AFL-CIO’s Timid Approach Makes It Irrelevant in Health Care Debate

August 2004

Workers in every industry, from trucking to telecommunications, know that there’s a health care crisis in the United States. Yet the AFL-CIO refuses to endorse the only proposal that can rein in health care inflation without damaging quality of care: a single-payer system.

In a single-payer system, one insurer or payer (typically a government agency) reimburses doctors and hospitals. Oddly, though it refuses to endorse universal single-payer, the AFL-CIO has endorsed Medicare, a single-payer health care system for the elderly.

The AFL-CIO’s illogical position — single-payer for the elderly but not for the rest — has contributed to labor’s feeble influence on the national health care debate.

THE CASE FOR SINGLE-PAYER

Two features are essential to an ideal single-payer system. First, one payer (or insurer), rather than hundreds of insurers, reimburses providers (doctors and hospitals) and drug manufacturers.

This cuts administrative costs for insurers because a public insurer devotes a much lower proportion of revenues to overhead (marketing, supervising doctors, underwriting, lobbying, obscene salaries for management, and profits) than private-sector insurers do. It also cuts administrative costs for providers because providers have to bill only one payer, not hundreds.

This feature, by itself, would cut the U.S. health care bill by 10-15 percent if it were extended to all Americans.

Second, the one payer in a single-payer system must have the authority to set limits on what doctors, hospitals, and drug companies charge. This feature could easily cut another 10-15 percent.

Medicare is not an ideal single-payer system, but it does contain both of these essential features. It is the sole payer for Medicare’s 41 million beneficiaries for the services it covers, and it has the authority to set limits on what doctors and hospitals charge. (Unfortunately, thanks to legislation passed last year, Medicare will have no authority to set limits on drug company prices once Medicare drug coverage commences in January 2006.)

MEDICARE FOR ALL

Because Medicare resembles a single-payer system, it is far and away the most efficient health insurance program in the nation, public or private. Medicare’s overhead costs eat up only two to three percent of its revenues, while private-sector plans divert roughly 20 percent of their revenues to overhead.

For this reason, and because Medicare pays providers slightly less than private insurers pay them, Medicare’s per capita costs rose at an average rate of 9.6 percent annually between 1970 and 2000, versus 11.1 percent for private sector insurers. And, perhaps most importantly, traditional Medicare has achieved greater efficiency without resorting to the private sector’s favorite cost-containment tactic—routinely refusing to pay for necessary medical services.

If Congress passed legislation giving Medicare the authority to limit drug prices and lowering Medicare’s eligibility age from 65 to zero, we would have a national single-payer system, what single-payer advocates often refer to as Medicare-for-all.

UNIONS AND SINGLE-PAYER

Although several AFL-CIO affiliates have long supported a national single-payer system, the national AFL-CIO has deliberately avoided endorsing single-payer. Today, a section of the AFL-CIO’s website entitled “How can we fix our health care system?” says not a word about single-payer.

The website does mention, however, the National Coalition on Health Care, to which the AFL-CIO belongs. The NCHC consists of big corporations (including AT&T, GE, Pfizer, and United Health Group, the nation’s largest health insurance company), churches, and unions.

Like the AFL-CIO, the NCHC avoids supporting fundamental health care reform, instead calling public attention to our health care system’s deficiencies and the need for universal coverage.

(Many people equate single-payer with universal coverage, but the two are not synonymous. A government could, in theory, establish a single-payer system and not cover its uninsured. Similarly, universal coverage could be achieved without fundamental health care reform, by, for example, raising taxes high enough to pay for health insurance for the nation’s 44 million uninsured, and turning the new revenues over to the health insurance industry.)

LABOR’S PARALYSIS

The AFL-CIO has never explained why it won’t endorse single-payer, leaving observers to draw their own conclusions. In a 1999 article for The Journal of Health Politics, Policy and Law, Marie Gottschalk focused on the fact that some unions, including many in the building trades, run their own insurance plans (called Taft-Hartley funds), which would disappear under a single-payer system.

According to Gottschalk, in 1991 AFL-CIO President Lane Kirkland and SEIU President John J. Sweeney led the internal campaign to keep the AFL-CIO from endorsing single-payer. The issue came to a head that year because premium inflation had hit double digits for several years in a row, and because the single-payer movement had succeeded in introducing single-payer legislation in several state legislatures and the House of Representatives.

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Single-payer advocates, including unions such as AFSCME and UAW, believed that labor’s endorsement would add significantly to single-payer’s credibility with politicians and the media. But the federation’s health policy committee split eight-eight on a motion to endorse single-payer.

A second possible reason for the AFL-CIO’s single-payer paralysis is the Democratic Party’s tendency towards either paralysis or bogus solutions on health care, coupled with the AFL-CIO’s tendency to follow the Democrats on health policy, rather than lead them.

In the early 1990s, the AFL-CIO in Minnesota stood by while Democrats campaigned for “managed competition,” the doomed theory that pushing people into HMOs would solve the health care crisis. When “managed competition” bit the dust in the late 1990s, Minnesota’s Democratic legislative leadership simply stopped talking about fundamental reform, and the AFL-CIO did not challenge them.

NO VOICE

The AFL-CIO’s hemming and hawing on single-payer came with a high price. It deprived the organization of a voice in the debate about health care reform that reached a crescendo during the first term of the Clinton presidency.

Not surprisingly, labor had little influence in the writing of the Clintons’ awful Health Security Act of 1993 (which advocated managed competition). Not surprisingly, single-payer legislation was shunted aside in Congress and nearly all state legislatures. Not surprisingly, the Health Security Act died in the Senate in 1994.

The death of that legislation, and a short-lived reprieve from rampant health care inflation in the mid-1990s, swept health care reform off the national agenda for the rest of the 1990s.

But by 2000, double-digit premium inflation had returned and unions were out on strike all over the country over employer attempts to cut insurance coverage and shift costs to employees. More and more union leaders are now calling for political action to solve the health care crisis.

But effective political action on the health care crisis is highly unlikely as long as the AFL-CIO refuses to endorse single-payer.

Even with the AFL-CIO in the ranks of the single-payer movement, the odds against single-payer being established in the near future are not good. But if the AFL-CIO were to endorse the single-payer solution and pour resources into organizing grassroots support for it, that would jolt the debate about single-payer up to a much more visible level, which would in turn make organizing for single-payer a lot easier.

Kip Sullivan is on the steering committee of the Minnesota Universal Health Care Coalition.