Obamacare Already Starts Collapsing Into Medical-Industry Feeding Frenzy

Guest post by Eric Zuesse.

Part of the Obama Administration’s promise to the American people regarding Obamacare was that the enormous waste in America’s medical expenses would be reduced. The reversal of that promise has already begun, with the Administration’s announcement on April 1st, that is will increase instead of (as had been promised) decrease, taxpayer subsidies to private health insurance companies.

Estimates of this waste already range generally around 40%. On 15 May 2007, Reuters headlined “US Health Care Expensive, Inefficient: Report,” and announced: “Americans get the poorest health care and yet pay the most compared to five other rich countries,” according to a study by the Commonwealth Fund. “The U.S. health care system ranks last compared with five other countries on measures of quality, access, efficiency, equity, and outcomes.” In other words, the U.S. was paying gold for garbage. “Canada rates second worst. … Germany scored highest, followed by Britain, Australia and New Zealand.” Moreover: “Per capita health spending in the United States in 2004 was $6,102, twice that of [top-rated] Germany, which spent 3,005. Canada spent $3,165, New Zealand $2,083 and Australia $2,876, while Britain spent $2,546 per person.” On top of that: “U.S. doctors are the least wired, with the lowest percentage using electronic medical records or receiving electronic updates on recommended treatments.” The conservatives’ myth that “free market” healthcare is more efficient, or is better, or is even more “wired,” than socialized health insurance, benefits only the corporate providers within the system, and the stockholders of those corporations. [Comment by Washington’s Blog:  We don’t think capitalism is the problem … Indeed, we don’t even have free market capitalism in America today. Instead, we have fascism, communist style socialism, kleptocracy, oligarchy or banana republic style corruption … choose your label.  Also, while Mr. Zuesse is passionately progressive, we are trying to follow the Founding Fathers’ advice to be non-partisan.] Everyone else loses.

On 14 March 2012, the Journal of the American Medical Association, headlined “Eliminating Waste in US Health Care,” and estimated that the waste amounted to somewhere between 21% and 47% of the total U.S. medical expenses, mixed public and private.

One of the most wasteful parts of the entire system now is Medicare Part D “Advantage” private supplemental insurance plans, which are heavily subsidized by U.S. taxpayers, and yet, on average, still are costlier to Medicare recipients than is the government-run Part B program. On 25 July 2008, the Los Angeles Times bannered “Medicare Part D a Boon for Drug Companies, House Report Says: Taxpayers pay up to 30% more for prescriptions under the privately administered program” than under the publicly administered one, and Nicole Gaouette reported that, “U.S. drug manufacturers are reaping a windfall from taxpayers because Medicare’s privately administered prescription drug benefit program pays more than other government programs for the same medicines. … In the two years Medicare Part D has been in effect, drug manufacturers have taken in $3.7 billion more than they would have through prices under the Medicaid program.” For example, “Bristol-Myers made an additional $400 million from higher prices for a single drug, the stroke medication Plavix.”

Part D, including “Advantage,” was sold by President George W. Bush to Congress on the basis of the President’s estimate that it would add “only” $395 billion to the deficit during its first ten years. Douglas Holtz-Eakin, who had previously been the head of Bush’s Council of Economic Advisors, was now the head of the Congressional Budget Office, and on 20 November 2003, right before the crucial House vote, he wrote to Congress, “CBO estimates that enacting the legislation would result in direct spending outlays totaling $395 billion.” This figure was crucial, because opponents had already said that any such legislation which would cost more than $400 billion (these were ten-year estimates, 2004-2013) would be unacceptable. Two months after the legislation was passed, the White House Budget Director revised that cost-estimate upward to the range of $534-$551 billion. Then, on 11 March 2004, Tony Pugh of Knight Ridder Newspapers headlined “Bush Administration Ordered Medicare Plan Cost Estimates Withheld,” and he opened: “The government’s top expert on Medicare costs [Richard S. Foster] was warned that he would be fired if he told key lawmakers about a series of Bush administration cost estimates that could have torpedoed congressional passage of the White House-backed Medicare prescription-drug plan.” On 2 April 2004, the Los Angeles Times headlined “Medicare Secrecy Inquiry Is Silenced: House Republicans stop Democrats from delving further into why the prescription drug bill’s true cost estimates were kept from Congress.” On 9 February 2005, the White House re-estimated what this legislation would cost the federal Government over ten years: $720 billion. That’s $320 billion more than congressmen had been promised when they voted to pass the legislation. (Almost no Democrats voted to pass it, but Republicans needed this cover from the Administration – “only $395 billion” – so that they could justify this program when speaking about it to their constituents.)

So, now with a Democratic President, on a 15 February 2013 Friday night news dump, the Center for Medicare and Medicaid Services (CMS) announced a 2.3% reduction in subsidies to insurers who provide plans under Part D. This was supposed to be part of the cost-efficiencies in Obamacare, and an important part of the projected reductions in the growth of the federal debt. But then, after lots of lobbying by those insurers, CMS reversed itself on April 1st, and said that instead those subsidies would increase 3.3%. Reuters headlined on April 2nd, “In Reversal, US to Raise Medicare Advantage Payment Rate,” and announced, “In a reversal that followed intense lobbying from the health insurance industry,” the CMS “said on Monday it will increase the rate by 3.3 percent in 2014, reversing a 2.3 percent cut announced in February.”  The many “free market” fans of increasing this Republican federal subsidy to big businesses were applauding. At fool.com, Sean Williams bannered “The Insurance Industry Shows Obamacare Who’s Boss,” and exulted “The insurance industry effectively dictated itself a raise.” He pointed out that Humana, Universal American, UnitedHealth, and Health Net, “generate 63.5%, 75%, 25%, and 25%, respectively, of their revenue from Medicare Advantage.” He didn’t note, however, that this “revenue” comes from enormous subsidies that are paid by U.S. taxpayers to those companies. CNN headlined on April 2nd, “Health Insurance Stocks Surge on Medicare Rate Hike,” and reported that all insurers jumped at least 4%, and “Humana, which has the greatest exposure to Medicare Advantage, jumped nearly 10%.”

This is how America’s “free market” works. But it is also how Americans spend twice as much per person and receive inferior health care, as compared to other industrialized countries. And now, with Obamacare, it is how these subsidies will be increased, not reduced, and the federal government’s debt will rise even higher than is being projected, while the largest corporations will thrive.

So: President Obama is working, as he has since he first became President, with Republicans in Congress to cut Social Security, Medicare, and Medicaid. After all, Humana, UnitedHealth, and other health insurance companies – and the mega-banks on Wall Street – all need that money. “Entitlement” recipients shouldn’t be so “greedy.” They need to share more of it with the mega-banks and the corporations in the DJI and S&P.


Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

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  • Chris

    This info is very useful for me! Thanks for sharing.


  • justsomeguy05

    Agree with SO much of your post. Especially about “free market” health care.

    Obama … so many lost opportunities.

    A few of Obama’s biggest mistakes :

    1. Not fighting for single payer. Or at least Medicare for those over 55.

    2. Doing Health Care reform before Financial reform (thereby letting true financial reform fade away).

    3 . Letting Rahm oust Howard Dean from the DNC
    4. Hillary for Sec of state instead of Senate Majority leader

    On the other hand … these all relate to his essentially conservative nature and his inclination to take the path of least resistance and not upsetting people that are close to him or represent powerful interest. A failed Presidency, but a better than average Republican President.
    And a very sad example of how for 30 years the Overton window has moved ever right-ward to the point where perhaps Obama is NOT acting on his beliefs – but rather is correct in his political calculations of what actions were do-able.

    • Eric Zuesse

      I agree with all four of your points, but in many places (just web-search “Eric Zuesse”) I argue that Obama is basically George W. Bush II, and specifically that he continued Bush’s thrust to transfer the enormous losses that the aristocracy suffered from the 2008 crash onto the middle class and the poor; and, further, that he is doing everything he can to be able to approve the Keystone XL Pipeline in a manner that will do him the least amount of political damage. So: I expect that future historians will rate Obama no higher than a “D,” and perhaps an “E” (or “F” to mean failure).

      While I agree with you that Obama is the conservative as compared to the Republican Party’s fascist ideology, he has been helping to drive the Republicans fascist, inasmuch as the Republican Party’s base, who elect their candidates, always want a Republican nominee who will be to the right of whomever the Democratic nominee is. Obama’s conservatism is, thus, unfortunately, one reason why the Republican Party has become outright fascist.

      Obama is a traitor to the Democratic Party. He is a fake “Democrat,” who won the Party’s nomination by running to the left of the fascist Hillary Clinton, and who, as President, has ruled almost exactly as she would have ruled. Our Party will earn the curse of future historians if Hillary is unchallenged for the Party’s nomination in 2016, just as Obama was unchallenged for it in 2012. The future of this nation will then be extremely grim if that happens; and, if that happens, then the entire Party, and not merely a few elite phony “Democrats” such as Obama and Clinton, will be to blame for it.

      • nveric

        Political parties are a problem. Both stab the People in the back, but the People, such as yourself, keep voting for a party, thus you stab yourself in the back too.

        End your madness of party voting.

        • justsomeguy05

          SO RIGHT !

          I am proud to say that at the Presidential level I have not voted for a Democrat or Republican in my entire life (going back to the 1980 election).

          • Eric Zuesse

            Ohmygod, I don’t agree with you; I am no Naderite; Gore was vastly superior to Bush. Anyone in 2000 who sat that one out by voting third-party was an idiot, because the stakes that time were enormous, not just regarding Iraq, but global warming and so much else.

          • justsomeguy05

            That’s OK, we can agree to differ on that one. I think the decision to vote 3rd party is largely dependent on whether you live in a swing state.

      • justsomeguy05

        I agree with you completely.

        Seems to me that with the advent of the DLC in the 80’s the Democratic party made a conscious decision to move away from populist leanings and any differentiation from republicans on financial issues and regulatory oversight of corporations (or pension funding, environment etc). Whether it be Obama or Hillary, the Democrats differentiate themselves
        from the Republicans by slight matters of degree on a handful of issues. From a “get elected” standpoint, that corporatist shift probably made sense. I think what you and I think of as traditional democratic policies and beliefs (new deal) is long gone. It is not in the interest of either party to advocate for true campaign finance reform, so I only see one depressing circumstance which would move the Democrats in the direction of a “peoples party” – a complete collapse of our institutions (financial, education, health care, environment etc) – which could just as easily move the country further towards fascism.

        And it is not just the US in which I think a rightward tilt seems likely for the foreseeable future.

        There is an inherent mis-match between
        A ) globalized capital, globalized corporations
        B ) regulations that are at a nation-state level

        That discrepancy causes a global flight to areas of less regulation (whether of the environment, labor, capital requirements, lending restrictions etc).
        I think that flight to “unregulated” areas is what causes inevitable collapse of systems – whether it be global debt and currencies, or global food, air and water systems.

        I think more “protectionist” policies to prevent outsourcing of jobs, capital or profits may be a solution, but although a more populist Democratic party COULD have been in the position to win on such a platform, it is not currently in the interests of any political party to do so – it cuts off campaign funding and would therefore cause them to be unelectable.

        I sure wish I had a more positive outlook including practical solutions .. but I don’t.
        Depressing stuff.

        OK – time to go do something more fun 😉

        • Eric Zuesse

          I agree with everything you said.

  • “America is not a Country – its a business!” Brad Pitt in Killing Them Softly!

  • wunsacon

    How ’bout an animated Pac Man gif, with MittBamaCorpCare gobbling up little coins and patients in blinking hospital gowns?

    [in ferris bueller’s teacher’s voice]: … Freda?

  • nveric

    Capitalism is a problem, damn it.
    Profits come from somewhere.

    • Eric Zuesse

      And profits don’t necessarily come from producing the best product at the lowest cost; in fact, they rarely correlate with that at all. Microeconomic theory is garbage, but “George Washington” hasn’t yet fully absorbed that fact; he only asserts it — doesn’t yet fully put that understanding into practice in his underlying assumptions about “capitalism” and lots of other things.

      • nveric

        Price, cost, and value are momentary numbers, not to the future worth of a thing. Labor is also a momentary thing never given its justice. Our time is finite and non-renewable. It must be compensated for equally. Skill required to do something is an arbitrary factor lending more to persuasion than real worth, leaving risk as something both under compensated when physical, and over compensated when mental.

      • If you consider the neoliberal model as “capitalism”, then of course the theory is garbage. Keynesian “aggregate demand” theory is finally getting the attention it deserves. It will collapse under its own weight. There are some main macro elements which are the causes of the decay in society we now see:

        1. White collar, grand scale fraud and manipulation that goes unchecked and is not prosecuted.
        2. A system that allows money to buy influence of state officials who control the monopoly on force and who are able to pass legislation that smothers competitive and creative innovation.
        3. A centrally planned command economy that utilizes debt-based money to perpetrate foreign country conquest, debt-based servitude, a boom-bust cycle with increasing frequency and severity, and a financial aristocracy that will do everything in its control to stay in power.

        Arguing Democrat vs. Republican is just misdirection from the real issues at hand. The Republicans want the same thing as Democrats; their will imposed upon the masses. Our election system has come to the zenith of its design and is now a one-party dual-winged nightmare that does not remotely represent the people. There is no accountability, transparency, or adaptability. There are superior election systems available.

        As “George Washington” points out (or at least used to before some of these guest posters such as greenbacker Ellen Brown and you gained momentum on this site), this country was founded on free market principles (designed to limit private power), a sound monetary system, and limited government (designed to limit public power) that was designed to discourage centralizing power from taking hold. It obviously failed in part because the system wasn’t error free and in part because the masses became lazy and uneducated of the system that was established. What this country has devolved into is nothing less than a full fascist state. Advocating anti-free market practices will only accelerate the devolution, not reverse it. The foundations of a truly great society must begin with liberty.

        Systems that are not sustainable, will not sustain themselves.

        As an afterthought, Charles Hugh Smith offers some solid analysis on his site:


        It is much better than the junk analysis by some of the guest posters here. It’s just too bad that GW cannot devote as much time to this site anymore. ‘Washington’s blog’ used to be one of the best sites on the net.

        • nveric

          I don’t know this GW or “George Washington” character.

          Whatever system which wants growth on a finite plant will fail. Growth is unsustainable on this planet alone.

          Freedom and Liberty are incomplete and destructive without RESPONSIBILITY.

  • Eric Zuesse

    Re. [Comment by Washington’s Blog: We don’t think capitalism is the problem … Indeed, we don’t even have free market capitalism in America today. Instead, we have fascism, communist style socialism, kleptocracy, oligarchy or banana republic style corruption … choose your label. Also, while Mr. Zuesse is passionately progressive, we are trying to follow the Founding Fathers’ advice to be non-partisan.]

    No democracy has no parties; democracy without politics is impossible; politics without parties is possible only in a dictatorship — a one-party state. Even George Washington wouldn’t have wanted that.

    George Washington was no god; the best thing he ever did was decline Al Hamilton’s desire that he become king. His realism did not, unfortunately, extend to political theory — he wasn’t very strong at that.

    As regards our “capitalist” economy: It’s fascist; it certainly is the problem; and your underlying libertarian assumptions are based upon falsehoods that I expose in a book I am doing on how libertarianism grew out of a failed fascist coup attempt in 1934 against FDR by aristocratic U.S. fascists, who then decided to create a “movement’ by which fascism would become relabeled as “libertarianism” — equally hostile towards democracy as the original.

    • nveric

      “…democracy without politics is impossible;
      politics without parties is possible only in a dictatorship — a
      one-party state.”

      Sorry, this is an error. No parties means no parties. Dictatorship can arise for many reasons. Factions / Parties are private non-governmental entities serving the private interests of their members. They do not serve the Public. They serve narrow and controlling interests only.

      And today, there is no real representative government as stated in the Constitution, for our proper amount has be reduced, over time, to be virtually worthless. No federal representative elected has less than 500,000 people to represent and on average over 700,000.

      This two-party system is a dictatorship – plain and simple.

      • Eric Zuesse

        In the Soviet Union, they had only one Party. That was a dictatorship.
        In Nazi Germany, they had only one Party. That was a dictatorship.
        You’re more than a bit confused about what democracy is.
        Unanimity is always an exceptional condition, never the norm for any extended period of time.
        There will be parties; if there is only one party, there is a dictatorship.

        • nveric

          To say to me “You’re more than a bit confused about what democracy is.” is rather bold without facts in evidence or explanation.

          Political parties are private clubs, not a part of any government. They are not in law anything other than private associations. They hold no standing in any constitution. They have no legal authority.

          Political parties are vehicles to subvert democracy, because they skew reality. Democracy must have each person able to speak and vote with equal weight. If we understand democracy to be pure, then we do not have it in the USA. We instead have a republican form of government, which is not defined in law other than it being the only valid form of government in the USA, via the guarantee in the Constitution.

          Is this not the way it is stated?

          Variance from this system, via political parties becoming defacto government entities is an absurdity and illegal. The Constitution gives no authority for political parties. Claims of freedom to create parties are valid, but the parties themselves are not allowed weight in government anymore than the Boy Scouts. I can’t imagine anyone thinking these parties as anything other than private clubs. Unless it is written, it is not allowed. Freedom never applies to those in government, because they are held to their charter/constitution/restraining order.

          Members of Congress are allowed to write their rules, but nowhere are parties given official status. Those rules are for each session, if I’m not mistaken. But, officially political parties have no status, standing or other. The People elect people.

          I’m I still not understanding how our system works?

  • Honest Harry’s Used Cars

    What a strange comment thread here. Everyone is agreeing with everyone else.

    Let me change the tenor a bit. I don’t think the government should be in the health care industry.

    I’m 63. I have not seen a doctor since I was 31. I can die without a doctor, thank you.

    And, I plan on living into my nineties.

    Now think what ObamaCare means to me. (It’s just another fascist tax, this one for the healthcare and the insurance industries.)

    Here’s my health plan-

    I swim a mile five days a week.

    I don’t eat much meat, and never fast food.

    I don’t drive too fast, or very far.

    I don’t drink.

    I don’t smoke.

    I don’t have casual sex. (I’ve been married 43 years.)

    And I don’t take any drugs (legal or otherwise).

    In fact, there isn’t likely anyone of any age reading here who could jump in the swimming pool with me and beat me in a race -of any length, or any stroke. There may be, but whomever wants to take up the challenge had better be in pretty good shape.

    You only get one life. Forget about health care, and take better care of yourselves.

    For everyone, eventually, the only thing that really matters -is your health. And good health is not something you can buy at a hospital or doctor’s office.

  • Show me a single Conservative who didn’t know this was going to happne. Go ahead show me just one. You can’t!
    Now find me a Liebral who knew this was going to happen. Well that’s easy … Just look for Dem politicians, they all knew this was going to happen, but they also knew their supporters are such drones that they can be told anything and they’ll believe it.
    Get prepared for the mess that Obamacre makes to be blamed on the Republicans, especially as we get closer to election time …

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