By Uwe Reinhardt
The New York Times
January 29, 2010
Even before Senator-elect Scott Brown’s stunning victory in the Massachusetts special election, there was no shortage of advice on simpler approaches to health reform that the president and his Congressional allies could have used in place of the bills now before Congress.
Although the current reform bills undoubtedly are burdened with many tangential items, one can easily underestimate how quickly any kind of health reform will become complex.
(He quotes Peggy Noonan who advocates for “small, discrete steps” such as “a simple bill that mandated insurance companies offer coverage without respect to previous medical conditions.”)
In the eyes of people unfamiliar with economics, the step she (like others before her) proposes may seem small.
She seems completely unaware that, to be implemented, that step has to be accompanied by (1) a mandate to be insured or, at the least, very powerful financial incentives to be insured. And if government imposes such a mandate on citizens, it must be ready (2) to subsidize low-income families in the acquisition of the mandated insurance. Already we have a bill requiring many pages.
(He quotes from Sen. Tom Coburn’s summary of his bill calling for guaranteed coverage, and affordable premiums through risk adjustment.)
The European systems Mr. Coburn has in mind are the Swiss and Dutch health systems, because we are referred to a paper on these systems.
It should be noted that the Dutch and especially the Swiss systems are subject to heavy government regulation — far heavier than is foreseen in the Senate health reform bill passed in late December.
For example, health insurance is mandatory in both countries. Both countries prescribe purely community-rated insurance premiums which, unlike the Senate bill, cannot take the age of the insured into account. And both countries extend sizable public subsidies toward the purchase of private health insurance.
In short, as Senator Coburn’s bill illustrates, “simply” to pass a bill that imposes community rating on health insurers, as Ms. Noonan suggests, is anything but simple. It opens a veritable Pandora’s box of additional, required legislation which, once fully fleshed out, would pretty much constitute the core of the insurance-reform bill currently in the Senate bill.
Posted response of Don McCanne, San Juan Capistrano, CA (Response #23)
Once Congress decided to build on our existing, fragmented, dysfunctional system of financing health care, it became necessary to create the complex legislation that was generated in both the House and the Senate, precisely because of the reasons Prof. Reinhardt describes.
Congress and the administration began with the most expensive system in existence and then attempted to apply social insurance principles to our hybrid model, allegedly with the goal of covering everyone with a system with sustainable spending. The health policy literature is replete with simulations and real-life studies demonstrating that this is by far the most expensive model of reform, and it falls short on universality, equity, and efficiency.
The least expensive and most effective models are a government-owned health service (socialized medicine, not America’s first choice), or a bona fide social insurance program used to finance the largely private health care delivery system. Although there is no perfect system, a government social insurance program (like Medicare) does have an advantage over social insurance programs using a market of private plans in that administrative costs are lower and mechanisms to moderate spending increases are more effective. Also, the Swiss and Dutch private insurance-based programs still leave uninsured about 1.5 percent of their populations.
President Obama this week told the nation that he was eager to see a better approach to cover everyone and bring down costs, though in his prior comments he has revealed that he already knows how to do that. And what is that?
During this break in the negotiations on reform, we really should take a serious look at an improved Medicare program that would cover everyone. It is the least expensive model of reform. It has the greatest administrative efficiency. It would truly cover everyone automatically. And even for those who do not support social solidarity, it would finally control our intolerable growth in health care spending through the proven mechanism of a single payer monopsony.