “3 strike” cause like we see in many cancers).

      I was a hard core clinical researcher for some time, including doing some of the very early work trying to “discover” and characterize stem cells. I will just tell you that early promising research does not mean “correct”, just like early conflicting research does not mean “wrong”.

      FWIW: although I am an MD, I have little to no skin in this game. Almost none of my patients have chronic fatigue or fibromyalgia. I do have autistic patients and I’ll be overjoyed when somebody finds a cure or a prevention.

      although people think that these diseases are big money-makers for medicine, let me assure you that they aren’t, at least not for the docs. Reimbursement for chronic fatigue, chronic pain, autism etc SUCKS SUCKS SUCKS. I lose tons of money on every single patient that I have with these things.

      they do rack up huge bills though… so somebody is making money. (who knows who it is? like Radiologists, Labs, etc).

      the brain is exponentially more complex than any other part of the body, and thus cracking its secrets has been difficult to say the least.

      1. Jim

        Thanks for reading. I have what is mis-labled as CFS. CFS is a name given by the CDC and the lobbyists to prevent chronic insurance payouts. It is really a neuroimmune disease that has a whole range of sysmptoms and not just fatigue as the name implies. One of my most troubling symptoms is severe cognitive dysfunction.

        The CDC has employed researchers to create bogus research that makes one think CFS is psychological and can be treated with cognitive behavioral therapy and graded excercise. This is simply false. It does us patients great harm. It also confuses doctors and researchers because they don’t know how to help us and no research can be done.

        The main problem with the CDC not accepting diseases for what they are is it stops real research from being done.

        The conflicting studies are how the Elites control public perception. They control the news media and control governments. So the FDA confirmed the WPI results. THE CONFLICTING STUDIES ARE CREATED BY THE FDA. Also by the UK. THe UK and the US work together. They did on Iraq they do on other things. looks at the movie out called a “special relationship” about Tony Blair and Bill Clinton.

        THE CONFLICTING INFORMATION COMES FROM THE UK AND CDC. They intentionally are NOT doing research to find to true causes of Autism, CFS/ME, and maybe even cancers. I know it for a fact.

        I will try and go get somebody more in the know than me to respond in that ME/CFS forums I mentioned.

        Thanks For taking an interest.

        1. Jace

          Conspiracy or C**k up? This world is made of individuals, all acting from their own interests. The interest of the WPI founder/benefactors was to find a cure for their daughter who had been sick for 12+ years. The interest of a psychologist, such as Simon Wessely in the uk, is to grow his empire. There are a few true scientists around, Lo and Alter of the NIH study come to mind, but many researchers have half an eye on the next grant, and the status quo is hard to shift.

          The Human Gamma Retrovirus hypothesis is supported by studies in Science and PNAS, combined impact factor of the two journals 39.18

          It is challenged by studies published in PLoSONE and Retrovirology, combined impact factor 8.47

          HGRV’s are hard to find, and all the negative studies (many with Dr Reeves of the CDC and in the UK Simon Wessely, advisor to the MRC and NICE directly involved) have used methods that have never worked to find the retrovirus.

          Makes you think…

        2. Jim

          Another problem with the CDC not excepting the true cause is it deprives organizations on the right track with from critical funding.

          The WPI(whittemore Peterson Institute) needs funds badly. If anybody here has had, or fears getting Prostrate cancer, Autism specturm disorders, Fibromyalgia or ME/CFS(myalgyic encephalomitis). Or, is just has plain tired and keeps getting bounced around from one doctor to another with no good answers or results. I would suggest donating to the Whittemore Peterson Institute. They have made ground-breaking research and are one of the few organizations that operate outside of the political nightmare going on unnoticed in the CDC and other lobbyist controlled government agencies.

  9. grandiosity

    In Canada, there is a similar population who do not wish to pay into the system b/c they are “healthy”. My sister is an example. When pressed, she says, well when I need the care I just have to pay a fine and the back taxes.

    It seems to me that this is what the current legislation proposes. So you don’t have to pay, but when you do you pay a one-time big bill. Why is this called a mandate?

    1. paper mac

      Good luck with that. If you’re not current on your taxes in Canada and you’re not in your provincial health insurance plan, and you show up in an emergency room, guess what, you’re paying out of pocket. There’s no way to retroactively assign yourself to an insurance plan which you deliberately dodged.

      1. grandiosity

        Yeah I think what you said is consistent with her plan, namely she pays out of pocket and then she jumps onto the plan to get future expenses covered. It is like a big deductible, she says.

    2. Wendy

      Not to split hairs here, but generalizations about Canada’s health care system and its policies cannot be made, because there is no national health care system in Canada. Instead, Canada has issued something like a national mandate to all its provinces, and required them to set up provincial health care systems. Each one is different, has different rules for eligibility, waiting periods, and even differ as to what is covered and treatments provided.
      Mandating provinces (or, here, states) to provide care is not the best solution. For one, economies of scale are lost. For another, corruption is a problem. That said… I would take their system over our present one, to be sure, but would much prefer a Medicare for all approach. Too bad almost no one in Congress seems to care that a MAJORITY of the American population want this, too!

  10. Disgustapated

    As a view into a small part of what is the problematic, big-corporate-dominated health insurance system in this country, I will as briefly as possible outline a recent experience.

    There is an ongoing epidemic of drug shortages in this country. See for example:

    I am a scientist by training and have been looking into starting an operation to work on alleviating supply issues for some of the shortages. I discovered that in order to bring a copy of an EXISTING GENERIC drug to market you need to pay the FDA $771,000 to review your paperwork, and then fork over $497,000 for site inspections and $89,000 for each dosage form you make. Even going from something like a 10mg/pill active ingredient to 20mg/pill active ingredient formulation triggers a second $89,000 charge. So If I were to bring, for example, another copy of a known chemotherapy drug to market in two strengths, I would have to fork over $771,000 + $497,000 PER YEAR and 2 x $89,000 PER YEAR to the FDA. They justify this by saying “you are doing this for profit, and we can’t force the taxpayer to foot these bills”. OK, I get that, but why is it in the EU the fees are a third to a tenth of those in the US, AND they are generally waived (or at worst reduced 90%) for small business? I don’t mind fees, but why for the love of god are they so damn high, and why is there very little in the way of small business waivers?? I was told to “get venture capital” by the FDA. Well then the cherished American Small Business I have started just becomes another investment vehicle for a guy with far more money than I have.

    The upshot is the reason generic drugs sometimes remain expensive is because there is a significant barrier to small business manufacturing of pharmaceuticals in this country. If I pay all the fees and get set up, I would have to raise my expected selling price per pill to offset the fees. My uneducated guess is that foreign companies (who manufacture a significant number of our active ingredients and dosage forms) get a lot of these filing fees paid for by their government either directly or by tax breaks/rebates.

    I suppose if there are any venture capitalists out there who are interested in this problem, feel free to email me at makinggenerics at

    1. sgt_doom

      With all due respect, the principal reason that those drugs remain so expensive is that the Rockefeller family — together with several of the other richest families in North America, happens to own over half the pharmaceutical corporations (along with munitions makers and those very crucial banks, JPMorgan Chase, Morgan Stanley and Citigroup).

      1. Disgustapated

        Oh that I understand. I guess I didn’t want to come off as a conspiracy theorist so I just relayed my experience. Federal agencies would not impose fees if the big companies did not approve of them. The fact that there are not mobs of lobbying firms pushing to repeal the fees suggests that big pharma is fine with the system. In fact the act that installed the fees has been renewed a few times since its introduction in 1992.

        note the fee schedule listed in the wiki is for 2008. Inflation has taken its toll.

        1. Yearning to Learn


          good luck with your endeavor. in the early 1990’s I was in a somewhat similar position as you are now. We were doing hematopoeitic stem cell research at the time and came across a few findings that may have clinical application. Then enter the FDA.

          keep fighting the good fight. I know of few people who can help you without extracting an ungodly toll.

          I do have 2 suggestions that you might try:
          1) if your med is for a disease that affects a celebrity or an “important person” they may be able to get you the funding or resources or at least the contacts you need.

          2) if your med is for a specific disease, you may be able to team with a foundation.

          For instance, if you had a generic med for testicular cancer you could try to contact Lance Armstrong.

          or if you have a generic med for diabetes you could contact the American Diabetes Association.

          for instance, back in the day some HIV meds were pushed through the FDA very quickly and “cheaply” because of the pressure put on the FDA by AIDS activists.

          clearly: that is more difficult if you are making generic Viagra!

          Good luck and regards,


        2. sgt_doom

          Those of us residing in the ranks of forensic economics don’t refer to the corporate mcmedia term of “conspiracy theory” — we simply call it sound research.

  11. avgJohn

    “Nobody is forced to drive a car?” I suppose if you live on the bus route and your job is on it too, then you don’t have to drive a car.

    But life can become very difficult without one. For instance, people living in rural areas requiring regular visits to the doctor, or weekly trips for groceries. Think about how constraining it would be to search for a job without a car. For many, it means never rising out of poverty, or at least requiring many more years to recover.

    If the governments are going to pass legislation to benefit the insurance association at the expense of the poor, they darn sure should pass legislation that ensures there is job opportunities for the working poor to own a car and insure it.

    I liken refusing to insure as the poor man’s version of Wall Street risk management. If they don’t get in an accident, look at all the money they save to pay for extra food and utilities, if they do get in an accident, they are already insolvent, so let some one else worry about it. Works for Wall Street anyway. Maybe we could even get the Bernank to bail them out.

  12. dearieme

    Yor post has a central contradiction. You complain that Obamacare is desugned to enrich corporations. Then you say “Don’t be surprised if the Roberts court throws the whole bill out. This is probably the most pro-corporate Supreme Court in decades ….”.

    1. sgt_doom

      Negative, it is the normal routine.

      Occupy people’s attention and energy to work for and against those entities who will profit whether they “win” or “lose” — either way, they health insurance and pharmaceutical industries profit.

      It’s exactly like that diabolical mindfreak, Jeremy Rifkin, who always poses as the opposite of what he actually is.

      Rifkin recently wrote a book, then went on a book tour claiming that the high price of oil in 2008 was the primary cause for the economic meltdown.

      Of course, in the middle of 2008, the price of oil was 13.8 times the actual market cost, thanks to massive ultra-leveraged speculation on those derivatives and futures exchanges (ICE Futures, etc., where the two principal traders were Goldman Sachs and Morgan Stanley).

      Now Rifkin, who has been a continuous member of the board of the Wharton Business School (U. of Penn.) and is a lobbyist on behalf of the cap-and-trade movement in Europe, which has been great for financial fraud but done nothing for alleviating pollution, would have us adopt cap-and-trade in the USA, along with those carbon permits, carbon derivatives, etc., to provide all that faux money for Wall Street and the oil companies.

      You get the macro picture now???? (Plenty of not-so-bright environmentalists actually accept what Rifkin is peddling, and he was doing the same on behalf of Monsanto when he claimed to be a bioengineering activist.)

  13. Yearning to Learn

    Although I was always ambivalent on Mr. Obama, his shenanigans with the health care fiasco cemented my opinion that he was a corporatist hack masquerading as a leftward leaning centrist.

    Hordes of people clamored for the public option including many doctors. We were sold out. It wasn’t even brought up for debate.

    Neither party wants it, and thus we will never get it until our corporation “citizens” decide that it’s in their best interests.

    American Health Care is broken on so many levels. the biggest reason IMO is that we allowed our medical system to be “capitalized”. We thus no longer treat patients as patients, but as customers. we thus focus not on health but on “customer satisfaction”.

    some (many?) doctors have been complicit in this situation.

    to me, one step was to enact single payer. Doing so reduces the complexity that is our multi payer system. I’ve said this before, but these days it is difficult to be in a solitary practice. You “need” to join a group so that you can hire big $$$ directors and administrators and CEO’s and CFO’s and COOs and CTO’s. Every year the top brass in my group make $1M/year NOT including options/bonuses etc. One year I think they hit $10M.

    why? because we have to recruit “talent” to “compete” and negotiate with the CEO of United Health Group (who made $102M in 2009 by the way), not to mention the CEO of Blue Cross Blue Shield, and all the other insurers out there.

    So TONS of our health dollars go to sky-high administrator salaries.

    Doctors do not escape blame. We have set up a system where one is compensated MORE for “procedures” and LESS for “thinking”. Thus, I get paid more to remove a mole (10 minute procedure) than to diagnose cancer and console a family (many hours of work).
    Therefore, the highest paid docs are those that do lots of little procedures. (like Radiologists, interventional cardiologists, GI docs).
    those in the non-procedure fields make much less (Peds, Internal Med, Fam Practice, Psychiatry).

    where do you think everybody wants to go? Thus, we have TOO MANY specialists.

    since we treat people as “customers” we let them go to a specialist right away, even if their concern can be diagnosed by a generalist.

    In my group a few years ago the #1 and #2 diagnosis made by our orthopedic surgeons was “sprained ankle” and “sprained wrist”.

    why? because most patients are convinced they broke their ankle or wrist and thus want a specialist. Never mind that the specialist costs way way more.

    we thus have a relative shortage of primary docs. And to keep open the docs have to see more patients. This means SHORT VISIT TIMES. (hate that 10minute doc appointment? me too).

    due to relative shortage of primary docs, people go to the ER. Again, costs WAY MORE.

    thus, we spend lots of money on overhead that doesn’t need to be spent…
    we spend lots of money on specialists that aren’t needed
    we do too many tests (because again, the customers want it), or sometimes because the doc is afraid of litigation (less often), or because it is EASIER and QUICKER for the doc to do.

    (easier for me to just get a wrist xray and tell the people it is negative than to explain for 10 minutes why they don’t need it).

    Don’t even get me started on the rest. We have remodeled our clinic 4 times (at HUGE expense) in the last 10 years. why? because “customers” wanted a nicer environment when they were sick.

    Most recently, we put up flat panel TVs, and brought in this huge live Tree to put in the Atrium. Our specialty center bought a designer waterfall done by some Hoo-Haw artist somewhere.

    MILLIONS of dollars in remodeling costs every few years.

    our system needs overhaul.

    but Big Pharma and Big Med (which is really Finance wrapped in Medical clothing) do everything in their power to block change.

    and patients unfortunately judge the quality of care they receive by the state of the lobby.

    The first step is a public option. once we break the farce that is “capitalized medical care” then we can move toward helping patients through their lives.

    1. sgt_doom

      Sorry, but while I’m sure you make valid points, you are simply attacking one of those “thousand points of confusion” and not focusing on the macro picture.

      The three principal cost drivers in the American healthcare sector, which wouldn’t be allowed in many not-so-corrupted countries are:

      (1) Rampant speculation on all areas of the healthcare sector (as in ALL areas: medical instruments, medical personnel agencies, etc., etc.) by hedge funds, and specifically healthcare hedge funds;

      (2) Private equity leveraged buyouts on all areas of the healthcare sectors (all types of companies, corporations and hospitals, etc.); and,

      (3) Colossal criminal penalties levied on criminal corporations such as Pfizer, Eli Lilly, Merck, HCA, etc., so you have the cascading costs from the maiming and deaths wrought by their actions, then they pass on said legal costs and penalties to the public customer base.

      Now those are where the heaviest costs lie….

  14. But What Do I Know?

    You know, when I mention this “Medicare for all” idea to upper-middle class people of roughly my age, they have one of two reactions.

    1) It’s a good idea

    2) It will cost to much.

    To answer 2, I usually ask how much they’re paying for health insurance every year (not the total cost, just their portion of it). Then I ask them to compare that with paying another 1.5% of their income (what Medicare costs them now –I know the employer pays the other half, but bear with me). Invariably, they’d pay less under the second scenario–and their employer would too. . .

    If they’re the least bit open-minded, they have a hmmm moment–but then it passes and they go back to not thinking about it. . .

    The absurdity of my having to pay for the health insurance for those over 65 regardless of their income/wealth would drive me crazy if I thought about it enough. The only recompense I have had is the one time I was confronted with an old man bitching about Obama’s “socialized medicine.” I thanked him for the opportunity to help pay for his health insurance–he didn’t have too much to say after that.

    1. bob

      But he has insurance…

      BS, medicare pays first for ALL people over 65. If they have insurance, then the insurance kicks in for anything over and above what medicare won’t cover. It’s done behind the scenes, all he sees is bills that he can’t understand from his insurance company.

      This is by design, don’t pay any attention to the man behind the screen.

  15. rps

    An equitably remedy would be to umbrella Medicare, Medicaid, and Veteran healthcare as one organization (like DHS) and offer it to businesses to buy in. If people want to add supplemental insurance they could buy an additional policy from private insurers. The US is at a competitive disadvantage with other industrialized nations that provides “universal healthcare.” So level the playing field and bring back the jobs

  16. Sufferin' Succotash

    The opponents of ObamaCare–possibly including a five-vote Supremes majority–may wind up making universal health insurance politically doable.
    Dontcha just love irony…

  17. john c. halasz

    “health care reform represents yet another huge giveaway to large businesses whose 13 percent share of GDP (and the corresponding economic rents they extract)”

    Wrong. The correct figure is 16% of GDP.

  18. Grinder

    The real issue here is the lack of a living wage.

    The system is trying to figure out how to provide a very expensive benefit to people who do not earn the wage to afford it by forcing healthly people to overpay for something they may not want or could fully take advantge of. This at a time when wages are stagnating. 99% of the people are sharing too small a percentage of the overall pie.

    In absence of rising wages, what really is needed is cost containment. In my opinion, the healthcare legislation was aimed at creating a giant pool of capital by which the healthcare industry could gorge themselves on as a way to subsidize future medical breakthroughs. This would allow the US to position the healthcare industry as a core
    competency (along with financial services and agriculture) and be a major export business in the global economy. Affordability was not the goal and it shows in the lack of cost containment and protection the industry received from competition.

  19. S Brennan

    I had an individual policy “Health Insurance” for 12 years.

    I changed policies 6 months before getting sick.

    I waited in in IC for pre-approval from my insurance company…which they gave before I entered the operating room…three witnesses.

    The insurance policy refused to pay…claiming pr-existing condition.

    I appealed to the insurance commissioner of my state.

    I provided a letter from: my doctor, the surgeon who saved my life and a gastroenterologist

    The former insurance executive and now insurance commissioner of my state overruled the judgment of three doctors without justification and concurred with the insurance company.

    The insurance company paid $80.00 for one day’s stay out of four in hospital and told me I was lucky to get that instead of charged with fraud.

    The hospital seeing the extreme injustice referred it to the charity adjudicator who ruled that the hospital would cover 80% of it’s $22,000.00 cost. The surgeon helped as well. All those costs will passed on to other insured people, but avoided by my carrier.

    My condition?

    A burst appendix.

    Think about that. The insurance company and the state commissioner are so depraved, so whorish, venal that they claimed with a straight face that I had hidden such a condition for 6 months.

    As a child I never understood the anger of crowds that thronged to cheer the royalty being beheaded after the French Revolution, but now, I could calmly watch every US Health Insurance executive being burned alive should we have the fortune to live during such a time.

    Really, I could, Health Insurance executives murder something like 40,000 people a year.

    1. Doug Terpstra

      Thanks for telling your story and sorry for your experience. Beyond the absurd and indefensible economics, this is the human tragedy of our dysfunctional, immoral system—and it starkly spotlights the magnitude of Obama’s sell out.

  20. Robespierre

    Medicare for all as a buy in is the only alternative fair for most Americans. However, it is the kiss of death for corporate provided insurance. IMO corporations want out of the health providing business just like they wanted out of the retirement business (pensions). So as soon as medicare for all is available they will put it in as an option for their employees taken business from private insurance. This simple fact makes this impossible for the bill to pass our FIRE bought representatives..

  21. MinnItMan

    “In my opinion, the healthcare legislation was aimed at creating a giant pool of capital by which the healthcare industry could gorge themselves on as a way to subsidize future medical breakthroughs. This would allow the US to position the healthcare industry as a core
    competency (along with financial services and agriculture) and be a major export business in the global economy. Affordability was not the goal and it shows in the lack of cost containment and protection the industry received from competition.”

    That’s the best statement of what I fear, but could not really articulate until now.

    I had a rare form of cancer (that wasn’t all that bad – a “good” carcinoma) a few years ago. It really wasn’t, I hope. The sysptoms were apparent for about 3 years before it was diagnosed – during that time, I got very minimal and ineffective treatment, and then boom, when I really pushed to have someone look at it closer, I’m a cancer patient, and things kicked into high gear. At that point, the system was awesome. I live near a world-class head and neck cancer center at a huge university. I was seriously blown away by the efficiency. On the other hand, the bills (like a thousand of them from folks I never met) for the 10% non-coverage on my “good” insurance hit as my financial situation became tenuous for other reasons.

    In any case, after COBRA for 18 months, I’m pretty much uninsurable. In two more months, I can get into the state high risk low coverage plan, so I’m trying to be really careful – like not start fights in bars over drugs and cigarettes, etc.

    I’m assuming that the docs and others who work the biz here know what they’re talking about – at least more than I do. That quote above makes a lot of sense to me, and my interpretation is something like this: we just kind of blew by health care being any kind of public good that might manifest as an individual right, but it sure is hell is a public good as an area of industrial policy, and that’s just way more important, and there is a pretty strong elite consensus to keep going that way.

  22. Mark Hoffman

    Marshall, you wrote, “My colleague, Bo Cutter, has noted the likelihood of continued challenges to health care reform in the wake of the recent Florida State Supreme Court decision to invalidate the entire health care bill.”

    The Florida State Supreme Court did NOT recently invalidate the health care bill. In fact, in a 5-2 ruling last August, the Florida Supreme Court invalidated a ballot measure that would have nullified the healthcare bill. The Florida Supremes said the wording of the ballot measure introduced by Republicans in the Florida state legislature was fatally “misleading and ambiguous.”

    It was Roger Vinson, senior federal judge of the United States District Court for the Northern District of Florida, who struck down the federal healthcare bill. He ruled that its individual mandate to buy health insurance violated the Constitution by regulating economic inactivity, and he then ruled that the whole bill is unconstitutional because the the individual mandate section cannot be severed from the rest of the bill. But Vinson allowed the law to stand while the Obama administration appeals it.

  23. eagerly beaverly

    We have a public option, it is called medicaid. It forms the largest part of nearly every state budget, bigger than pension payments, and it is still chronically underfunded. The reimbursement rates for doctors are pitiful and most practices in middle to higher income areas don’t accept medicaid. My child’s doctors office has a large sign when you walk in that says” no new medicaid patients as of 1-1-11″. There are zero out of pocket charges for medicaid patients. You heard that right, zero. Medication, treatment, everything costs zero. Since there is no cost to them, they go to the doctor or emergency room for every little thing imaginable. There is no consequence or punishment for abusing the system. And since arguably poorer patients who have medicaid have more expensive chronic treatments, costs to the system are astronomical. I like the utopian idea of just getting free medical care but quite frankly it is so exensive and complex it scares the crap out of me. Sure, it might work. Or it may just run deficits for years to come until it starts cutting the quality of care for everyone.

  24. John Locke

    Medical care is a scarce commodity whose use will be rationed, either by price or government panel. I prefer price rationing, since I can choose to work hard and compete for a high-paying wage. Life is not fair, and there are downsides to universal, cradle-to-grave healthcare. What will happen is care quality and quantity will decrease, because no government can mandate healthy lifestyle choices. Costs will skyrocket, taxes will increase, and the program will become a massive wealth redistribution to the indigent/irresponsible. Do you want a government panel to tell you when to undergo diagnostic testing, when to exercise, when to consume beer/salt/cholesterol? Do you want to pay a penalty or serve time for engaging in unprotected sex? Do you mind mandated organ donation, blood donation, sperm/egg donation? Keep government out of healthcare.

  25. deeringothamnus

    I am in my fifties, live in Massachusetts where we are required by law to buy health insurance. I also just cancelled it. The premiums are simply not affordable, and my only other option would be to go broke and on welfare. I can therefore pay a hefty fine for the privilege of not having insurance. What I need is a catastrophic policy, with a huge deductible, but you cannot buy one in this state and are not allowed to buy one out of state. We plan to move, veritable health insurance refuges. Does anyone know of a foreign health insurance that you can buy which would cover US citizens?

  26. eric anderson

    “Frankly, the legal attacks on the bill, even if driven by highly suspect and selfish motives, are unsurprising. They represent the inherent flaws of a bill that entrenches private insurance as the basis for our health care system.”

    I don’t get how these two sentences connect. Wouldn’t those with “suspect” motives be in favor of a private insurance-entrenched system? But never mind.

    I noted to my friend that 26 state Attorneys General were unified in challenging this. I said, “That’s over half the states!” But my friend is very sharp. He reminded me that 26 is less than half of our 57 states. I suppose if I challenged him, that would mean I was racist. Therefore, I cannot argue.

  27. bob

    “Wouldn’t those with “suspect” motives be in favor of a private insurance-entrenched system?”

    They get that if it gets defeated in court. This is what we have now, and have had for a very long time.

    Possible outcome number one- the bill stands and the health care system gets more “customers”.

    Possible outcome number two- the bill gets defeated, and the health care system stays as it is- “private insurance-entrenched system”.

    Keep your monopoly, or expand it. win or WIN.

  28. Mark

    I’m self employed so I get worst case scenario insurance. I pay $100 per month more solely because I’m a one person shop. Last year, my High Deductible Health Plan went from $550 to $830 per month, with a 10,000 deductible. I paid a few years back @$700 per month and they paid for things like child birth and a few very minor surgeries. Now I pay more for a policy that, by design, will only pay off for something huge like Cancer or Heart issues. Not that it is likely, but if my spouse became pregnant, that would neatly fall under the deductible. There is no competition here as there are 3 companies that have “sewn up” my County and they all charge the same.

    Health insurance is one place capitalism does NOT work. I want a buy in to Medicare…my elderly relatives have no complaints, despite the usual problem$ of old age.

  29. Chris Harlos

    It looks to be a US District Court, and not Florida court, opinion.

    Expanding Medicare coverage to all U.S. non-veterans between the ages of 18 and 64 is clearly the best political and policy outcome, particularly if the several later-added amendments to the original act that have curbed the US’s ability to negotiate lower costs from providers and drug-makers are stripped from the act. As a practical matter, its easier to move to a less corrupt country.

  30. Rodger Malcolm Mitchell

    Medicare for everyone makes the most sense. The reason it has not been enacted is the false belief that Medicare is funded by FICA. The federal government is Monetarily Sovereign, meaning it has the unlimited ability to spend, and its spending is constrained neither by taxes nor borrowing.

    In short, the federal government funds Medicare, and if FICA were eliminated, this would not reduce by even one dollar, the federal government’s ability to pay all Medicare premiums.

    Rodger Malcolm Mitchell

  31. PQS

    The other option, which works very well in my state, WA, is to have non profit health insurance or “co-ops.”

    Our local co-op has their own doctors and facilities and also contracts with other doctors and facilities, sort of like an HMO. Premiums for a policy for two adults over 40 and one small child, including a $1200 per person annual deductible and prescriptions run about $900/month. Coverage is the usual 80/20. (20% “copay”).

    Same deal with private for-profit insurance? About $1800 a month. I think most people have zero idea how much their employers are chipping in, unless they ask, which I did when I had to go on COBRA and was weighing the options.

    A non profit system can be done at the state and local level – it just takes some vision and investors interested in the idea (and who don’t think they simply must have $5B a a year to be worthwhile human beings.) I would think a big state like California could make this go like wildfire.

    To the “healthcare refugees” noted above – come on over! I don’t think they discriminate on length of residency.

    Go to: for more information. No, I’m not a member, but seriously considered it when I was unemployed. Would have joined if the COBRA subsidy wasn’t available.

  32. PQS

    PS – no, I’m not suggesting that $900/month is totally reasonable for everyone in the world. (I would MUCH prefer to pay Medicare rates: $96.40 per person per month!) But compared to TWICE as MUCH, for the same benefits, it’s a bargain, and you know you won’t go broke paying for care.

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