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Ezekiel J. Emanuel, M.D., Ph.D. Headshot

The Financial Crisis and Health Care

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The financial markets are gyrating. The world economy is teetering. The U.S. government is making a $700 billion or more bailout to avert a worldwide disaster. No surprise, health care has become a side show. Or has it? Not only does this upheaval actually make health-care reform more pressing, it makes comprehensive reform--change in the way health care is paid for and how care is organized and delivered-- more realistic and feasible.

"Socialism" has come to Wall Street. For more than 60 years, Republicans have criticized as "socialized medicine" any reform proposal that gave government a central role in funding health services or in regulating providers.

The charge has always been false. True socialism requires governmental ownership of the means of production. No health-care reform proposal, even the most ardent single-payer plans, ever suggested the government should employ doctors, or own hospitals, pharmacies, home health-care agencies or drug companies. Moreover, in the current system, the government already pays for more than 40 percent of the health-care bill. With a Republican administration leading the takeover of Freddie Mac, Fannie Mae, American International Group Inc., and the purchase of housing securities, it hardly seems credible to criticize health-reform plans as socialized anything.

The phenomenal failure of Wall Street dramatically changes the appetite of the country for regulation and for shoring up the safety net. With trillions of dollars evaporating in this crisis, millions of middle-class Americans face the prospect of losing their homes and jobs, and witnessing a dramatic contraction of their retirement savings. In response, the public will desperately want financial security, and health care is a critical element of that.

This financial crisis also means Americans may be more willing to forgo gold-plated comprehensive insurance that covers everything with few restrictions. Under the threat of losing everything, Americans may feel content with the guarantee of a decent plan that covers cost-effective treatments with some restrictions on choice and services to save money. This should enhance the chances for a bipartisan deal on health care.

With politicians and regulators committing $700 billion in a single week, spending a few hundred billion to make the health-care system cover everyone more efficiently and at higher quality begins to look like chump change. This upfront spending can create the infrastructure--such as systematic measurement of quality and patient outcomes--for serious health-care cost savings. After the last several weeks, health-care investment appears more reliable--and politically palatable--than bailing out bankers and other gamblers.

The huge increase in the federal debt that these bailouts will entail intensifies the pressure to rein in health-care costs. This favors comprehensive rather than incremental reform.

Before the financial crisis, the most likely options for controlling government health-care costs involved tinkering around the edges--striking a new deal between Medicare and physicians on their pay, initiating more demonstration projects in paying for performance and efficiency, and assessing comparative effectiveness of new tests and treatments.

While absolutely valuable, these policies are far from certain to control health-care costs--and it will be five or 10 years before they are likely to generate savings. Paradoxically, only more radical changes in the health-care system are likely to actually save money and improve care--and more quickly. For instance, the Wyden-Bennett health-care bill--which proposes more extensive changes than either Barack Obama's or John McCain's proposals--is the only health-care legislation scored as budget neutral by the Congressional Budget Office. The CBO said that in the first year of full implementation, the expenditures would equal revenues, and in subsequent years the Wyden-Bennett bill would generate a surplus because it would save the health-care system money. The Lewin Group, a health-care policy research and management consulting firm, estimated that within a decade this plan could save as much as $1.4 trillion. No other health-care legislation comes close.

Some will find this comprehensive reform unpalatable because it removes employers from health care altogether. As the economy stagnates, this may be absolutely necessary to keep employers afloat. Facing a rising deficit, more comprehensive reform that can really control costs begins to look more realistic than a few untested adjustments here or there.

The dean of health-care economists, Victor Fuchs of Stanford, has long maintained that we will get health-care reform only when there is a war, a depression or some other major civil unrest. It's beginning to look like we might just have all three.

While the financial crisis has appeared to knock health care off the national agenda, in the strange chemistry that is American politics, it may in fact make comprehensive health-care reform more politically feasible, indeed maybe even absolutely necessary for fiscal stability.

Ezekiel Emanuel is an oncologist and chair of the Department of Bioethics at the National Institutes of Health. He is the author of Healthcare, Guaranteed: A Simple Secure Solution for America.

This post originally appeared in the Chicago Tribune.