Dissent, "Health Care: What Ought to be Done"

Health Care: What Ought to be Done
by Ted Marmor, Dissent, Summer 2004
How should Democrats think about health care reform now? And what should Democrats do about it? The simplicity with which one can pose such questions is misleading. Health care reform is a topic marked by much ideological cant, ferocious interest group lobbying, and the difficulty of finding common ground even among apparently like-minded Democrats.

A good starting point would be for Democrats to reject, rather than adopt and adapt, the language with which and the moral framework within which most Republicans typically address health care reform.

The Democratic reform of American medical care should aim at making it much more likely that people can get the care they need and not face financial ruin as a consequence. We have been struggling with this nest of problems since the Second World War. Forty-five million Americans live without that assurance on any given day, but between sixty and seventy million Americans face a period of being without insurance in any two-year period. And that calculation leaves out entirely the problem of insurance coverage that excludes chronic conditions.

All this takes place in a nation that spends much more on health care, by any measure, than any other nation ever has. The rapid inflation in medical costs of the past few years continues unabated. Tens of millions of uninsured or underinsured live in physical and financial jeopardy; they incur more serious illnesses, more losses of function, and more pain than they would with adequate and timely care; and their lives are being unnecessarily shortened.

Democratic political leaders should make it clear that health care reform is not an empty abstraction, and that it most certainly is not just a debating point for the fall election or a "wedge issue." As a substantive matter, but also as a political one, Democrats need to make the reform of American health care policy a cause that distinguishes the parties.

Over the past decade, and during the current administration, Republican rhetoric about health care policy has been morally pallid, managerialist in its language, and economistic in its presumptions. Republicans profess to be consumed with "perfecting" the market for health care and with encouraging efficiency and patient choice by deploying incentives and rewards, and, by the way, only rarely are they concerned with penalties. Readers of Bruce Vladeck's commentary in this issue on the Medicare "reform" bill of 2003 will see the most recent evidence of the Bush administration's intentions: to attack Medicare's social insurance roots. But those intentions have a history; they go back decades, though they were often expressed in code.

In the 1970s, the celebrations of health maintenance organizations (HMOs) were for Richard Nixon's administration a way to harness "incentives" by internalizing the costs of medical care within the very organization that delivered the care itself. In the 1980s, policy analysts of all stripes found in diagnostic-related group reimbursement (DRGs) a payment method that seemed, again, to harness market signals to social gain. And, with the Clinton administration's endorsement of what it called "managed competition," metaphoric confusion reigned. Only a world trying to use marketing hyperbole and business management would ever embrace "managed competition" as a political aspiration.

The reform of American medicine should focus on protecting American medical care from delusionary policies, not on perfecting the market. Democratic leaders should remind voters that no nation has achieved universal coverage by tweaking its health care market. (And no serious health care economist believes that the American health care market is just a couple of tweaks-say, a targeted tax credit and computerized prescription ordering-away from perfect competition anyway.)

In short, Democrats should start with the premise that Republican premises are wrong. Liberals should be dismayed by how many Democratic politicians in this election year have been speaking in the language of market efficiency, "consumer choice," and economic incentives. We should be dismayed as well by the fact that their embrace of the Republican vocabulary has been reflected in too many of their proposals.
Reformers should also be disappointed by the willingness of so many Democrats to disavow-or not to avow, which is pretty much the same thing-the achievement of universal coverage as the central animating principle of health care reform. This is so even if today's fiscal and political realities put that goal beyond the grasp of a Democratic administration in 2005. It is not just happenstance that from Bill Clinton to Al Gore to this year's primaries, the health care proposals of Democratic presidential candidates have been decreasingly ambitious in their scope, even as the numbers of Americans without any health coverage climbs. Democrats should be willing to speak for all the uninsured (and the potentially uninsured) even if the immediate challenge, as Vladeck and I argue, is to protect Medicare from debasement of its social insurance core.

Democrats should lead with their hearts on health care, but plan with their heads. Democratic political leaders at all levels should deal resolutely with our problems of cost, quality, confusion, and disorganization. That commitment need not imply inflexibility about methods and strategies; we have to begin by acknowledging the fiscal constraints on any election year proposal. What is worth fighting for now depends both on what is wrong and whether one is in a position to do anything much about it.
So What Are Democrats to Do?
During the presidential primary season, all the Democratic contenders issued health care reform plans of varying breadth and depth. Three candidates-Dennis Kucinich, Carol Moseley-Braun, and Al Sharpton-called for the establishment of a single-payer health care system modeled loosely on Canada's. With the exception of Richard Gephardt, who included an employer mandate (and generous federal subsidies to employers, which drove up the price of his plan and allowed other candidates to underbid him and claim efficiency), the other candidates proffered combinations or expansions of existing programs (such as Medicaid and the State Children's Health Insurance Program (S-CHIP)); tax credits; and the creation of new purchasing pools, modeled on or extrapolated from the Federal Employee Health Benefits Plan (FEHBP). Again with the exception of Gephardt's proposal, these other packages were projected, by outside analysts and the campaigns themselves, to extend coverage to between 50 percent and 75 percent of the uninsured. The official estimate from John Kerry's campaign is that his plan, in its current incarnation, would cover about twenty-seven million of the currently uninsured.

Broadly speaking, there are three major options for Democrats to consider in the near term. I will briefly discuss the logic and merits of each. Then, I want to sketch a range of alternative political scenarios and examine their potential implications for Democratic political strategies after the election.

A. The Federalist Option Democratic reformers could consider developing legislation that would not establish a single national plan for coverage-that would instead permit states to organize their own arrangements for health care and would make federal subsidies available to help them assure universal coverage and broad benefits to those within their boundaries. This federalist option could make it possible to unify advocates of reform who agree on the goal of universal coverage, but who disagree on which plan should be adopted to reach that goal.
The lack of consensus among reformers over which model of national health insurance the United States should adopt and the failure to enact legislation have obscured the extent to which so many reformers favor the same goals: universal insurance coverage, moderating the rising costs of care, and the reform of the pathologies of private health insurance. Although no single proposal for health care reform has attracted a legislative majority, during the early 1970s and the early 1990s there were arguably congressional majorities prepared to support these fundamental principles. In both periods, national reform was stymied more by disagreement over means than over ends.

If the federalist option were pursued, perhaps this deadlock could be broken. Congress would enact legislation offering financial support to all states that establish health care plans that meet federally defined standards. To receive federal subsidies, states would be required to guarantee universal coverage, comprehensive benefits, administrative accountability, fiscal viability (including cost containment), and portability (that is, recognition of coverage provided by other states). States could choose to meet these standards by implementing any one of a variety of different models for reform, ranging from single-payer systems to plans calling for competition among privately administered HMOs.

B. The Pincer Strategy Another option would be to build on existing public programs in order to move the United States closer to universal coverage-by, for example, extending eligibility and enrollment for such public programs as Medicaid, S-CHIP, and extending the reach of Medicare. In addition to broadening these programs to encompass additional age or income groups, legislation could make available refundable tax credits to employers to subsidize the provision of coverage to employees and their families. This option for reform would not entail the creation, nationally or within states, of new systems to finance or deliver care. It would be a more incremental approach than the federalist option described above. It is worth emphasizing that the pincer option-as advanced (although not under that rubric) by many of the Democratic presidential candidates this year, including Senator Kerry-differs from the incrementalism pursued by many Democrats in Congress over the past decade in that it envisions the passage all at once of a substantial package of reforms, not a sequence of separately enacted adjustments.

A pincer strategy could generate substantial reductions in the proportion of Americans without health coverage. Because this approach would incorporate many of the uninsured into existing programs and insurance arrangements, it would not require extensive (and perhaps expensive) administrative innovation to accommodate and finance coverage of newly insured population groups. For example, one could imagine a plan to extend Medicare downward in age, making all those fifty-five and older eligible for it. This would address some but not all of the problems of the difficult-to-insure. A pincer strategy would neither alter nor threaten the arrangements of those who are already insured.

C. Single-Payer Plans A third major option for Democratic reformers is the category of initiatives conventionally referred to as "single-payer" plans. This has been the model of choice for many Democrats for decades. Medicare itself is a single-payer plan in the sense that the insurance funds that pay for its benefits are in a single program.

The trouble with the conventional terminology, however, is that it falls short of describing what most people who support the single-payer option actually want to achieve. Consider the characteristics of Canada's Medicare, the most often cited single-payer comprehensive public health insurance program. The legislation governing that program prescribes broad coverage of care by physicians and hospitals; accessible terms (that is, no deductibles or co-insurance as financial barriers); public administration (for accountability); and portability (that is, coverage that protects Canadians whether or not they are in their home province when they need care). Most Canadians view universal health insurance as their nation's signal postwar public triumph. It has brought a decent level of care to all of the country's citizens and at a price that as a proportion of national income is 40 percent lower than health care spending in the United States.

A program like Canada's Medicare is administratively cheaper than other options, is more easily understood, and involves far fewer constraints on the autonomy of health care professionals and on the latitude of patients to choose among providers than do current arrangements in the United States. Such comparisons help to explain why Canada's model has been so appealing for American reformers. At the same time, however, this option has elicited intense opposition from groups whose incomes and ideological sensibilities are threatened by it. It is no surprise that the Health Insurance Association of America, the American Medical Association, and trade associations representing the pharmaceutical industry and managed care plans have viewed the Canadian example as a serious problem rather than a potential solution to the problems of American health care.

The Canadian system is unusual in that it bans private insurance for services covered by the public program. But the central lessons of the Canadian experience-for instance, that universal coverage is conducive to cost containment and that effective cost containment requires the concentration of financial responsibility and budgeting-are also manifest in other national systems that are less centralized and that retain a larger role for private insurers. We know from the German experience that it is possible to have multiple payers and still control costs if everybody plays by the same set of rules. We also know from Germany and Australia that it is not essential that everyone be in one public insurance system. These nations permit wealthier citizens to enroll in private insurance; what matters is that most people are in the public system so that it has broad political support and strong purchasing power.
Context Counts
Health care reform will never be a simple matter of dispassionately selecting policy instruments from a menu of idealized options. The stakes are too high and the politics around and about them too intense for that. Health care politics will vary with changes in the control of government and changes in America's economic circumstances. Let me close, then, with a brief analysis of alternative scenarios and their possible implications for the reform strategies of Democrats.

We can conceive of a realistic range of contexts by postulating combinations of political balance and economic vitality. Imagine three broad political scenarios: unified Democratic control of the White House and Congress; unified Republican control; and divided control. If we then posit two broad categories of economic circumstances-rapid economic growth of the sort experienced in the second half of the 1990s or a period of slow growth or recession-we have generated six possible futures to consider.

Chances are that only a thriving economy coupled with Democratic political dominance would make the single-payer option viable. But even under those conditions, this option would face tremendous opposition. Elements of a potential pincer strategy-such as universal coverage for children and expanded access to Medicare for uninsured older adults-could also attract support in these circumstances. If Democratic control of government is accompanied by economic and fiscal austerity, a more defensive posture would be likely, with emphasis on protection of Medicare and Medicaid.

If Republican domination were conjoined with favorable economic conditions, we might expect increased momentum for the enactment of a market-oriented tax credit program. If the economy were to lapse into recession, Republican leaders would be likely to seek restraints on Medicare spending by moving the program further in the direction of fixed-sum vouchers for coverage.

In all these scenarios, other situational factors would matter-including skillful and energetic political entrepreneurship and leadership by Democrats committed to reform. History instructs us that at any given moment marginal adjustments in health care policy are more likely than dramatic, transformative shifts. But those big shifts can happen, and we would be wise to be ready with plans to implement under expansive conditions. How well we adjust under more straitened conditions will be even more crucial in the short run. At some point the country will have universal coverage. When and how will depend on circumstances and opportunities-and on the choices that reformers make about how to make the most of those opportunities.
After the Election
The election of 2004 is unlikely to usher in a bold spirit of reform. Democrats can realistically hope to capture the presidency and, perhaps, to improve their relative position in the House and the Senate. But there is no reason to imagine a Democratic electoral sweep.

The defense of Medicare's social insurance structure is the most important, immediate, and desirable object of Democratic electoral commitment. The Bush administration imagined it could take credit for adding an outpatient prescription drug benefit, take the issue away from Democrats, and, under the cover of "saving Medicare," transform it. The subsidies to private insurers are a sign of their transformative intention. The effort to charge much higher premiums to upper-income elderly and disabled with a rhetorical commitment to "progressive" financing is a second indicator that breaking up Medicare's unified constituency was the real motive. The refusal to permit Medicare to use its bargaining power with the pharmaceutical industry is shameful-if understandable given Republican ideological opposition to what is done everywhere else among the industrial democracies. But the very weaknesses of the Medicare "reform" of 2003 offer a Democratic opportunity for the election of 2004.
The Bush administration misleadingly budgeted $400 billion over ten years for the 2003 changes in Medicare. We now know that the Medicare actuary anticipated spending of something like $550 billion. But emphasizing the scandalous silencing of the actuary -however justified-calls attention away from what one could regard as a budgeted, designated "pool" for health care reform.

Imagine first treating the estimated budget as twice what would be needed for a sensibly designed prescription drug benefit. (This assumes, rightly, both that Medicare could purchase drugs for far less cost than predicted and that the subsidies for private plans-and health savings accounts-are utterly wasteful.)

One could regard this money "pool" as a Republican mistake. They believed the public would be fooled by the rhetoric of saving the Medicare program. Instead, the Bush administration legitimated funding health policy reform. What an opportunity we have. First, a simpler drug plan for Medicare. Second, a chance to advance the "pincer" form of expansion by including those over age fifty-five who have problems being insured. And, at the same time, the Democratic candidates, nationally and locally, could attack the market premises of Republican orthodoxy and offer an alternative voice. Rationing medical care by ability and willingness to pay is what Medicare was designed to replace. Balancing access to care with the ability to benefit from it with a commitment to reasonable budgetary restraint-this is the real challenge for the Democratic Party. Its chances for success hinge on its ability to take on the challenge.

Ted Marmor teaches at Yale University's School of Management, in the political science department, and at the law school. He is the author, among other works, of The Politics of Medicare and co-author of America's Misunderstood Welfare State.