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The Not So Common Good

Feb
22
2007

We’ve been hearing a lot about the problems of the uninsured. We’ve been hearing more how the cost of healthcare is making it harder and harder for individuals to afford insurance, and for employers to provide benefits to employees. Those are the drivers for why health care reform has suddenly emerged as a political force – even if the governor who once led discussion of the topic, Mitt Romney, is backpedaling away from his “liberal Governor of Massachusetts” pro-gay, pro-big government stance so that he can appear sufficiently conservative to win a Republican primary or two.

But the train is out of the station on the reform message. Even though the chances of real reform are slim, everyone and their dog has a plan. Most of these plans are self-serving. And even the ones that aren’t are generally built on continuing the employment-based health care system that got us into this mess in the first place; Senator Ron Wyden, economist Vic Fuchs and the single payer crowd being the honorable exceptions.

But at some point, for any change to occur, the connection has to be made between insurance being unaffordable and health care being too expensive.

Sure there are savings to be had in reducing the avarice of the insurance sector, which over the past few years has done precious little to justify the 15 to 20% it skims off the top as administrative costs. But even the much vaunted efficiencies of the federally-run Medicare program still cost 4% of the dollars it spends and of course, its elderly recipients have far more money spent on them per head than on younger people. Whatever system we end up with, there will still be an administrative cost. And even if administrative costs were reduced, compared to other countries, health care in the US would still cost somewhere between 50% and 100% more per head. So that puts us in a bind.

To compare and contrast, a few years back the Brits under Tony Blair decided that they were not spending enough on health care, and threw money at the problem of long waiting lists and inadequate IT support. This was politically popular. They were starting from a base of spending 6% of GDP on healthcare and were aiming to get that up to the average of their European neighbors at closer to 8%. Now, the money may not all have been spent effectively, but there was clear political support for them to do so, and the money was there.

Not so here. We clearly have huge problems around access to insurance, and the obvious way to solve that would be, as John Edwards points out, to spend about $100 billion a year more to insure the uninsured. The problem is that unlike the Brits – spending less than everyone else – we’re spending much more.

So inevitably if we get everyone in a single insurance pool, and somehow get to universal coverage, but we don’t hit oil, gold, or the lottery – or find Americans willing to pay much more tax – the other shoe will have to drop. That means that eventually the amount of money going into the healthcare system under any universal care scenario will have to be reduced.

You see a little bit of the politics of this every time the American Medical Association starts whining about Medicare “cuts,” even though the worst of the fee cuts mandated in the balanced budget amendments in the late 1990s not only get postponed every year, but the total paid to doctors keeps going up.

It’s pretty obvious, however, that costs need to be reduced, or at least have their rate of increase go below that of the growth in the rest of the economy.That means a few nasty basic choices. Either fewer services are provided, or the people providing those services get paid less.

The AMA and friends of course say all we can do is cut services provided by hospitals and doctors. The good news is that the data is in about whether we actually can do the latter. In a ground-breaking study, economists Gerard Anderson and Uwe Reinhardt assessed the levels of services performed in the major developed countries and found that contrary to popular belief there wasn’t much difference. The difference in costs between the US system and everywhere else was in what we paid for those services, or as they suggested, “It’s The Prices, Stupid.” On the other hand, several health care efficiency experts, such as Elliott Fisher and Arnie Milstein, believe that we can perform fewer unnecessary services. But the end result is the same. There will be less money going to the system overall, or at least less than some would like.

Which is why there is extreme ambivalence amongst those working in the health care system as to whether they want to see health care reform that arrives at genuine universal care. For example, New York Governor Eliot Spitzer gave a rational speech on health care suggesting that New York state would be better off providing benefits to its needy citizens rather than just subsidizing the graduate medical education programs at Upper East Side teaching hospitals. Then Andy Stern, president of the Service Employees International Union – which also represents hospital workers – began a campaign to protest Sptizer’s proposal and link the concept to proposed budget cuts from the Bush administration. It’s not just the AMA’s doctors who think they deserve the money. Lowly paid hospital workers value their employment too.

And there you have one, less openly discussed aspect of the “reform” story. The people in the system who claim that they want reform, don’t really want it in the way that’s rational for the rest of us. And as any student of PoliSci 101 will tell you, concentrated interests tend to outweigh the “common good.” That’s why several health care organizations are coming out to rally in favor of plans they find acceptable. They’re hoping that they can delay the real reform that will make the “common good” not so good for them!

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