I first heard the term "lemon socialism" articulated by Simon Johnson, who is a former chief economist at the International Monetary Fund and now is at MIT's Sloan School of Management. He defines the term as a system wherein financial successes are credited to the private sector, while their failures are transferred to the taxpayers through bailouts. Anyone who has paid attention to our nation's financial woes recognizes how lemon socialism is a most apt description of the American economy.
It is also applicable to our health-care system, though here better called "lemon cherry socialism." Health care costs Americans $2.5 trillion this year, approaching 20 percent of our gross domestic product. Most of that (60 percent) is paid by taxation. Many years ago, health insurers did not want the responsibility of paying for the health problems of the poor and elderly (two groups of health-care lemons), so they pushed those populations onto the taxpayers' shoulders. However, health insurers realized that some of the beneficiaries of government programs are relatively healthy (the proper industry term here is cherries, as in "cherry-picking"), and so they lobbied successfully for the "business" opportunity to provide health financing to selected groups of these patients, in Medicaid managed care and Medicare Advantage plans. These plans actually cost the taxpayer more than traditional government programs, because the private health-insurance business model is all about avoiding risk, not managing it. The plans inventively enroll healthier people and take their government subsidies while they are well and then push them back into traditional government programs when they become sick and need care. The private sector picks the cherries, and the public sector gets the lemons.
American socialism, better known as corporate welfare, at its finest.
Health insurers are not alone in learning how to play this game. Mike Leavitt is fond of telling the story of his attempt to change the way Medicare pays for durable medical equipment. On his watch as secretary of Health and Human Services, staff organized a trial competitive-bidding process for expensive equipment needed by Medicare patients and demonstrated savings of up to 46 percent. The program was killed before it became standard policy, however, when medical-equipment sellers used lobbying to induce their representatives in Congress to obstruct the department's attempt to reduce taxpayer costs. Medicare Part D, the pharmacy benefit for seniors, is yet another example of lemon cherry socialism. We set up a pharmacy-benefit program and then asked the pharmaceutical firms how much they wanted to charge the taxpayers for the drugs. Americans pay far more for brand-name medications than do the citizens of other countries. Lemon cherry socialism is really corporate welfare.
Bill Moyer recently said: "Over the last two decades, the current members of the Senate Finance Committee have collected nearly $50 million from the health sector. A long-term investment that's now paying off like a busted slot machine. … A century ago, muckraking journalists reported that large corporations and other wealthy interests virtually owned the Senate, using bribery, fraud and sometimes blackmail to get their way. Jokes were made about the Senator from Union Pacific or the Senator from Standard Oil."
One of the muckraking journalists of a century ago, David Graham Phillips, wrote an article in 1906 titled "The Treason of the Senate." He wrote: "Treason is a strong word, but not too strong, rather too weak, to characterize the situation in which the Senate is the eager, resourceful, indefatigable agent of interests as hostile to the American people as any invading army could be."
We are witnessing another round of corporate welfare from Congress masquerading as health reform. Neither political party is acting in the interest of patients and taxpayers, but they are eagerly pouring lemon cherry entitlements for corporate hogs at the public trough.
Joseph Q. Jarvis, M.D., is chairman of the Utah Healthcare Initiative.