Arguments in Favor of Universal Coverage
The most fundamental argument put forward in favor of universal coverage is that medical care is a basic right. In this, I find that I cannot argue, except that we’re not talking about gaining access to health care. Everyone in this country has access to medical care when they need it by federal law. Federal, state, local, and even non-profit public health services provide basic medical (and even dental) care to indigent populations. Universal coverage might make it more convenient to pay for such services, but coverage itself (whether government-provided or private) does not confer health care. Advocates for universal coverage use words like care, coverage, and insurance interchangeably as if they all mean the same thing. But, they don’t!
Another argument is that ensuring the health of all citizens provides an economic benefit to a nation because the uninsured forgo basic health care. Therefore, universal coverage is economically beneficial. Again, this argument is, on its surface, true. The healthier that your workforce is, the more productive they will be! However, Helen Levy of the University of Michigan’s Economic Research Initiative on the Uninsured, and David Meltzer of the University of Chicago, were unable to establish a “causal relationship” between health insurance and better health. There was simply no evidence to support the conclusion that expanded coverage leads to better health outcomes. That conclusion has been backed up by a New England Journal of Medicine article that stated “health insurance status was largely unrelated to the quality of care.”
Why is this? Well, there is a distinct grammatical difference definitionally between ensuring health and insuring payment of health care. To ensure is to make certain. To insure is to provide for. It might not sound like a huge difference, but consider this: just because you have insurance does not mean you’ll be healthy. The only way to ensure health is to mandate healthy living practices, which reeks of totalitarianism. Therefore, the economic benefit does not apply.
Thirdly, advocates argue that America spends a far higher percentage of GDP on health care than any other country but has worse ratings on such criteria as quality of care, efficiency of care, access to care, safe care, equity, and wait times. A recent article cited by advocates from the OECD makes many of these same points on a surface perusal. However, an in-depth analysis reveals a great deal of hedging on the part of the authors themselves. For instance, one measure used to measure quality of care was infant mortality rate (IMR). While the authors note that the U.S. IMR is higher than that of countries with “universal health care,” they also provide two enormous caveats. First, the U.S. uses a very liberal definition of live birth (literally moment of birth), whereas most universal care countries require an infant to live for two days before it is considered “alive.” Second, they point out that the more advanced medical techniques available in the United States make it possible for infants with fatal diseases to be born alive. These infants generally die within their first year of life, inflating the statistic further. So, you can see that any comparison between countries is severely limited by definition difficulties as well as societal and cultural mores (i.e. attitudes toward therapeutic abortion). This limitation is so severe in my opinion as to be utterly useless.
Arguments Against Universal Coverage
The most often cited argument against government-run universal coverage is rationing of care. Ramesh Ponnuru puts it succinctly: “If you can’t get an operation because your country’s national health insurance system has you on a long waiting list, in what sense have you enjoyed ‘universal coverage’?” Advocates say that Ponnuru is wrong and blinded by bias, but the evidence points to him being right. Michael Cannon of the Cato Institute provides three examples: first, even the Canadian Supreme Court has noted long waiting lists for medically necessary treatments. Secondly, advocates say that many universal coverage countries don’t have waiting lists. Well … that’s not entirely true. It turns out that those countries are playing games with their statistics. There is no waiting list because the government says so. Apparently, only those being treated for a condition have coverage for it. Therefore, since nobody else has “coverage” for it, you can’t be waiting for it. Finally, there are studies that note that you are far more likely to survive a catastrophic illness, such as cancer, in the United States than in most universal coverage countries. (For more, see here.)
Next, many critics of universal coverage point out that coverage doesn’t equal universal access or even universal outcomes. For instance, Britain maintains two systems, much like Obama is contemplating (and Massachusetts has implemented). Evidence gathered by the National Health Service in Britain suggests that the private health care system provides better access to medical treatment and better patient outcomes. Furthermore, even in these systems, money talks! Many folks in the northern United States have noted those Canadians who can afford it go to private doctors in Canada or else come to the United States for treatment. There is no way to guarantee universality in “universal coverage.”
Finally, critics of universal coverage point to Medicare as proof that universal coverage does not solve for the basic problem: cost. The Cato Institute, and even the United States Senate, have noted that Medicare does not compare well with market-based solutions. For example, Cato’s Sue Blevins demonstrates that the advocates of universal coverage understate the cost of said coverage. It is also virtually impossible to control costs in the Medicare system. Because doctors are paid on a “fee-for-service” basis, there is no incentive to curb costs. Medicare also does not balance the benefits of a particular treatment against it’s cost (i.e. Medicare does not ration care).
This final point leads to the central problem with universal coverage. The goal of universal health care is to allow every single person to access health care at a reasonable price. Therefore, the system has to balance access and cost, which turn out to be mutually exclusive. Unfettered access means skyrocketing costs, while cost-containment means rationing of care, which in turn means lack of access. The private insurance market in the United States does a good job of cost-containment (insofar as this is possible), while Medicare excels at providing access to care. That’s not to say that both systems don’t attempt to do both, only that their efforts are directed at one or the other.
The Obama Plan
Barack Obama’s health care reform plan aims to split the difference. Use government resources to provide “universal” coverage, while allowing the private insurance market to keep costs under control. Obama has proposed a three-prong plan: provide high quality and affordable health coverage to everybody, modernize the U.S. health system in order to reduce costs and improve efficiency, and, finally, strengthen the public health system.
He claims that we cut by $2500 a year the cost of the average families health care by:
- Investing in health IT systems aimed at reducing paperwork and preventing medical errors;
- Improving prevention and management of chronic health conditions, such as diabetes;
- Increase competition within the health insurance industry;
- Providing reinsurance for catastrophic conditions (the phrasing is somewhat redundant, since reinsurance by definition is for worst-case scenarios) to reduce premiums;
- Making health insurance universal through a new Medicare-like entitlement program that will complement private insurance, Medicare, Medicaid, and S-CHIP.
How credible are those claims? Well … some, like the IT initiatives enjoy near-universal bipartisan appeal, but that’s no guarantee of success. Obama’s key reform is guarantee quality, portable, universal coverage for all. So how does he do on this measure? Again, his quality initiatives didn’t vary greatly from John McCain’s during the campaign or the Republicans’ now. Of course, these improvements are already happening without anyone’s help, so one really can’t credit Obama with this!
A Medicare-style government-provided health insurance program is certainly portable, and some of Obama’s other proposals, such as a National Health Insurance Exchange, should improve portability. However, portability of insurance, like improved quality of care, is a secondary concern to the cost of the insurance. It’s great to say that you are improving the quality of health care and making it’s insurance more portable, but if people still can’t afford it, then you’ve done nothing!
On the surface at least, Obama’s proposal does make health insurance more affordable. He does this by shifting the costs of health insurance onto the federal government and away from consumers through a Medicare-style insurance program and other subsidies. Of course, the real question is whether or not the entire system of health care is more affordable by this shifting of burdens. If the lowered cost of health care is offset by new taxes to provide these subsidies, then you really can’t say that health care is any more affordable.
In structure, the Obama health insurance plan is similar the Massachusetts initiative launched by Gov. Romney. If Obama’s plan were judged by it’s results, then his plan will not reduce costs or provide universal coverage for all. The Massachusetts plan has fallen short of covering everyone for an affordable cost. It’s second-year costs look to be coming in 50% higher than were projected when the plan became law in 2006 and it’s insurance is still unaffordable for most families making between $60,000 a year and $110,000 a year.
Will It Work?
The Lewin Group conducted an interesting study that evaluated this proposal. It found that:
- Assuming Obama’s reimbursement were similar to Medicare (a reasonable assumption), then physicians and hospitals would their revenue cut by almost $70 billion in 2010 alone.
- Medicare-level reimbursement could also reduce premiums by up to 30%. This is assumed, of course, because Medicare reimbursement levels are 20-30% lower private insurance reimbursement. Lewin assumes that this money would flow to the bottom line; not necessarily an unrealistic assumption.
- Under the President’s plan, as it is envisioned, the new plan would enroll up 42.9 million people. This would seem to be good news, considering that the number of uninsured is roughly 45 million people. (This isn’t entirely true, however. For a breakdown of this statistic, see here.) This would appear to insure nearly 95% of those currently without insurance. However, Lewin also projects that 32 million would lose their private coverage. So the net effect is that perhaps a little less than 11 million people would become insured (or 25%).
Lewin has two other concerns about this plan. First, Medicare-level reimbursement policies would cut into hospital and provider revenue. And it would across the board, not targeted. As the study points out, doctors that provided unnecessary and wasteful care would see their reimbursement cut 20% to 30%, but so would doctors providing delivering appropriate care. In other words, the plan will cut out not only the bad stuff, but some of the good stuff as well.
The Lewin study concludes that Obama’s plan would mean 5% decrease in revenue for hospitals and 7% for physicians. That may not sound too bad to the advocates of universal coverage, but consider that, according to the American Hospital Association, in 2005, roughly one-quarter of all the hospitals in the nation operated in a negative revenue margin (meaning that they spent more than they were reimbursed). Overall, a hospital’s operating margin was roughly 3%, while their patient margin (the difference between reimbursements versus expenses) is about -2%. So, we are talking about literally wiping out what little profit providers make now; profit that acts as a safety buffer in bad years. It’s hard to see how wiping out profit (and more likely actually forcing hospitals and doctors to operate on red ink) is not going to force a government bailout over the long-term.
Using this data, it is possible to see how Lewin concluded that the Obama plan could easily create a two-tiered health system, similar to Great Britain’s, with all of the problems that are inherent in the system. One of the many problems with Medicare is government’s refusal to means-test benefits or perform cost-benefit analyses on medical procedures. Medicare controls costs by controlling reimbursement rates with medical care providers. In other words, the government dictates, like an HMO but with far more clout, how much the government will pay for a certain procedure. Currently, doctors (but not hospitals) can refuse to accept Medicare and Medicaid payments. It’s hard to see how the Obama reforms would not cause an acceleration of that trend. So, we’ll be left with one system that caters to private insurance policyholders and one that handles government policyholders.
So, the answer appears to be: yes, in the short-term, the Obama plan will produce greater coverage (though still far short of the universal coverage goal). It will take advantage and possibly accelerate QC and IT trends that are already being introduced to the industry. And it will do so for a reasonably manageable cost. However, as a consequence, we may produce a two-tier system that produces quality care for one group and adequate care for another. Further, the plan does not address the ultimate drivers of cost: the cost of care (i.e. paying for diagnostic tests and treatments). Obama’s looking for a surgical strike on the health care problem. What he may end up doing is firebombing innocent civilians, but leaving the health care problem looming over our economy.
How Sustainable Will This System Be?
Nearly everyone agrees that in the short-term this proposal will accomplish its stated goals. The problem will come in the long-term. Barack Obama is a shrewd politician. Unlike most of the Left, Obama understands that Americans are not prepared to accept a single-payor system of truly universal coverage. He further understands (though he cannot admit) that cost-containment is truly not possible under his plan. The lesson that he (and other Democrats) learned with Hillarycare is that you must get buy-in from the key stakeholders or you’re dead in the water. To cap costs, you must actually cap costs! That requires doctors, hospitals, insurers, and even the trial lawyers who sue them getting less money. It might also require patients to accept a lower standard of care than they are prepared to accept. By emphasis efficiencies based upon “magic bullets” like IT improvements, wellness, and prevention, Obama avoids making any meaningful cost-containment cuts in the short-term.
However, it is not enough to just introduce a stopgap measure to will prove to enormously costly and unsustainable over the long-term, especially if your stopgap blows up the existing structures and makes it impossible to make a U-turn. This may in fact be Obama’s plan! Destroying the existing system now will make it far easier for the government to assert a need to fully nationalize (or socialize, if you prefer) the entire health care industry at a later date when costs continue to rise. It’s the sort of government creep that conservatives and civil libertarians hate, but which they can do very little to stop. If this is actually Obama’s plan, then it’s politically astute and brilliant. It’s also quite wrong-headed and ignores the 700-lb. gorilla in the room.
That gorilla is the ever increasing federal debt. As of April 2009, the national debt stood at $11.1 trillion dollars. We are adding an average of $1 trillion a year to the national debt, so that by 2015 we may well have closed in on the $20 trillion dollar mark, especially since the current recession does not appear to be conforming to Obama’s plans. This number doesn’t even include the unfunded Social Security and Medicare mandates of $41 trillion. Of that, $34 trillion belongs to Medicare. This is the present value of the mandate, meaning this is how much money we’d need to add to the system today to fully fund our future obligations. Each year that goes by drives this number upward at an almost exponential rate.
In fact, long-term solvency for Medicare depends a great deal on the private insurance market remaining the way it is today. The only reason that the government can continue making lower payments through Medicare is because the market share of privately insured persons under 65 is so large. In other words, one of the primary drivers of cost in the private health insurance system is the public insurance system. But, the Obama plan would theoretically place two-thirds of American under the aegis of the public insurance umbrella, eliminating providers ability to recoup their losses through the private insurance system. In fact, the loss of market share would force most private insurers to charge higher premiums to make up for the increased risk of a smaller market. Eliminating the last stone in the Medicare ponzi scheme would force the government to focus seriously on cost-containment in public insurance for the first time. The cuts would be severe because the obligations would be so enormous. In fact, the obligations would likely be so enormous as to be impossible to meet even with 80-90% benefit cuts. It is projected that by 2030 (D-Day) the entire federal budget will consist entirely of Medicare and Social Security obligations and interest to service the debt. Obama’s plan might destroy what little ability Medicare has to control costs and, thereby, balloon the obligations of the federal government. In other words, focusing on universal coverage instead of cost-containment may well cause D-Day to come sooner, say in 2025 or 2020. That may seem like a long way off, but consider that in 2020, your 5-year old will be just 16 years old. Is this really the world that you want him to inherit?
Final Thoughts
The irony of the entire situation is that the Left in this country has opposed proposals that would create a two-tiered system for Medicare, yet they are suddenly in favor a proposal that will do just that! The Left has opposed a two-tiered Medicare system (done either through means-testing or greater privatization and competition) because they claim that it will create one system for the rich and another for the poor. However, the Left’s acceptance of this proposal would seem to indicate to me that their arguments were a sham; a cover to hide a bald-faced fact! The Left does not trust private enterprise; they do not believe that market capitalism can produce socially beneficial results without government interference (or preferably control). In the case of health care, the Left does not seek control of the system in order to contain run away costs. Most analysts don’t believe that’s possible over the long-term and the preponderance of evidence agrees with them.
No, the Left seeks to control health care because they seek to have government control all aspects of social interaction; not because they are inherently evil, but they because they are engaged in the ultimate utopian experiment. Despite thousands of years of human history that shows us that government’s true face is not one of altruism but power, they simply refuse to accept it. In the face of evidence that the Left’s intellectual ancestry produced two of the most totalitarian and destructive regimes on the planet, the Left doesn’t believe that can happen to them! I wish them luck in their experiment and only hope that in doing so, they don’t drag off the cliff them when their time comes.
