Risk & Compliance

The View from West Virginia

What will health reform do for the unhealthiest Americans?
Economist StaffMarch 6, 2009

His bedside manner would unnerve the most stoical of patients. In the past eight years, says Barack Obama, health-insurance premiums have grown four times faster than wages. Every year a million Americans lose their coverage. The crushing cost of health care causes a bankruptcy every 30 seconds, and by the end of the year it could cause 1.5m Americans to lose their homes. In short, America’s health-care system is sick, and “there’s no easy formula” for fixing it.

After the financial crisis, health reform is Mr. Obama’s most urgent domestic priority. This week he named his second choice for health secretary (Kathleen Sebelius, the governor of Kansas) and was due to convene a health summit at the White House as The Economist went to press. His first choice for the health job, Tom Daschle, had clout on Capitol Hill and a mastery of health-care policy, but had not paid all his taxes and so had to drop out.

Mrs. Sebelius is no lightweight. As the Democratic governor of a Republican state, she is used to working with the centre. As a former state insurance commissioner, she knows the subject. But her own efforts at health reform in Kansas came to little. If confirmed, she is more likely to implement policy than to drive it. Mr. Obama also named Nancy-Ann DeParle, a veteran of the Clinton era health-reform battles, as director of the White House Office for Health Reform. Mr. Daschle would have done both of these jobs.

The two women have a tough task. America spends at least twice as much per head on health care as other rich countries. Yet for $2.2 trillion a year — twice the GDP of India — Americans get mediocre results. They die, on average, nearly two years earlier than west Europeans. Some 46m of them lack health insurance. And ever-rising medical costs could break the budget.

Economist healthcare

Mr. Obama promises several reforms. He has already signed an expansion of state health insurance for children. And he promised on February 26th to set aside more than $630 billion over ten years as a “down-payment” towards making health care affordable for everyone.

Mr. Obama wants to oblige all parents to obtain health insurance for their children, subsidising those who cannot afford it. He would create a national health-insurance exchange to help individuals and small firms join larger risk pools and so reduce their premiums. He would bar private insurers from rejecting people because of pre-existing illnesses, and offer everyone the option of buying into a government health plan.

It is too early to say what kind of reform bill will eventually emerge from Congress. Unlike Hillary Clinton in the 1990s, Mr. Obama favours a gradual approach to reform, refusing for example to make it compulsory for everyone to buy health insurance, at least for now. Nonetheless, his proposals are radical.

He insists that Americans who like the health insurance they currently get through their employer can keep it. But Michael Tanner of the Cato Institute, a libertarian think-tank, predicts that government insurance will crowd out private insurance. The government could offer insurance cheaply by dumping part of the cost on future taxpayers, and so crush its private competitors.

If that happens, hospitals will be squeezed. Currently, patients with private insurance cross-subsidise those in government schemes. (A typical hospital enjoys a profit margin of 48% on each privately insured patient and suffers a 44-percent loss on each patient covered by Medicaid, the government programme for the poor, according to McKinsey, a consultancy.) If that subsidy disappears because there are fewer private patients left to pay it, hospitals will have to cut back. European-style queues may form, the sceptics fret.

Mr. Obama dismisses such fears. He says he can expand coverage while curbing costs by cutting waste and encouraging healthy living. Critics grumble that he provides few details. He wants to computerise medical records, of course. He would promote “evidence-based medicine” (the novel idea that you measure what works and offer only treatments that do).

The Facts on the Ground
And Obamaworld is buzzing with ideas to help people keep fit. Taxes on booze, cigarettes and sugary drinks, which are low by rich world standards, could rise. There is talk of making companies install gyms in the same way as they do fire escapes. Some favour giving people a “nudge” (the title of a recent book popular among Obamaites) to live more healthily. For example, people eat less if restaurants serve smaller portions; children eat better if the school cafeteria puts healthy food at eye level.

The cultural obstacles to all this, however, may be greater than Mr. Obama’s lean, sporty advisers understand. Consider the shoppers at the Save-A-Lot supermarket in Hamlin, West Virginia. At the beginning of the month, when the food stamps arrive, they snap up buckets of lard so big that the label says: “Warning — Children can fall into bucket and drown.” The manager, Key-Ray Adkins, shrugs: “People now say lard isn’t good for you. But it’s what we grew up with.”

Hamlin is near the Huntington metro area, one of the unhealthiest in America. Some 77 percent of adults are overweight; an incredible 46 percent are clinically obese. Some 13 percent of adults have diabetes, 22 percent of those over the age of 45 have heart disease, and nearly half the over-65s have lost all their teeth.

The local cuisine dates back to the days when people burned off calories at work. But the coal mines these days use more machines and fewer people. “That’s good, in that people aren’t getting torn apart [in mining accidents],” says Rob Walker, a local doctor. “But bad in that they are gaining a lot of weight.” Some 26 percent of West Virginians smoke too, despite the warning on every packet and 16 percent of the men chew tobacco, the highest rate in the country.

Because West Virginians are unhealthy, they cost a lot to insure. The Riedel-Wilks building firm in Huntington, for example, saw its premiums soar by nearly a quarter in the past year because the boss fell ill. Paul Riedel, the firm’s president, needed $58,000-worth of treatment for diabetes and chronic obstructive pulmonary disease. A couple of his middle-aged colleagues racked up large bills, too. “A big illness can knock [a small firm] sideways,” says Mr. Riedel.

Some firms stop offering health insurance. Under Mr. Obama’s plan, they will have to pay a penalty for this, but probably less than the amount they save by dropping coverage. Firms that go on offering insurance must worry about things unrelated to their true business, such as whether a prospective employee has a chronically sick child. “You can’t legally discriminate, but no sane employer would hire that person,” says a local businessman.

Roman Prezioso, a Democratic state senator in West Virginia, is not holding his breath for Mr. Obama to shake up the system. “How many times have we heard that?” he asks. Regardless of what happens in Washington, “it’s up to us” to boost preventive care, he reckons. What works, he says, is making sure people have a primary-care doctor who knows them well and can recommend not only treatment but also lifestyle changes.

Dr. Walker is one of those. He says that you need to know your patients to be able to persuade them. “You may say: ‘Eat less salt because you have high blood pressure.’ He may reply: ‘But I feel fine.’ You have to be able to say: ‘I know, but your wife and your three kids need you to be around for a long time.’”