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Merrill Goozner

Merrill Goozner

Posted: January 29, 2007 12:14 PM

Shaping the Health Care Debate


We're entering a period, like 1988-94, when everyone is for health care reform. The debate will center on what shape it should take.

I believe progressives should articulate a set of overarching goals, and evaluate any plan or incremental reform in light of those goals. Of course, compromise is inevitable. But it's much more likely to lean in a progressive direction if there is a strong movement articulating core principles that are much broader than "universal health insurance." Indeed, many universal health insurance plans have unintended consequences that will make our overall health care system worse and the payment system less fair, even if they succeed in eliminating the problem of the uninsured. I am especially concerned about individual mandate plans, whatever their shape, because they ultimately rely on some version of "consumer-driven" health care to hold down costs. This is a prescription for exacerbating the nation's public health crisis, which already has us spending 40 percent more than any other advanced industrial nation yet delivering results that rank us 22nd out of 30 countries in the OECD.

Here's my laundry list of goals, an attempt to redefine what is meant by Access, Affordability and Quality, which has been the mantra of health care activists for generations:

Access: We should demand access to health care for everyone when they get sick. That means universal coverage. But we should also demand that the universal insurer(s) support preventive care and launch public health campaigns around income inequality, stress, smoking, obesity, the food supply, environmental toxics, and the built environment--the factors that contribute to America's ill-health. If you are among the healthy 50 percent of the population that accounts for just 3 percent of health care costs, you should be especially interested in delivering preventive care and public health campaigns to the 5 percent of the population that accounts for 49 percent of health care costs before they get sick. This is the only way to improve the overall health of the American people while effectively controlling costs.

Affordability: We should demand that the payment system be fair, i.e., it should be at a price that all people can afford, whether that comes from out-of-pocket payments, through taxes, or through the insurance system. And we should demand that the payment system be progressive. Those that can afford to pay more should, and those that can't afford anything shouldn't have to pay, with the rest of us strung out somewhere in between. Finally, we should demand that the health care system stop draining the rest of the economy, i.e., health care can't continue growing at two to three times the rate of inflation without squeezing out other economic activities.

Quality: We have to redesign the health care delivery system so that it provides high quality care that is the best that medical science has to offer. That means grappling with issues like health information technologies, medical error, evidence-based medicine, and eliminating the perverse incentives of fee-for-service medicine. What it doesn't mean is offering everyone Cadillac care since many modern technologies are the health care equivalent of 1959 Caddies: low mileage behemoths with ridiculous tail fins that aren't necessary to get you where you want to go, which is better health.

Using this set of guiding principles, let's evaluate recent developments, specifically, the Bush proposal to end the inequitable tax exclusion of employer-based plans. As Robert Reich points out in his single cheer for this proposal, it is the first step on the road to ending employer-based plans entirely, which everyone seems to be for these days, including Ezra Klein in his post. Yet Reich also calls for single-payer, which Ezra Klein says is unlikely to happen.

Has anyone thought through the implications of canceling the $700 billion or so paid out by private firms for their employees' health insurance? The unfair tax implication of employer-based plans is reversed on the expenditure side. A company that provides a $10,000 insurance plan for a workers' family is giving a 25 percent raise to the $40,000-a-year worker, but a 10 percent raise for a $100,000 a year worker. When they are in a common risk pool, each employee is treated the same. But if employers instead started giving cash grants to employees, how likely would it be that they give equal amounts to all rather than distribute it the way they do retirement 401-k contributions, which is based on salary?

So let's say we're only be for ending employer-based plans if we tax employers to replace the $700 billion they pay for their workers and families' coverage. No cash grants to drive individual insurance plans allowed. How would we do it? Payroll taxes? Income taxes? And if we did that with employee matches, how would the incidence (who pays) of the new system compare to the current incidence of employer plan and individual co-pays? I find it curious that some people think moving to single-payer can't be achieved because it would be too disruptive or would engender too much opposition. Is this any more disruptive than ending employer-based plans? Insurance companies take about $200 billion a year off the top of the $1 trillion in health care expenditures they manage (these are back of the envelope numbers). Ending employer-based plans requires raising $700 billion additional revenue.

Make no mistake, when the public finally starts paying attention to health care reform, they'll be pretty smart about the details. Who pays will matter. Last week, I briefly attended the annual Families USA conference in Washington where I heard liberal economist Uwe Reinhardt, who is a very insightful and caring man (he also happens to sit on the boards of a hospital chain, an insurance company and a medical device maker). He called for taxing the upper third of income earners in this country to raise an extra $100 billion to pay for insuring the uninsured. That's half a year's expenditure in Iraq, he said to thunderous applause from the mostly progressive grass roots health care activists in attendance. But as the applause died down, I asked myself this question: Is that any more politically saleable than eliminating the insurance industry from the equation, which would provide more than enough money to get the job done?

Progressives need not worry about calling for single-payer because it's "not a terribly likely outcome," to use Ezra Klein's phrase. Nor should they spend a lot of time trimming our sails (as long as proposals remain "scalable") in the name of political expediency. My position is that we should build a strong movement for single-payer that is simultaneously fighting for quality health care and the overall health of the American people. In those debates, we'll be taking on the drug, device and durable equipment makers, the diagnostic testing industry, hospitals and organized medicine, as well as the tobacco industry, environmental polluters, the food industry and other drivers of the dis-ease in American society. If we can't get up the gumption to take on the insurance industry, how will we ever generate the political will to take on the real drivers of skyrocketing health care costs?

-- Merrill Goozner

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