POLICY: Single payer versus vouchers: somewhat missing the point

In an op-ed called One Nation Uninsured Paul Krugman has given intellectual solace to all the single payer advocates out there and in his terms defined the serious argument in health poicy as being "between those who believe that the government should simply provide basic health insurance for everyone and those proposing a more complex, indirect approach that preserves a central role for private health insurance companies." Krugman is right in that this correctly excludes those avocating government-run health provision for all (and there aren’t really any of these) and the numerous HSA/individual account backers who still can’t do basic mathematics from the serious debate. (I’m having an offline conversation with a couple of these HSA promoters that may come to some resolution on that, but for now I still don’t see how giving money to healthy people doesn’t take it way from the sick ones who need it).

Krugman also puts some historical perspective to the analysis of why uninversal health insurance never passsed in this country. Yup, it’s the AMA that’s largely been to blame (and not just in 1945 either! They also helped stop it in 1917, 1933, 1965, 1971, 1977 and 1994 too). But Krugman largely ignores the doctors and says that it’s the insurance companies to blame. Jonathan Cohn moonlighting from his New Republic gig over at TMP gives some more detail about the failure of some parts of the supporting coalition to back the Clinton plan, and the success with which some parts of the opposition (notably the small health plans and their brokers) dumped tons of horse manure on top of the proposal – notably "Harry and Louise". There’s even been some comment from centrist Democrat Matt Miller suggesting that socialized medicine will finally really win support from big business.

This all apparently leads to a showdown between the voucher crowd, led by Vic Fuchs and Ezekiel Emmanuel, and the single payer advocates, whom Krugman is now supporting — although in several other forums like this months Harper’s he is backing the French model, which does have a mix of private pay, unlike Canada’s. The key question is whether or not you maintain a private insurance sector, and whether or not politically you’ll need the insurance industry’s support to pass the legislation.

Clearly the way health plans and providers interact today is a total mess.  Witness this case in N.Carolina where the doctors are accepting the local Blues plan, but the hospital at which they are practicing isn’t.  However, I actually think intellectually, there is room for independent advocates (e.g. plans) for patients to bargain or ally with providers, sort of like Enthoven’s vision of multiple competing Kaisers under managed competition. But in the end I think this is a false distinction in terms of practical running of the system.  There is no infrastructure for that kind of competition between plans at the moment(i.e. over delivering better care not avoiding risk), and crafting the legislation to get to it is so complex that it’s unlikely to be possible to get us there from our current system.

So the question is, if we are to get to universal health insurance, what are the circumstances that will get us there.  This is where the real lessons of the Clinton debacle come in.  The legislation will have to be done in response to a genuine crisis, and probably be done in the early days of a new Administration with a new Congress. Waiting for 18 months for the First Lady to draft something with her buddies won’t cut it, not least because the crisis may go away. (That’s what happened in 1994 and that’s the real untold story of the Clintons’ failure).

In that case there’s probably no time to do anything more complex than to create a universal Medicare-for-all that takes in everyone, allows people to buy supplemental insurance at the margin to pay for nicer waiting rooms (as in the UK), and fixes prices for providers at the prevailing rate, with some tough caps in the out years to contain costs. That’s how we’ll get it done. 

The real issue will be how does it get reformed to be a logical system beyond that. It’s taken the Brits 60 years to get to pay for performance, and we’re only just starting for Medicare. The real trick to get to better care will be the incentives to change medical care delivery, once everyone is in the same insurance risk pool, and payers and providers can’t run away from the cases they don’t want.

But, and this is a huge "but", the level of crisis that we need to be at to get this new Adminstration and new Congress elected to change the health care system will need to be very large indeed. I don’t think that we are anywhere close yet. Meanwhile we’ll meander around with HSAs, more uninsured and health care coming up on the 2008 radar, but not as a defining issue. So methinks the apparent optimism of some of my more liberal colleagues that something is gong to get done here just because GM is hurting understates the inertia in the system.

I’ll be writing more about the data behind the Clinton plan failure and what I think will constitute a crisis later.

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3 replies »

  1. Krugman wrote, “These companies played a secondary role in Truman’s failure but have since become a seemingly invincible lobby.”
    That’s not true. The insurance industry was against HSAs and they lost.

  2. One factor not present during the Clinton debacle is medical tourism and – more generally – the globalization of medicine.
    It is possible to obtain many medical procedures for a fraction (travel expenses included) of what it would cost in the United States.
    The average consumer may not be able to figure out whether County General is better than St. Mary’s in the Swamp or whether Hipxocor is better that Phenomol, but he can figure out that a $4,000 bypass is available in India as opposed to a $40,000 in the USA.
    And telemedicine is advancing. Robots are being developed to allow doctors to deliver services from afar. This is being sold as a device to allow specialists to deliver services to rural areas, but the same technology could be used to deliver inexpensive care from India.
    This gives the consumer and John Q. Public far greater bargaining power than they used to have. This is no longer purely a matter of whether white knights can be persuaded to rescue the day from Washington. We are moving to a position where we can give the medical system an ultimatum: Clean up your act or we can and will go elsewhere.

  3. The biggest driver of inertia (besides the lobbyists for AMA and insurers) are folks who have a plan they like and assume that any change will “cost” them benefits or out-of-pocket cost. The recognition that failure to change has a cost is beyond many of them.
    GM illustrates the issue that is going on in many board rooms today and perhaps tying that to consumer education will help. The rising cost of health insurance is killing many U.S. jobs. Most offshore labor options have affordable health care (not necessarily our quality). That “price tag” difference is just one more reason to move offshore when a company faces competitive pressure relative to labor costs. When the average employee starts to understand that rising health care premiums may close their operation (because that cost is rising far faster than any other labor cost), they will start to demand the issue be solved–but advocates of health care reform need to start helping them make that connection.

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