As well-meaning as these initiatives are, the Obama plan has one fundamental drawback. It keeps the private health insurance companies in control of our system and facilitates the transfer of tax dollars into private hands. There would be little savings from the one quarter to one third of total expenses now being eaten up by the insurance industry. Instead it relies on a patchwork of cost control measures.
It would also fail to address the fundamental component that is necessary to fix the problem--instead of creating the widest possible risk pool (every citizen in the nation), it keeps risk pools divided and vulnerable to market predation. The cardinal rule of competitive health insurance is to keep as many rich healthy people on your roles as possible while avoiding the sick and the poor. This dictum will not change in the new system. By keeping the poor separate and dependent on special government funding they will always be at the mercy of conservative attacks on social spending. Insurance coverage should also not be confused with actual healthcare. A special fund for the poor and discount policies for the middle class will do nothing to reduce the disparity in quality of service.
As has been widely noted, the Obama plan is nearly identical to the plan put forward by Hillary Clinton in her campaign this year. To understand the roots of the HCAN/Obama agenda, it is perhaps most informative to trace the evolution of Hillary Clinton's perspective. Famously, she led the effort in 1994 to develop a comprehensive revision of the United States healthcare system. That effort failed for different reasons but significantly because of the raw power of the insurance lobby to influence public opinion.
The lessons that she came away with I'm sure are quite nuanced, but in terms of her changes in policy goals it could be summed up as: give them what they want. By 2006, the NY Times was reporting that Clinton was now working closely with the Health Insurance Association of America and was receiving significant financial support from them. This support has translated over to Barack Obama and to the Democratic Party as a whole. After years of giving twice as much to the Republicans, the health care industry, notably the insurance lobby, now favor the Democrats and their plans.
The ideological foundation for the middle way on health care comes from a close advisor from the Clinton administration and now an advisor to Obama, David Osborne. He is a former member of the conservative Democratic Leadership Council, the author of Reinventing Government, and an advocate for streamlining government through mixed public and private solutions. His prescription for controlling skyrocketing healthcare costs is to foster competition between private plans that utilize the model of capitation, which means paying doctors a flat fee for treating a fixed number of patients whether they are sick or well. His criticism of single payer is that it still relies on the fee-for-service model which distorts financial incentives causing more needless services that earn more money for the provider.
While it is true that there are incentives in our current system that favor late stage treatment over prevention, the fee-for-service model is unlikely to be the sole culprit, as it is used in other countries such as France without causing cost inflation. Perhaps a greater factor is the degree to which healthcare has become a growth industry in our economy. Ever since we moved from a manufacturing to a service economy in the 80's and 90's we have grown ever more reliant on publicly traded healthcare companies on Wall Street to fuel the expansion of our economy. In some ways, inflation in health care costs are similar to the real estate bubble we have just experienced. Health companies are going to great lengths to keep the price of shares rising, including a reliance on new more costly treatments and drugs. The actual health of the population, which might not require that level of expenditure, becomes secondary. This is the factor that other countries that utilize fee-for-service are not contending with.
The use of capitation has also fallen out of favor with many in the industry because of actual practice of HMO's of scrimping on service to the healthy to keep costs down. While it is possible to imagine an effective capitation model it would more likely work in a completely socialized system where doctors are paid a certain salary to take care of whoever came through their door.
The paradox of healthcare reform is that no real solution is possible without directly confronting the entrenched powers in the system. At the same time, that power is the aspect of the political equation that many see as insurmountable. The lesson of the Clintons' and the rationale of the HCAN/Obama plan is that cutting off the incredibly lucrative health insurance industry is simply not going to happen. Therefore the best that can be hoped for is to incrementally put some fairness into the system while accepting that inefficiency, cost inflation and disparity will continue into the foreseeable future.
This is a view, however, that is firmly rooted in the political environment of 1994. The insurance lobby is just as powerful as ever, but there is every reason to expect that an informed and energized public could counteract that influence. That is why clear and reliable information is essential to finding a solution. The disinformation campaign from HCAN seems like an attempt to forestall such an outcome.
Courageous leadership would be another counterweight to a stubborn political logjam. Instead, we have to ask why would our leader go into a negotiation asking for less than what we want. If you hired an agent to negotiate the sale of your house and you wanted $200,000 for it, but he asked for $180,000 and ended up settling for $150,000, you would rightly assume that he was either incompetent or was getting something on the side from the other party. Our system is costly and inefficient and unfair because huge fortunes are being made on those very conditions. The role of Obama and HCAN would seem to be to protect those interests. Hence he receives their financial backing.
Obama's portrayal of himself as the reasonable compromiser in the center betrays the reality of his position. By starting off a negotiation halfway between the special interests and the public good, the end result will inevitably move toward the special interests leaving three quarters of the status quo intact. Progressives who favor a systemic solution to the problem make a mistake in believing that Obama is their representative in these political negotiations. He may sincerely believe in a middle solution to the problem, but he does so against the wishes of the vast majority of his Democratic and progressive constituents.
Finally, what differs in today's environment from the lessons of 1994 is that we are no longer in a position to use the largesse of the federal government as a panacea for intractable problems. The paradigm that has been in place for many years has been of growing corporate welfare; a federal budget that was large enough that powerful lobbying groups could push policy that financially benefited their members even though it haphazardly served the public interest. The HCAN/Obama/HIAA reform plan fits exactly into that mold.
This era has now come to an end. The Federal Treasury is tapped out. We will be lucky to preserve even the most basic of government services and there will be no room for expensive wasteful new programs. Thus the middle way plan is almost dead on arrival. The only viable solution is one that actually saves money. We have to look at that figure of 16% GDP and make sure that it is reduced. Whether it is spent in premiums or payroll tax is irrelevant.
Throughout the layoff and outsourcing era we have repeatedly been told that inefficiency cannot be tolerated. That just because a worker likes his job and relies on his paycheck is no protection in the harsh environment of the marketplace. Any company that went soft and allowed the needs of their workers to dictate employment policy was destined to be driven out of business.
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