AAUP Voice

Special Issue

Spring 2006

Special Policy Report:

Faculty Health Care & the National Health Care Crisis

Introduction

During last year’s contract negotiations, the Administration asked the AAUP to participate on a committee to discuss post-retirement health care benefits and issues. The committee has held two meetings. Patricia Barber, Leon Campbell and David Colton represent the AAUP on the committee. They report to the Executive Council.

The AAUP has long been concerned with health care benefits. In the early 1990s, the AAUP fought to maintain and stabilize health care benefits through contract negotiations. In 1997, our chapter jointly sponsored a conference with the Delaware Health Alliance. This conference brought nationally known experts to our community to discuss the health insurance crisis. Nationally, AAUP has endorsed universal health care and has made it a legislative priority.

This issue of AAUP VOICE is a special report that focuses on key aspects of national health care in order to provide some context for the situation we face at the University. The report does not aim to be exhaustive. It does, however, show the serious political, scientific and financial conditions that must be confronted in the health care arena.

The Problem

The U.S. health care system is in crisis. Over the last 25 years, the number of U.S. companies that provide employees with health insurance has dropped from 70 to 50 percent. Along with the increased cost of insurance for everybody, this decrease in employer-sponsored plans has helped to swell the nation’s number of uninsured to approximately 45 million or about 16 percent of the population.

This, however, is only one aspect of the situation. Even among the insured, there is the anxiety and economic hardship of dealing with higher co-pays and reduced medical options. There is also the despair of living in a philosophical climate that suggests that the best way for the country to handle its health coverage problem is for people to have even less coverage than they do now or to pay prohibitive costs to retain what they have.

When George Washington University switched health plans in 2002, going to a bigger provider, costs skyrocketed. Benefits that had previously been free for university employees, except for $10-15 co-payments for doctor visits, were revamped. A $750 deductible was instituted as well as increased prescription expenses. At General Motors in 2005, employees were also slammed with higher costs as the company began the process of shedding the “burden” of supplying health care. The company instituted a new “defined contribution” clause which allows GM to increase, at its own discretion, workers’ out-of-pocket costs. The company also implemented major cost increases for 85.9% of all retirees.

One reason given for the growing price of health insurance is that it is driven by rising medical costs. But as Alvin Goldman of the University of Kentucky’s College of Law has pointed out, this is largely a bogus argument. In assessing the University of Kentucky’s own health care situation in a study for his local AAUP, Goldman showed that while from 1997-2001 medical costs rose 10 percent on the Consumer Price Index, University of Kentucky health care premiums increased between 30 and 80 percent, depending on the type of coverage.

Another reason frequently cited for mounting health care costs is that the recipients are themselves driving up the costs through overuse of medical technology. According to this argument, Americans, spoiled by a range of medical options unavailable to much of the world, have forced providers, through this overuse, to increase costs so insurers can pay their bills to physicians, laboratories, clinics and hospitals.

In an October 2004 interview with Counterpunch, Dr. David Himmelstein of Harvard Medical School and cofounder of Physicians for a National Health Program, responded to this notion of consumer-driven cost increases by pointing out that it is not supported by the facts:

“Americans do not actually get very much care by world standards. We don’t stay in the hospital more often or longer. In fact, on average, we have shorter stays than people in most other developed countries. We don’t visit the doctor more often than people in most other countries to which we compare ourselves. “We don’t even get more of most kinds of high technology care. The Japanese get many more MRI scans and CT scans, and the same is true for many European nations as well. I’m not sure if more scans are a good thing or a bad thing, but it’s clear that you can’t explain our extraordinarily high health costs based on the amount of care that Americans get.

“The fundamental cause of the high cost of health care in the U.S. is the deranged structure of the health care system.”

The Health Care Industry

Bureaucracy, False Science and Reengineering

A 2005 Kaiser Family Foundation study reported that from 2000 to 2005, employees in preferred provider insurance plans experienced a 76 percent rise in their premiums and an 85 percent increase in their deductibles. Such cost increases, outpacing the inflation rate, not only place a great burden on the low-income earners but also reinforces the trend of mounting health care destabilization even for the middle classes.

But what is driving this trend if not the forces mentioned in the previous section?

Most U.S. politicians and big business associations have long been on record as opposing any health care delivery system that resembles a “socialist”-style national health care plan. A key element in their argument against such plans is the myth of what would happen to health services administration if nationalized health care were instituted in the states: the rise of a Kafkaesque bureaucracy in which people’s medical options would be curtailed by government control, procedural inertia and piles of paperwork.

Yet a comparison between the U.S. and Canada, which has government-run universal health care plan, shows that equating nationalized health care with a deadening bureaucracy is far from accurate.

As an August 2003 New England Journal of Medicine article demonstrated, the Canadian health care bureaucracy is in fact more cost-controlling and in many ways less “bureaucratic” than the U.S. health care industry. For instance, between 1969 and 1999 the number of administrators within the health care industry grew from 18.2 percent of that total workforce to 27.3 percent. Meanwhile, during the same approximate time period, the number of administrators within the Canadian system expanded from 16.0 percent in 1971 to 19.1 percent. Of the two systems, the U.S.’s is clearly more bloated at the managerial level. By the end of the last millennium, this meant that the U.S. health care industry’s administrative costs averaged $1,059 per capita whereas in Canada the cost was only $307 per capita.

Another health care cost inflator is advertising, particularly when it comes to drugs. In fact, advertising not only helps drive medication costs up, it also renders health care per se less efficient by blurring the line between medical diagnosis and salesmanship.

According to “Prescription Drugs and Mass Media Advertising,” a research report from the National Institute for Health Care Management (NIHCM), pharmaceutical companies pursue a strategy of boosting profits through the high-powered marketing of selected drugs, frequently newer ones. The report indicates that in 1999-2000 the sales of the 50 most heavily advertised drugs accounted for (a) 31.3% of all retail prescription drug sales and (b) nearly half (47.8%) of the $20.8 billion increase in retail spending on prescription drugs during that time. Also, whereas sales for these intensely marketed medications rose a combined 32 percent, sales all other drugs together rose only 13.6 percent.

These sales were generated by marketing strategies whose expenditures grew faster than the inflation rate, thereby helping to increase consumer price rises that also outpaced the inflation rate. As the NIHCM report shows, from 1997 to 2000 mass media advertising for consumer drugs more than doubled, while from 1999 to 2000 alone these costs climbed from $1.8 billion to $2.5 billion.

Interestingly, during this period the most heavily advertised drug was Merck’s Vioxx. In 2000, Merck spent $160.8 million to promote it. This outlay of cash resulted in the quadrupling of Vioxx’s sales from 329.5 million in 1999 to $1.5 billion in 2000. Not until reports surfaced in 2004 that Merck’s advertising copy for Vioxx was skewed by a company decision to withhold scientific evidence of the medication’s adverse health effects did the bottom fall out of the Vioxx boom. After an extensive investigation, The Wall Street Journal published a 2004 article saying that Merck “forcefully fought” to hide Vioxx’s connection to increased cardiac problems while peddling it as a powerful painkiller. One consumer analyst told CNN, “This raises the question of whether pharmaceuticals should even be advertised in the traditional sense. Maybe medications should be sold not by ad people but on the basis of scientific reports put out by specially designated disinterested parties.”

Vioxx has not been the only example of prioritizing copywriting over medical research in the health care industry. In the same year the Vioxx scandal broke, AstraZeneca was cited by the FDA for falsely advertising that Crestor, its cholesterol lowering drug, had scientific and governmental approval ratings that indicated its safety. Ironically, the rebuked ads were part of an AstraZeneca strategy for countering the testimony of Dr. David J. Graham before a senate committee. Graham, an FDA official, had testified that he believed Crestor to be unsafe.

The corporatization of health care not only moves decision-making about health care delivery closer to the boardroom than to the doctor’s office or hospital, it also, along with blurring the line between ad copy and sound medical analysis, transforms the criteria for what is and what is not considered sound health care. Among other places, this phenomenon is evidenced even at campus medical schools.

In a 1999 Academe article Robert Miller of the University of Minnesota discussed the details a corporate-style push to make the university College of Medicine more “efficient” resulted in a so-called “reengineering” strategy that streamlined operations. This bottom line strategy ultimately led to sale of the university’s highly regarded teaching hospital, the Eliot Memorial Hospital.

Prior to the sale of the medical school, a corporate mindset became pervasive and transformed the orientation toward health care delivery. As Miller pointed out, this reevaluation process “started with a corporate model that encouraged faculty to think of their ‘customers’ and ‘shareholders’ rather than their students and patients.” This move away from viewing the university teaching hospital as part of a large-scale teaching/research/health care-delivery operation was the first step in wrenching the hospital away from higher education values and toward a business-only perspective.

These changes in mission and standards were inevitably accompanied by structural changes, which a consulting firm was paid more than $2.7 million to develop and help implement. Ultimately, the medical school reengineering project resulted in the concentration of decision-making power in the hands of a few top administrators. Not only did faculty lose much of their shared-governance power, they also had to wage a fight against an attempt to inaugurate radical tenure changes that would have given top administrators the power to downsize medical personnel through widespread dismissals. Although the proposed tenure changes were finally defeated, the psychological toll was significant. When the teaching hospital was eventually sold for $70 million in 1997 in order to insure its survival as a newly reengineered institution, faculty were already too deflated to organize sufficient resistance to stop the sale.

Conclusion

The trends described above indicate that the future of health care delivery is fraught with problems at all levels, from higher costs to shrinking benefits to increased pressure to replace traditional scientific research standards with research standards infused with corporate interests.

Such realities affect not only people’s current standard of living, but also heighten their fears that employers may find ways scuttle health benefits that were considered to be the cornerstone of retirement. As Bankix Systems, a health care consulting firm, wrote in a recent report, “Many that have jobs and should have retired are staying on if they can, some for as long as a decade, because they cannot afford health insurance. School districts are running bankrupt because they can no longer service the generous retirement packages erstwhile strong teacher unions negotiated.”

Faculty members, at UD and elsewhere, cannot avoid the fact that like everyone else we stand to suffer if U.S. health care continues its current path. There is a lot of political rhetoric at the moment about the need to help out the working and middles classes with regard to health care, but little action. Actually, there is action, but of a kind that neither the AAUP nationally nor locally endorses: a fervor for “solving” the problem by shifting a larger and larger part of the responsibility of funding the health care industry onto those who need care. Just as higher education continues to undergo a transformation (i.e., corporatization) designed to make advanced learning more “functional” and less analytical, so the nation’s health care delivery system is being reorganized to protect companies (i.e., the health insurance companies themselves as well as companies that provide their employees with health benefits) from costs that can be downsized by shifting them to health care recipients.

We must pay attention to these realities, analyze them, and develop strategies that will protect not only our own interests but the interests of tens of millions of others in our society. This is not a time to surrender to the faddish rhetoric of reengineering. We must bring our knowledge and skills to the health care crisis. We must help build a health care system that is universal, rational and equitable.