July 15, 2009 by Daniel Stack
There’s been a lot of talk about reforms to health care in the United States. I’m not an expert but I’m a guy who has done a lot of reading. For an excellent overview of various health care systems across the globe, albeit from a proudly liberal point of view, I’d refer you to Paul Krugman’s The Conscience of a Liberal.
What I’d like to do is talk a bit about what the various options are for guaranteed health care and some of the issues often heard in the debate. If I’m mistaken on any of the actual points (not in opinion) please point me to a source correcting me and I’ll gladly update this post. (Though my bias is what it is…) This is largely an exercise of analysis, albeit from my own perspective. Having been unemployed the same time my wife was on maternity leave after the birth of our first child, you could say I appreciate both the cost and importance of health care.
Anyways, from what I see there are a lot of examples across the globe. I think we can lump them down into a few categories to consider:
- Private insurance. What exists in the United States today. You either pay cash or have your own insurance, most often provided by or subsidized by an employer.
- A single payer system. Under a single payer system, doctors operate independently but receive payment from a common source, typically a government-run and funded source. Medicare in the United States is an example of a single payer system, albeit for a limited group of people.
- A single payer system where doctors are also directly part of the system and reserve their salaries from the single payer.
- Mandatory health care. Under this system private insurance companies provide coverage. Everyone is required to purchase health care but frequently there are caveats that insurers cannot deny coverage or charge extra for preexisting conditions. Below a certain threshold of income premiums become subsidized by the government. Employers above a certain size are typically required to provide some level of coverage. Massachusetts operates under this model.
- Mandatory health care with a public option. Basically this model would be the same as the previous one with the additional option of signing on to a public insurer (such as if Medicare were made available to the entire US population).
Obviously there are combinations of these cases, such as a single payer option with the option to supplement through private insurance.
Canada is an example of a single payer system. The doctors tend to be privately employed but the government is the insurer.
The current debate in the United States is essentially between Mandatory Health Care and Mandatory Health Care with the Public Option. There is no real consideration at this time of a pure single payer system.
Private insurers, not surprisingly, tend to favor the mandatory health care option. This indeed would provide an improvement to our current system. Why? Beyond those people who simply cannot afford health care, there are those who choose not to sign up for health care in the interests of saving money. These people tend to be young and healthy and are least likely to need health care services. Any insurance program requires a pool of people who tend not to need the services during any given window of time. In automobile insurance, it is expected the bulk of the insured will not get into a car accident in a calendar year. Health care requires a pool of people who put in more than they take out – presumably in their younger years. As these people age, they will tend to need the services more. If everyone needs to sign on then it becomes easier for insurers to swallow requirements that they must insure everyone and cannot charge more for people with preexisting conditions.
We’ve operated under this model in Massachusetts for a few years. Mitt Romney was a champion of it. However, there are some issues in expanding this across the country. The November 3, 2007 Boston Globe has an article discussing the difficulties in exporting this model across the nation:
What Romney does not tell campaign audiences is that his plan would probably be impossible to replicate in most states without a tax increase because Massachusetts had an uncommon advantage: a readily available $610 million “free care pool” that he and the Legislature were able to tap to provide coverage for the uninsured.
That two-decade-old fund – financed in nearly equal parts by assessments on hospitals, surcharges on insurers, and state tax revenue – was being used to provide care for the uninsured in Massachusetts.
Four other states have such a pool and those without one – including Iowa and New Hampshire, the first two states to vote for presidential nominees – would have difficulty adopting the Massachusetts approach without levying new fees on hospitals and insurers to create a similar pool or raising taxes, several policy specialists said.
“It was a great plan in Massachusetts, but the notion that you could do this nationally is simply laughable,” said Jonathan Gruber, an MIT economist and member of the Health Insurance Connector Authority board that oversees the Massachusetts program. “If you’re going to cover the uninsured nationally you’re going to have to raise new funds.”
The other option, favored by most Democrats, is to expand this option to include a public option. In other words, you would be required to sign onto one health care program but one of your options would be a program such as Medicare. In effect, a public program would be competing with private insurers. I believe the Republican argument against this can be summed up in that:
- It would have quotas
- It would be the first step towards moving to a single payer system
- It would not be successful
With regard to quotas, they exist today, both in the financial incentive private insurers have to deny coverage and the fact that lifetime limits of around a million dollars frequently exist. This lifetime limit is difficult to hit under normal circumstances, but a bout with cancer or other serious problem can quickly exhaust it.
Now I think there may be something to the second point but its truth would be indicative of the third point not being true – i.e. it is difficult to picture the US moving to a single payer program if a public insurance option could not successfully compete against private insurers.
There is also the specter of the long waits of the Canadian system. The most common example given, for some reason, is that of the wait time for a hip replacement. Dr. Krugman in The Conscience of a Liberal makes an interesting rebuttal to this point – essentially, most hip replacement recipients tend to be elderly. Therefore those in the US tend to be on Medicare. So this argument is actually comparing the US’s single payer system vs. that of the Canada. And since the US wait is typically much less than the Canadian one that seems to indicate that there is no reason an American single payer system could not be superior to a Canadian one.
That said, I think it is important to start off with public insurance as a competitive option. If it winds up being wildly popular and sucesful then we’ll wind up evolving to a single payer system, otherwise we will have not dismantled our private insurers needlessly. And whatever problems one might have with the corporations as entities, these large companies provide employment for thousands and thousands of ordinary Americans. If I were a betting man, I’d predict (and hope) that these companies would adapt to the new circumstances allowing them to remain competitive. President Obama has indicated that were we to start from scratch he’d prefer a single payer system but we are not starting from scratch, something he also acknowledged. Currently the major insurers have a powerful financial incentive to deny coverage. Were they to be competing with a single payer system they would have a strong incentive to show themselves to be a better option. This is a competition that other private entities cannot provide.