Waste Not, Want Not
How Eliminating Insurance and Pharmaceutical Industry Waste Could Fund Health Care for All in New Jersey
This report was released in conjunction with Health Care Action Week, October 3 – 10, 2004. During the week of action, 11 unions and many health care reform organizations worked together with the Jobs with Justice coalitions to send a message to politicians and employers demanding health care reforms that would expand and improve Medicare-type coverage for all rather than undermine or privatize existing programs. (Here is the press release for the NJ report. The national report is at www.jwj.org.)
Report funded by:
American Federation of State, County, and Municipal Employees, Association of Flight Attendants, Communications Workers of America, Jobs with Justice, International Longshore & Warehouse Union, National Education Association, United Food & Commercial Workers
Jobs with Justice is indebted to Dean Baker and the Center for Economic and Policy Research for the research and data supporting this report's findings.
Summary for New Jersey
The United States is the only industrialized country in the world that does not guarantee health insurance for its population. The U.S. spends far more per person on health care than any other country in the world – in fact more than twice as much as the average for other rich countries. Yet people in the United States do not have good health. The United States ranks near the bottom of the industrialized world in life expectancy, infant mortality, and other standard measures of health.
As bad as the health care situation is in the United States, it is getting rapidly worse. Double-digit increases in health care costs are leading more employers to drop health insurance coverage for workers or their family members, and to raise costs for those who keep coverage. The number of people without insurance or with inadequate insurance is rising rapidly, leading more people to become insecure about their access to adequate medical care.
While everyone agrees that Medicare has been an enormously successful program, many people believe that covering everyone would be too expensive – that the country simply can't afford to insure its entire population. This report sets out to prove the opposite. The United States has the richest economy in the world, with an annual output of more than $11 trillion. We already spend more than enough to insure the entire population. The reason that we pay more and get less for our money is that our health care system is enormously wasteful.
This report looks at some of the waste in the U.S. health care system. It calculates how much waste could be eliminated at the national level and at the state level, and how many people could be insured with the savings. Specifically, it looks at the waste that results from our fragmented system of private insurers, rather than using a "Medicare for All" approach that efficiently covers everyone. It also looks at the waste associated with government granted patent monopolies for prescription drugs that protect drug companies from selling in a more competitive market. Finally, the report analyses the waste from the additional subsidies for the insurance industry that were part of the recently passed Medicare prescription drug benefit.
Our report finds that:
- The savings from replacing the system of private insurers with a "Medicare for All" approach would be $3.1 billion in New Jersey and more than $94 billion a year nationally. This is a very conservative estimate because it only includes the direct savings from eliminating administrative costs in the insurance industry. It does not include the savings that would result from reducing the paperwork that health care providers (e.g. hospitals, nursing homes and doctors' offices) must deal with because of the fragmentation of the current system.
- The savings from a "Medicare for All" plan would be sufficient to insure 1.399 million of the 2.199 million uninsured in New Jersey. Nationally, almost 55 million people, more than two thirds of the total uninsured population could be covered.
- There would be even larger savings from reforming the prescription drug industry. Currently the government gives drug companies patent monopolies, which allow them to charge as much as they want for life-saving drugs. The United States is the only country in the world that gives companies unrestricted patent monopolies, and as a result, we pay about twice as much as people in Canada and elsewhere for our drugs. If the government instead increased public funding for research and allowed a more competitive market in prescription drugs, the savings in New Jersey would be $4.6 billion and more than $140 billion a year nationally.
- The savings from replacing government patent monopolies with a more competitive market in prescription drugs in New Jersey would be sufficient to insure 2.104 million people. Nationally the savings could insure 70 million people or more than 87 percent of the total uninsured population.
- The Bush Administration-backed Medicare prescription drug bill passed last year included an additional $83.6 billion in subsidies for private insurers. This money was included because private insurers are too inefficient to compete with the traditional Medicare program on a level playing field. New Jersey's share of these insurance subsidies would be 240 million. If this money had instead been used to cover the uninsured, it would have been sufficient to cover another 109,900 people. Nationally, the savings would be enough to cover 3.7 million people, or nearly 5 percent of the uninsured population.
- Taking these three sources of potential savings together, there would be sufficient money to insure 164.3 percent of New Jersey's uninsured population. Nationally, the potential savings from all three sources would be enough to insure 160 percent of the uninsured. The savings would be more than enough in every single state to cover the entire uninsured population.
In short, New Jersey and the rest of the United States are already spending far more money than is necessary to provide adequate health insurance for everyone. It is only necessary to redirect some of the money from powerful corporate interests, like the insurance and pharmaceutical industries, to provide the high quality, secure health care that everyone should have.
The remainder of this report provides a more extensive analysis of the national and state data with charts and tables showing how the savings from eliminating private insurance red tape and drug company super-profits could be used to provide health care for all.
