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Saturday, August 26, 2006

Incremental versus Wholesale Health Care Reform

This discusses the argument that when it comes to health care reform, "things have to get worse before they get better" and whether reform should be incremental:

What Would Lenin Do?, by Maggie Mahr, American Prospect: While some progressives applaud efforts to force employers like Wal-Mart to take on greater responsibility for health care, others argue that our employer-based health care system is a failing relic of the past and that such gambits are actually counterproductive. Rather than trying to shore up our employer-based system, they say, we should seek to capitalize on that system's mounting woes to build support for replacing it with national health insurance. Call it the Leninist road to universal health care -- things have to get worse before they get better.

Chicago’s recent decision to pass a “living wage” ordinance that would require big-box retailers to pay $3 an hour in benefits has revived that debate. Last week, the Prospect's own Ezra Klein offered quotes from labor leader Andy Stern to buttress his own argument against efforts like Chicago's. ... Klein argued that we need wholesale reform -- that is, national health insurance. “Progressives are, or at least should be, engaged in a longer-term project of creating a better, more just society for everyone, regardless of employment status.”

Labor lawyer and blogger Nathan Newman wasn't impressed:

There is a strain of liberal advocacy for national health care that hopes for the system to get worse, in the assumption that only then can serious reform happen. . . . [A]ccording to Ezra, progressives should "view a slightly better menu of options for Wal-Mart employees as delaying the ultimate, more important victory."

So the worse the lives of low-wage workers, the better for certain liberal social engineers trying to enact national health insurance...

...While making it clear that, over the long run, he favors moving toward national health insurance, Newman suggests that, at present, there is no way to hike taxes enough to replace the hundreds of billions contributed by private sector employers to health care: “Some believe that the worse the health care system gets [as employers back away from offering health benefits], the better, since that will open up the possibility of national health care reform,” he observes. “But it's actually the opposite -- the more we shore up the employer side of health care responsibility, the more likely we can afford to bring the rest of the population into a reformed system.”

This sounds like a reasonable case for incremental reform. But on closer inspection, Newman's argument doesn’t hold up. ... The question that needs to be asked is how much of the total bill is subsidized -- directly or indirectly -- by taxpayers.

When you put the question that way, it turns out that taxpayers bankroll 51 percent of the nation's $2 trillion health care bill: this includes paying for private insurance for public employees (accounting for 6 percent of total health care spending), Medicare (17 percent of the total), Medicaid and SCHIP (16 percent), and other public health services including veterans’ programs, public hospitals, and school programs (12 percent). (These figures come from the Centers for Medicare and Medicaid Services.) And as the number of people on Medicare, Medicaid, and SCHIP climbs, the taxpayers’ share of the bill is rising. By contrast, private insurers pick up just 30 percent of the tab -- and the money they lay out comes from the premiums paid by employees as well as employers. In other words, private sector employers pay less than 30 percent of the total. The remaining 19 percent of the $2 trillion total is covered by patients themselves (14 percent) and by the nonprofit philanthropy sector (5 percent).

But even those numbers don’t do justice to how much of total health care spending is subsidized by taxpayers. ...[A] recent study published in Health Affairs calculates that in 2004 the government lost $108.5 billion in tax revenues and another $66.4 billion in payroll taxes for Social Security and Medicare.

Other taxpayers, not fortunate enough to work for an employer who offers health benefits, must cough up income and payroll taxes to make up for that $174.9 billion in lost revenue. Add that amount to the $950 billion that taxpayers spent in 2004 to fund both government programs and private insurance for government workers -- plus the money they spent out of pocket -- and their contributions to the health care system ultimately equal roughly 74 percent of the nation’s total bill. Some "private" health care system. ...

This is where "heightening the contradictions" -- or letting things get worse so they can get better -- comes into play. The fact that not only the middle-class but many in the upper-middle-class are beginning to panic over whether they can afford healthcare suggests that national health insurance is becoming a political possibility. Indeed, a 2005 Pew Poll shows that 65 percent of Americans want universal insurance -- “even if it means paying higher taxes.” Even more surprising, a 2003 study by the University of Indiana shows that nearly half of all physicians favor national health insurance.

But if support for universal healthcare is swelling, does Washington really have the will to fight the lobbyists who defend the health care system’s hazardous waste? On this point, recent history is discouraging...

Winston Churchill famously said that “You can always count on Americans to do the right thing -- after they’ve tried everything else.” When it comes to healthcare, haven’t we tried everything else long enough?

As health care problems continue to mount, the political will for change will increase as well, but I certainly don't hope that things get worse for anyone to build political support for change. I don't think employer based healthcare will survive. It might, but it doesn't look good given the falling participation rates in recent years and pressures from globalization. So the question is what system we go to next, privatization or universal care, and how to get there without imposing substantial costs on people along the way.

I don't know who is advocating that workers "hit the bottom" so that the current system can be replaced - I'm not - but the reality is that the current system is not functioning for all and it is not sustainable going forward. Changes to health care will happen, the question is type of changes will occur. We need a single payer plan, but we aren't yet ready to go there. Until we are, incrementally or otherwise, we should do our best to provide health care to all who need it while not putting roadblocks in the way of needed reform.

    Posted by on Saturday, August 26, 2006 at 12:33 PM in Economics, Health Care, Policy, Politics | Permalink  TrackBack (2)  Comments (7)

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