Renegotiating the Social Contract

Speaking of New Deals, it appears that momentum is building to change the social contract for health care. Businesses are deciding that whatever taxes or regulations come their way as a result of reform that relieves them of the responsibility for providing health insurance, the burden will be less than it is under the current arrangement, particularly if the tax advantage from providing health insurance to employees is eliminated. It's not clear what will emerge from all of this, but there does seem to be movement toward universal care, and all sides generally agree that employers should get out of the health insurance business.

First up is Ezekiel J. Emanuel and Victor R. Fuchs. Victor Fuchs is a former president of the American Economics Association. Their commentary is followed by news of a surprising alliance between Wal-Mart and a labor union on the health insurance issue:

Beyond Health-Care Band-Aids, by Ezekiel J. Emanuel and Victor R. Fuchs, Commentary, Washington Post: It seems everyone has ideas for health-care reform. President Bush ... Massachusetts ... California ... Maryland ... John Edwards ... Sen. Hillary Clinton ... And the list goes on.

This profusion of proposals means that health care is getting more attention, and this makes reform more likely. But these proposals are like band-aids and fall far short of what our sick health-care system needs.

They build on what everyone agrees is a broken system. Ultimately, they prop up the sagging employment-based insurance system, with all its inefficiencies and inequities... By focusing on covering the uninsured, they fail to address either administrative inefficiency or long-term cost control. ...

At $2 trillion per year, the U.S. health-care system suffers much more from inefficiency than lack of funds. The system wastes money on administration, unnecessary tests and marginal medicines that cost a lot for little health benefit. It also provides strong financial incentives to preserve such inefficiency. By building on the existing health-care system, these reform proposals entrench the perverse incentives.

Moreover, even plans that reduce the number of uninsured today may find that those gains will disappear in a few years if costs continue to grow much faster than gross domestic product. ...

Band-aids are not enough. The country needs comprehensive reform. Here are five essential changes:

· Get businesses out of health care. Health care is not part of their core competencies but something they use as a part of labor relations. It creates job lock and distorts employers' hiring and firing decisions.

· Guarantee every American an essential benefits package. This package -- modeled on what members of Congress get -- should be provided by qualified plans that would receive a risk-adjusted payment for each enrollee. Americans could choose their health plans, with guaranteed enrollment and renewability; "cherry-picking" and "lemon-dropping" would be minimized.

· The universal basic package should be financed by a dedicated tax that everyone pays, such as a value-added tax.

· Administer the program through an independent National Health Board and regional boards modeled on the Federal Reserve System. ...

· Establish an independent Institute for Technology and Outcomes Assessment to systematically evaluate new technologies and quantify their health benefits in relation to their costs. These evaluations would be used by the National Health Board and health plans.

Reform based on these measures would eliminate job lock, increase workers' wages and make labor markets more efficient. It would also give Americans -- rather than their employers -- their choice of health plans, doctors and hospitals. And it would eliminate the $200 billion business tax deduction for providing health coverage.

Most important, such measures would improve efficiency and provide cost control for the health-care system. Eliminating employers' vetting of insurance companies and all associated costs would save tens of billions of dollars. ... Finally, the expected consolidation of the health insurance industry would also increase efficiency.

Only comprehensive change of our broken system can provide universal, portable coverage, reduce inefficiency, control costs and secure health care for all Americans long into the future.

Wal-mart and SEIU have decided to set aside their difference momentarily and push for universal coverage:

Wal-Mart and a Union Unite, at Least on Health Policy, by Michael Barbaro and Robert Pear, NY Times: They have established one of the fiercest rivalries in the American economy, attacking one another’s organizations through dueling blogs, newspaper advertisements and news conferences.

But this morning, in an extraordinary meeting in Washington, the chiefs of Wal-Mart Stores and the Service Employees International Union will stand together and agree on a series of goals for achieving universal health coverage... The two men might even shake hands.

The ... issue — providing affordable health insurance — is arguably the biggest facing both Mr. Stern and Mr. Scott. Wal-Mart, which insures fewer than half its workers, has identified health care as potentially the biggest vulnerability to its image and business, and the S.E.I.U., one of the country’s biggest unions, has called it the No. 1 priority for its members.

So during today’s meeting, Mr. Stern and Mr. Scott will announce a campaign to seek public acceptance of several principles of health policy. One goal is universal health coverage by ... around 2012. Another is the idea of shared responsibility, emphasizing that individuals, businesses and government all play roles in financing health care and expanding coverage.

Executives from AT&T, Intel and several nonprofit organizations will also participate in today’s meeting. ...

Harley Shaiken, a professor specializing in labor issues at the University of California, Berkeley, said the meeting represented “a combination of pragmatism, idealism and desperation on the part of Wal-Mart and S.E.I.U; health care has become a devastating issue for both.” ..