CHAPTER 16 Medicine and Inequality
This chapter discusses finance of medical care in the United States. It discusses the history of medical
finance in America and Canada. Its essential question for discussion is: should a just American society
create a medical system to guarantee minimal care to all citizens?
Rosalyn Schwartz Rosalyn Schwartz, age 47, white, lives in Ridgefield, New Jersey, and has a son, Andy.
When she divorced in 1987, she lost the medical coverage from her hus- band’s job. 1 The gift-wrap
company where she works with five other employees (making around $19,000 a year) provides no medical
coverage, though it might do so soon.
When Rosalyn tried to buy an individual policy, because she had an ulcer, a preexisting condition ,
insurance companies offered her only policies that excluded treatment for ulcers and that cost $4,000 a
year. In 1988, she found a small lump in her breast. Her physician said it might be cancerous and
recommended removal, but Rosalyn postponed the lumpectomy, hoping that her employer would soon
provide coverage. In 1989, Rosalyn felt pain tear through her hip. By then her breast cancer had
metastasized and had eaten into her hip, making her bones as fragile as glass. When she slipped and fell to
the floor, her hip socket shattered. In the ambulance, she sobbed and could think only of costs. “Andy,” she
said. “I have no insurance. Tell them [at the hospital] I have no insurance. But you’ve just turned 18. Don’t
sign anything or you’ll be responsible.”
Some cancers are cells gone wild, so they must be excised and radiated as soon as possible. If such cancers
reach the bone, it’s bad. Hospitalized for 23 days, Rosalyn underwent three surgeries. The total cost was
$40,000, half paid by charity. Rosalyn owed the rest, which she paid off at $10 a month to each of 12
physicians and the hospital. Unable to work after her surgery, Rosalyn received disability under Medicare
amounting to $10,500 a year. Attempting now to purchase personal medical cov- erage, she discovered it
would still cost her $4,000 a year, but it would not cover ulcers or cancer. Lacking such insurance, she
forewent physical therapy, as well as bone scans every six months to check whether the cancer had
returned. A decade later, Rosalyn died. 2 Such is the life of one middle-aged working American woman
who got sick and, after her divorce, had no medical coverage. 3 In 2008, filmmaker Michael Moore made
“Sicko,” a devastating, funny cri- tique of the various ways our patchwork system of insurance seeks to
profit by denying coverage and by excluding benefits for sick people who need them (this film can be
easily rented; parts of it are available on YouTube).
Medical Coverage in the United States Universal medical coverage supports basic medical care for all
citizens in a nation. One form is a single-payer system administered by one organization, usually a
governmental agency, and funded by taxes. Most European countries provide single-payer, universal
medical coverage, including Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands,
Norway, Portugal, Spain, Sweden, and the United Kingdom. So do Australia, Canada, Cuba, Japan, New
Zealand, South Africa, and Taiwan. America differs from other developed countries in having high
expenditures per capita on medical care, yet not providing coverage for one-sixth of its citizens. The
Institute of Medicine estimates that this gap leads to unnecessary deaths each year of 18,000 Americans. 4
Another form of universal medical coverage is mandated multi-plan coverage where every citizen must
purchase some form of medical coverage, either from a private or public plan, and all plans work under
some governmental regulations. This is also called a play-or-pay program ; its name comes from focusing
on options for small employers, who must either play by offering medical insurance or pay a fine per
employee for not doing so.
Massachusetts and Vermont recently led the way toward universal coverage. Their programs compromised
between the right, which had pushed medical sav- ings accounts, and the left, which had pushed a
government-managed, single-payer system like Canada’s. They required every citizen to have health
insurance. Begin- ning in 2008, each citizen who filed a tax return had to indicate if he had health
insurance; if he did not, he had to pay $129 extra in taxes. Insurers who did business in these states had to
turn over lists of their clients to the state health department. 5
American’s Patchwork System of Medical Finance Because America lacks one unified system of medical
finance, explaining how the country’s finance works is complex. America essentially has stumbled into a
five- part patchwork system that covers most serious problems for most people most of the time, but which
still allows some people to fall through the cracks. The section that follows describes these six parts. 1.
Employment-Based Coverage and Private Medical Plans About half of Americans get medical coverage
though their employment. 6 This includes their spouses and children (including adult children up to their
mid-20s). Coverage in retirement varies according to the largesse of the employee’s former employer.
As a benefit to employees, employers provide medical coverage. Employers with many employees can
negotiate lower rates than employers with few workers because larger numbers spread the costs of illness
over more people. Because of their discounts, large employers usually offer the best medical plans. Since
World War II, private insurance plans have multiplied to over 300, each with its own rules, qualifications,
reimbursement rates, and forms to be filled out by patients and physicians. 7 For the average physician, two
full-time clerks deal exclusively with billing and insurance. One disadvantage of employer-based coverage
comes with small employers. As said, employers with fewer than 25 employees pay the highest rates. Small
businesses trying to allocate capital for expansion, or struggling to make profits, or that cannot obtain
inexpensive coverage, often cease to provide medical cover- age to employees.
A second disadvantage of an employment-based plan is that when workers leave jobs, medical coverage
eventually ceases. In 1985, Congress passed COBRA, 8 allowing employees to continue medical insurance
at group rates for 18 months by paying their share plus the employer’s share of their former premiums.
COBRA also covers spouses after divorce and also covers adult children. 9 Even with COBRA, many
employees cannot afford to continue their coverage because (like Rosalyn Schwartz, who was eligible) they
must now bear all this cost themselves, including the employer’s former share, which may have been as
high (for Ameri- can auto workers) as 95 percent of the policy.
In 1996, the federal Health Insurance Privacy and Portability Act (HIPPA ) required portability (i.e.,
transferability) for workers between similar plans and banned excluding preexisting conditions in such
transfers (without this ban, workers with any medical problem would be trapped in their existing job). A
third disadvantage of employer plans is cost shifting. American hospitals are not reimbursed for providing
medical care to the poor, but federal law for- bids them from turning patients away in emergency rooms
because of inability to pay. To compensate for losses from this care, hospitals shift costs and charge more
for services for insured patients. Large employers resent such cost shifting, because it forces them, but not
small employers, to subsidize the indigent. For this reason, large employers favored universal coverage in
Oregon, Vermont, and Massachusetts. A fourth disadvantage of employer-plans is that American employers
claim the cost of insuring their employees is too high. In 1990, over $675 of the cost of each new Ford
vehicle went to pay for medical coverage for employees. 10 Ford’s retired employees had such generous
coverage, with neither co-pays nor deductibles, that Ford and GM could not compete with foreign car
companies. 11 In 2008, the huge financial burden of medical coverage for their employees and retirees
helped cause the collapse of American automobile companies. Because of such high costs, some big
employers (like many universities) created a two-class system with regular employees with salaries and
good benefits versus part-time employees with no benefits.
A fifth disadvantage of the employment-based system occurs when illness or injury dislodges workers into
chronic unemployment. Many people became poor
because of medical conditions (cancer, schizophrenia, car accident) that then made them less desirable to
employers who seek to reduce medical costs. People who are unemployed or who work for a small
company that offers no medical insurance may buy individual policies. About 7 percent of Americans do
so, including the self-employed, seasonal workers, adult students, and people between jobs. However, as
Rosalyn Schwartz discovered, individual policies usu- ally are expensive and exclude just what is needed.
2. Medicare When Americans reach age 65, Medicare covers about 80 percent of their expenses for
hospitals and physicians. Medicare in 2005 covered 35 million Americans. Medicare is a single-payer
system run by the federal government. In creating it in 1965, Congress moved toward universal coverage.
Lyndon Johnson wrangled it into law and aimed at helping poor, elderly people during illness, but Congress
soon extended it to all Americans over 65. The creation of Medicare stemmed from the evaluative premise
that healthy, young citizens should pay for the medical care of sick, elderly citizens. A related idea lay
behind Johnson’s creation of the Great Society legislation of the 1960s, which created Head Start, food
stamps, VISTA, and Aid to Families with Dependent Children (AFDC).
Medicare gave the elderly a medical security they had never previously known. Before, many elderly
Americans worried whether they could afford phy- sicians and hospitalization. Before, retired workers were
on their own for medical coverage. Before, entering a hospital terrified the elderly for both medical and
financial reasons. Medicare also covers about four million people with disabilities under age 65, plus a
hundred thousand people on dialysis under the End-Stage Renal Disease Act (ESRDA). The Medicare