The Militant (logo)  
   Vol. 68/No. 36           October 5, 2004  
Workers pay dearly for health coverage in U.S.
As health-care costs rise, ranks of
uninsured grow to more than 45 million
(feature article)
WASHINGTON, DC—The cost of employee health-care programs rose for the fourth consecutive year, according to a report by the Kaiser Family Foundation and Health Research and Educational Trust released September 9. Drew Altman, the foundation’s president, said that the ranks of the uninsured in the United States, already at 45 million, will grow.

The cost of medical plans grew 11.2 percent this year, five times faster than workers’ wage increases before adjustments for inflation, the report concluded from a survey of 3,000 companies. The costs in premiums paid by employers for a package that covered a worker and family members increased by 59 percent, it reported. And the portion paid by workers for those plans increased by 57 percent. This development builds on similar trends from the administration of William Clinton.

In response to the rising costs for health-care premiums, small businesses are increasingly dropping medical coverage for their workers. Larger companies press workers to pay a greater share of health-care costs along with establishing so-called health-care savings plans.

This year, the report found, the portion of small companies offering medical coverage to their workers dropped to 63 percent, from 68 percent in 2001.

In 2004, at least 5 million fewer jobs provided health insurance than in 2001, said the Kaiser report. According to U.S. Census Bureau figures released last month, 1.3 million fewer people had company health insurance in 2003 than in 2002.

Rising health-care costs and attacks on Medicare and Medicaid have been part of the debate in the U.S. presidential elections. At the Republican National Convention in August, President George Bush called for establishing individual tax-free “health savings accounts” to provide medical insurance based on individual coverage rather than employer-sponsored plans. Workers would receive tax credits for putting savings in these accounts. These individual accounts would also saddle workers with higher deductibles. Such proposals—along with individual accounts for retirement pensions —are part of preparations by the U.S. rulers for a stepped-up bipartisan offensive against Social Security, Medicare, and other social gains working people have made through struggle (see “How working people won Social Security as a right for all” in last week’s Militant).

The Kaiser report said that a growing number of employers were familiar with the individual “health savings” proposal but only 3.5 percent of those surveyed had adopted the plans.

Kerry has been silent on the heart of Bush’s proposals, saying only he will not cut benefits for current Social Security recipients, which is also the president’s position. During a campaign stop in Des Moines, Iowa, Kerry blamed Bush for rising health-care premiums. Kerry has proposed to have the federal government subsidize 75 percent of “catastrophic” medical care. His campaign claims that would lower premium cost by $1,000 a year.

The Kaiser report said that small businesses pay an estimated $10,217 a year for the average family health-care plan in a preferred provider network, also known as managed care. Workers pay into these plans an average of $2,691 each.

A growing number of bosses also point to the rising cost of health insurance as a rationalization for hiring less full-time employees and more temporary or part-time workers who don’t get medical coverage.

In his acceptance speech at the Republican convention Bush also touted the bipartisan approval in Congress last November of a Medicare “reform” bill that, in the guise of offering coverage for prescription drugs and in the name of reducing costs, shifts more of the burden of health care for retirees onto themselves and their families.

Capitalist politicians offer a variety of “explanations” for the rise in health-care costs that have nothing to do with reality. Bush, for example, says that the proliferation of “frivolous lawsuits” against doctors, hospitals, and pharmaceutical companies is largely to blame. He offers that if re-elected he will push for legislation to restrict such lawsuits.

There are two main reasons for the rise in medical costs. The first is that under capitalism health care is treated as a commodity, not as a right for all guaranteed by the government. Doctors and medical or drug companies are in business to make a profit, not to provide needed care. As the capitalist system slides deeper and deeper into a crisis, doctors, hospitals, and pharmaceutical companies jack up prices to keep up or increase profit rates at the expense of the vast majority of working people.

Secondly, the astronomical increase in the price of medicines produced by pharmaceutical companies is another driving force in rising medical costs. Over the last decade, in an effort to protect their profit margins and market shares, larger pharmaceutical companies have gobbled up weaker competitors. Between 2000 and 2003, Pfizer acquired Pharmacia and Warner-Lambert in a deal valued at $149 billion. Johnson and Johnson acquired Alza for $10.2 billion, and Bristol-Myers Squibb acquired Dupont in a $7.8 billion deal. Glaxo, the largest pharmaceutical company in the United Kingdom acquired SmithKline for $172 billion.

These companies have used the mergers to strengthen their monopoly. “Pfizer is really staking out its position as a marketing and sales juggernaut,” David Webster, a pharmaceutical consultant, told the Wall Street Journal commenting on Pfizer’s acquisition of Pharmacia in 2002. “They will use their market power to get better deals on products near launch, and that will give them a competitive advantage.”

The Journal noted that Pfizer’s market power as a result of the merger increases the chances that smaller but more competitive biotechnology and pharmaceutical companies will license their “most-promising” new drugs through Pfizer. In this way large companies like Pfizer deflect competition and make billions without developing new drugs of their own.

The monopoly enjoyed by the pharmaceutical companies has also put a break, to a degree, on development of new drugs. New drug applications to the Food and Drug Administration (FDA) fell for five straight years up to 2002, according to the Journal. Through the first five months of 2002, the FDA received just two new applications. And in 2001 it received 24, less than half the 53 it received in 1996.

The pharmaceutical giants also fight hard to maintain drug patents that enable them to extract super profits. During hearings in May before the National Institutes of Health, Abbott Laboratories Inc. defended its 400 percent price hike for a leading AIDS drug. Abbott executives also told the government agency that it was unnecessary to allow production of cheaper generic versions of the drug before the expiration of its patent rights. The company said that in order to protect its patent it would provide the drug free of charge to anyone who needed it and who did not have health insurance or government assistance.

Abbott’s patent on the drug, Norvir, doesn’t expire until 2014. Known generically as ritonavir, this drug is an inhibitor that helps suppress the HIV virus that causes AIDS. The drug is distinctive in its group because it enhances the efficiency of other HIV-fighting medicines.

Last December, Abbott raised the price of a single 100-milligram capsule of Norvir, considered to be the most common daily dosage, to $8.57 from $1.71. That drove the annual cost to an individual patient from $624 to $3,128. The company rationalized its action by claiming that the price jump reflected the value of the drug, and that the price increase was necessary to fund future drug development.

Abbott received a $3.47 million government grant in 1988 for research in developing the drug. Company officials claim that the grant was only 1 percent of the more than $300 million it spent to develop the treatment.

Abbott’s worldwide sales of Norvir reached $95 million in 2003. Total sales of the drug since it hit the market are about $1 billion, the company said.  
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