Health Care Reform Inaction: Is Obama to blame?

Democratic Senator Ron Wyden and Republican Senator Robert Bennett “refuse to let partisanship kill health reform -- and (they) are proof that it doesn't have to.” Indeed, the two leaders were joined by 5 Republicans, 6 Democrats, and 1 Independent in their Washington Post op-ed piece today. Their plan (or here) combines the main interests of Democrats - namely affordable universal coverage - and Republicans - individual freedom and removal of tax benefits. Furthermore, and perhaps most importantly given our current political and economic situation, the Healthy Americans Act has received incredibly positive financial analysis from the Congressional Budget Office and the Lewin Group. Given that a group of 12 bipartisan senators are already on board with a financially viable plan to ensure health care for the American population, why have we seen little progress on the adoption of an actual proposal in Congress? Specifically, why has this particular plan seen been given such little mainstream attention?

My opinion regarding the answer to this question will be discussed further, but, first, I believe a consideration of general health care topics is necessary before any real debate can occur on the issue of reform.

1). Is health care in the United States worse than in other countries around the world?

As Matt discussed, many rich foreigners come to the United States for medical services. Undoubtedly, our medicine, doctors, equipment, and procedures are some of the absolute best in the world. This leads me to believe that there is one truth in this discussion: health care in the United States is the top-notch on the world level for affluent people. Unfortunately for the impoverished population in the United States, health care is undoubtedly worse than for those impoverished living under more heavily government sponsored programs. Thus, on the average, health care in the United States might fall below that of other countries (Japan, UK, Canada), but for those who can afford sufficient insurance, the United States has some of the best health care in the world.

This is not a good thing, of course. And extending the excellent care received by those who can afford it to the entire population is a goal of nearly everyone. By doing so, we could improve social welfare, reduce the tendency for the poor to simply utilize hospital emergency rooms for all health care (at the expense of the public at large), and improve economic output and efficiency by creating a healthier work force.

One other important point to consider is that most often the comparison for “health care standards” comes in the form of life-span. But, life-span is contingent on a wide array of factors, including health care. For instance, the Japanese have a longer life-span than Americans, so some might assume that they have a better health care system. However, the Japanese have obesity rates near 3%, while Americans are over 20%. Wouldn’t it be unwise to discount this fact when comparing life expectancy (health care). Instead, why not look at the ability of a health care system to treat diseases, after they have been discovered. Here, the United States is the unquestionably world leader.

2.) Is health care spending necessarily a bad thing?

First, it is important to note that health care spending is two-fold: money spent on insurance and money spent by those insurance companies for medical procedures had by its customers. This discussion will mainly focus on spending on actual medical procedures.

So, is high spending bad? I don't think so, but more often than not we have been reading pundits criticize the United States for spending 1/6 of its GDP on health care (with that number expected to rise considerably in the future). In fact, I would go so far to argue that spending on health care is inherently good. After all, good health care - regular screenings, preventative care, disease control, etc. - are ways for Americans to extend their lives, which, seemingly, would be of interest to the majority of us. The extension of life is an extremely costly measure, but it is one that I believe most are willing to pay for and rightfully so.

Why then, some might ask, is the life expectancy worse here than in other places despite our relatively high spending to extend lives? This goes back to the discussion above. Perhaps we have the best disease control in the United States because we spend the most money extending people’s lives after they have been diagnosed with cancer or heart disease. This should not be looked at as a bad thing, but a good thing. The high costs are helping people live longer, healthier lives. What more would you ask from a health care system? Federal Judge and economic/political commentator Richard Posner discusses this potential misconception nicely.

That being said, there are certain costs associated with the first part of the equation: paying for actual insurance. Most of these costs seem to have little to do with extending life or living healthier. For instance, administrative costs that can be avoided might be a valid starting point for cost reduction. This argument also holds for President Obama’s goal to create a more streamlined, electronically based, and efficient record keeping system throughout the country. Further cost reduction might occur if Congress made it illegal for doctors to receive compensation from insurance companies (ultimately paid by consumers in the form of higher rates) based on procedures administered, as opposed to results. (I would imagine that there are other sources of costliness that can be reduced without compromising the actual care provided to individuals.) These costs seemingly have little to do with actual health care and a reduction in spending in these areas would be highly beneficial.

But, a reduction in spending on medications, highly sophisticated equipment, intricate procedures, highly educated doctors and the costs associated with scientific research to further develop these fields would not only be a shame, but a direct detriment to us and our future generations.

3.) Can health care costs only be controlled by the federal government?

(This discussion will be about reducing the cost of health insurance, as outlined above.)

The idea that the government can help control the cost of insurance goes against all common logic, in my opinion. The most efficient way to control costs, theoretically, should be through a competitive market. After all, if an insurer is charging rates for services that are higher than a competitor can, then why wouldn’t that competitor charge lower rates and increase his market share? He would. Unfortunately, the current American health care system discourages competition between insurers because it generally removes the individual from decisions regarding his own care. Somewhere near 70% (I think…) of all Americans with health insurance have it through a provider paid for by an employer or the government through Medicare and Medicaid. As such, the individual is greatly separated from the insurance policy being provided to him.

For instance, someone working at Ford has little choice in his insurance plan, and it is a plan crafted by executives at Ford to “best” meet the needs of an entire company’s population. This separation reduces the competition between insurers, as many large companies are presumably looking for similar mass-policies, and large insurance companies are eager to provide similar options to those companies. Further separating the individual from his insurance plan is the fact that he generally pays a simple, small deductible, while the insurance company covers the remainder of the tab. This makes the individual care far less than he otherwise would about the cost of his medical treatment.

If a reform is to occur, it should be aimed at increase competition between insurers at the individual level. As individuals seek to reduce costs and maximize return for each dollar spent on health care, insurers will be forced to create policies that more readily adapt to the needs of its real consumers, not large corporations as whole. By removing tax benefits that encourage employer based health care plans and, instead, offering tax deductions to all individuals (and families), those individuals will be likely to spend money on individual plans. This will allow them to care far more about what they are paying for, and the government can effectively encourage competition that will drive down the cost of insurance. This is exactly what the Healthy Americans Act aims to do. And, don't worry, by utilizing tax deductions, the plan allows for our poorest populations to obtain health care.

A further decrease in insurance costs from this system will occur as insurance companies, because of the newfound demand for lower costs from individuals, will seek to reduce the costs that they must pay medical professionals and hospitals. This may create even more competition between hospitals and doctors to provide care at a lower cost.

Thus, the Healthy Americans Act has great potential for creating the competition that is truly needed to reform our health care system.

4) Finally, to answer my initial questions: Given that a group of 12 bipartisan senators are already on board with a financially viable plan to ensure health care for the American population, why have we seen little progress on the adoption of an actual proposal in Congress? Specifically, why has this particular plan seen been given such little mainstream attention?

I believe that the answer might lie with President Obama’s insistence on creating an FDResque legacy through the creation of a single-payer healthcare system in the United States. This insistence is not President Obama’s alone; he is joined by numerous House Democratic leaders, which is why an overwhelmingly Democratic House and filibuster-proof Senate has been unable to accomplish a timely reform. Moderate democrats have balked at the realization that the current health bill will, down the road, lead to an extremely large single-payer system that will not only fail to reduce overall costs in the industry, but will vastly increase public debt.

President Obama, like other Democrats, has consistently favored this idea of a single-payer system from the beginning of his political career. Indubitably, President Obama, like any other politician (especially true for Presidents) has a large streak of individual pride and selfishness; he wants to go down in infamy, like many others before him, especially amongst Democrats in an FDR fashion.

Unfortunately, this idealistic goal may come at the cost of or federal budget and the medical industry as a whole. If rising above the old-school politics and truly looking for efficient political policies for America is, as he has often told us, his true goal, then one would hope he considers more closely the Wyden-Bennett Healthy Americans Act. Hopefully the inability to pass a single-payer focused health plan will force him to do just that.