Cricket, Rugby and U.S. Health Reform: Three Sports, in Increasing Order of Violence

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

December 23, 2009

When Adam Oliver invited me, just under a year ago, to talk about health reform in the United States, he probably thought that matters would be settled by now. I surely did. How wrong we were. The process goes on. The outcome is still in doubt. I feel like a critic asked to review a three-act play at the second interval. The hope is growing that we are watching a gripping drama with an uplifting denouement, but many remain concerned that it may turn out to be a bizarre mix of tragedy and farce.

The origins of this political theater go back a long way—nearly a century, in fact. Theodore Roosevelt, running unsuccessfully for president in 1912 as an independent, advocated a limited form of national health insurance. The next Roosevelt, Franklin this time, considered including health insurance along with unemployment and old-age benefits and poor relief in the Social Security Act, but decided against it, fearing that including health insurance would rouse opposition from physicians and doom the whole bill. At about the time you were setting up the National Health Service, president Harry Truman tried and humiliatingly failed to get Congress even to hold hearings on a plan to provide limited health benefits to all Americans.

The reasons for his failure are instructive. The chairmen of the Congressional committees through which health insurance would have to move were Southern-state politicians. They understood that national health insurance would end formal racial segregation of American hospitals. Sure enough, just under twenty years later, when Lyndon Johnson’s landslide victory in 1964 gave non-Southerners enough clout to push
through nationally-mandated health insurance for the elderly and disabled, formal segregation in American hospitals ended. This episode illustrates an important feature of U.S. debate on health care policy: how seemingly extraneous considerations can frustrate reform efforts.
Later, presidents Nixon, Ford, Carter, and, most recently, Clinton all tried and failed to get Congress seriously to consider national health plans. As this list indicates, such failure has been bipartisan. Still, polls consistently report that the American public generally trusts Democrats more than Republicans on health care policy.

During the 2008 presidential campaign, the tone of the intra-Democratic Party debate could be summarized in five words: ‘mine is bigger than yours.’ John Edwards had the most sweeping proposal. Hilary Clinton had the most carefully detailed plan. Both embraced universal coverage. Both drew the same lesson from Bill Clinton’s failure—that it was important to persuade insured Americans that if they wished to keep the coverage they had, they could. Most did. Both embraced the same strategy for extending coverage.
Public coverage of the poor and near-poor would be extended. All but the smallest employers would be required to offer insurance to their employees or pay a tax instead. People not insured at work or by a public program would be required to buy insurance. Those who needed financial assistance to make insurance affordable would receive it. During the primary election campaign, Barack Obama was the odd-man-out. Health insurance should be mandatory only for children, he said. Others should receive financial assistance to buy it, but should not be required to do so.

Only one fringe candidate called for a government-run, tax-financed plan, and he won little support. Most Americans oppose that approach for two reasons. First, about 85 percent of Americans have health insurance. In general, it is good insurance. For twothirds, it is privately managed. Most of that private coverage comes as a fringe benefit of employment and employers pay most of the cost. Economists may think that workers really pay for such coverage because employers will reduce other compensation by about what insurance costs. But few others really believe it. Furthermore, the tax system encourages U.S. businesses to buy health insurance for their employees. If workers buy insurance themselves, they must first pay income and payroll taxes on the income. If employers pay for it, workers are spared these taxes. In addition, the administrative cost of insuring groups is lower than that of insuring individuals. Switching to a government run plan would upset all of these arrangements.