Many years ago (it feels like a lifetime), I was an editor at Variety, the show business magazine. I was there on “black Monday” in 1987, when the stock market dropped 22 percent in one day, and I helped write the story about the crash and how it might affect the entertainment business. Titled “Wall Street Lays An Egg: The Sequel,” which referred to Variety’s famous 1929 headline, the article quoted stock analysts about the likelihood of an adverse impact on purchases of videocassette players, cable subscriptions, movie theater revenues, and initial public offerings. Nothing about the larger implications of what then looked like the beginning of a very severe recession.
I was reminded of that narrowness of vision recently when I was moderating a pre-session conference at the National Congress on Health Reform in Washington, DC, in late September. Prior to the first panel discussion, a few speakers were standing around jawing. Dr. Ezekiel Emanuel of the National Institutes of Health was telling us what renowned Stanford University economist Victor Fuchs had told him: Health care reform would arrive only during a time of national crisis, such as a depression or a major war. We were now on the cusp of such an era, he said almost gleefully, and so the prospects for real reform had never been better.
Now, I have a lot of respect for both Emanuel and Fuchs, who are clearer, more farsighted thinkers than many other reformers. And perhaps they’re correct when they say that the special interests that defend the status quo will never be beaten back until the country faces a major crisis, such as the one we have now. But I have a problem with the notion that we can divide the prospects for health care reform from the prospects for our nation’s economic recovery. It is true that universal health coverage would make our people healthier and more productive, which would help the country get back on its feet. It’s also true that when people are really down and out—as they were during the Great Depression—they’re more likely to help each other, as they did when the first Blues plans charged everyone the same. But just because universal health care would benefit the economy doesn’t mean that we have the wherewithal or the will to build it in the next few years.
At the same National Congress on Health Reform, Families USA President Ron Pollack, who’s been building a reform coalition for years, said, “Where the rubber hits the road is how you finance [reform]. Because you won’t be able to expand coverage without paying for it.” And, of course, that’s a big problem as our economic and tax base shrinks, as expected, over the few years.
One way to pay for reform, Pollack noted, would be to cap the tax exclusion for employer-provided insurance. Emanuel suggested the same thing in a recent New York Times blog. Although Sen. McCain’s plan to eliminate the exemption goes too far, he wrote, one could limit the exclusion for a family policy to $12,000 and have employees pay tax on the value of “excessive health benefits.” He estimated that this change would net $25 billion in extra federal tax revenue, which could be applied to covering the uninsured.
Well, that’s fine, except that it would cover only about a fifth of the uninsured. (Emanuel also mentions the need for insurance market reform, but doesn’t explain how that would save money.) Moreover, as health costs and premiums rise, more and more people would be taxed on their employer-provided benefit. So this would be a redistribution of wealth from the middle to the lower class—never a popular political gambit, especially during a recession.
At the National Congress, Sen. Ron Wyden (D-OR) said that his reform plan, embodied in a bill that already has the bipartisan support of 16 U.S. Senators, will not be derailed by the financial crisis. The Congressional Budget Office, he noted, had given his legislation a favorable rating, predicting that it would be revenue neutral in the first two years and would start costing the government less in the third year after its implementation. Wyden’s plan, which requires everyone to buy insurance, would let people choose among group plans in government-regulated regional markets, using the money that their employers now spend on health insurance. Companies would be required to raise salaries by that amount or, if they don’t currently cover their workers, pay into a fund. Insurance companies would have to take everyone and charge them the same amount, regardless of health status. Government subsidies would be available for the less well-off.
The Wyden plan has much to recommend it, including the portability of insurance from job to job. But at the National Congress, he admitted that his plan does nothing to restructure the care delivery system. While he believes in changing the basis of provider payments, expanding the use of health IT, better preventive care, etc., he doesn’t believe that we’ll get savings from those things for a long time. The problem is that without those savings, costs will continue to rise faster than inflation, and so the extra amount that employers pay workers in salary will buy less and less health care. In other words, Wyden’s proposal may work today, but not tomorrow.
There is another way out that politicians and policymakers aren’t mentioning. Under that approach, health care reform would be based on a radical overhaul of the care delivery system. It’s not on the agenda today because too many powerful interests would oppose it. But in the long run, it’s the only way—short of a single payer system with a government-imposed global budget—to control costs while providing universal coverage. The reason why it would work—if coupled with a competitive market mechanism--is that it would establish an effective process to reduce the vast amount of waste and inefficiency in the system.
Dr. Lucian Leape, adjunct professor of health policy at the Harvard School of Public Health and the father of the hospital safety movement, described the case for delivery reform succinctly at the National Congress: “There are too many people making too much money off of the sick,” including insurance companies, hospital executives, and some physicians, he said. Considering the amount of money that’s spent on inappropriate care, administrative costs, and profits, he estimated, delivery system reform could cut health costs by half.
Other experts agree that the opportunity to reduce spending is somewhere between 30 percent and 50 percent of the $2.3 trillion that we now spend on health care. If we could liberate even 10 percent of that through a rapid restructuring of the system, we could cover everyone without raising taxes by a penny. If we start dealing with the real problems, our economic crisis need not stop reform.
