Healthy Choice: A Step-by-Step approach to Universal Health Care

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

September 29, 2008

To many Democrats, it has long seemed self-evident that Barack Obama, if elected president, should promptly seek enactment of one big bill to achieve universal health insurance coverage and reform the U.S. health care system.

Senator Edward Kennedy is currently working with Senate colleagues to draft just such a bill. The appeal of this position is strong. Covering all Americans has been a goal of the Democratic Party for at least seventy years. Fifty million people remain uninsured. The quality of care in the U.S. is spotty, despite costs vastly greater than those of any other nation. Increasing outlays for Medicare and Medicaid threaten fiscal meltdown. Furthermore, candidate Obama campaigned on a program of sweeping reform–not, perhaps as comprehensive as those of his two major primary opponents, Hillary Clinton and John Edwards, but very large indeed. Many business executives, long opposed to government-led reform of health care financing, now clamor for government involvement. And the number of Democrats in both the House and the Senate is likely to increase. For all of these reasons, it is argued, now is the time!

Despite the appeal of swinging for the fences on health care reform, it would be a serious mistake for a President Obama to make sweeping reform an early first-term priority. And the high cost of the current financial troubles is not the reason why. The fact is that a well executed “bailout” will not materially affect the long-term budget prospects of the federal government. Yes, it will initially boost spending and the national debt, but subsequent revenues from sale of acquired assets should offset those outlays. There are four other reasons why seeking to reform the whole health care system in one, large bill is unwise.

The Chances of Success are Small. No consensus exists on how best to achieve universal coverage. Budget deficits that were foreseen before the bailout meant that no acceptable reform could substantially increase outlays, which requires that new spending–for example to cover the uninsured–must be offset by reduced spending for something else. The plain name for such spending shifts is income redistribution, the politics of which makes rugby scrums look positively gentlemanly. Resistance from those who are asked to pay more or receive less in the $2.6 trillion health care industry will be ferocious and well financed.

Recall that Democrats held 258 seats in the House (25 more than now and more than they are likely to hold in 2009) and 57 seats in the Senate (five more than now) when President Clinton’s health plan imploded. Right now, Democratic support is wobbly. On April 23, 2008, The Hill quoted Senator Jay Rockefeller saying: “We all know there is not enough money to do all this stuff;”, Senator Charles Schumer saying: “Health care I feel strongly about, but I am not sure we’re ready for a major national health care plan,” and Senator Max Baucus, chair of the key Committee on Finance, “If they try to solve all the problems, it’s going to be difficult.”

The Political Fallout From Failure Would Be Devastating. The unsuccessful Clinton health plan was a political catastrophe for his party. That failure was a major factor in the massive Democratic Party loss in the 1994 congressional election. Were an Obama administration to fail similarly, the political consequences for the administration and the party could be equally serious.

Numerous Other Problems Cannot Wait. The next president will face an avalanche of issues neglected or mishandled by the Bush administration. To the financial crisis, which is an obstacle more for the political energy that it will absorb than for its cost, add global warming, energy prices, Al Qaeda, Iraq, Iran, Afghanistan, the Arab-Israeli conflict, recession, income inequality, Social Security, rebuilding the U.S. military, and tax reform. To be sure, presidents always have to do many things at once, but their capacity to pursue major objectives simultaneously is severely limited. A failed effort to reform the U.S. health care system would not only generate direct political losses; it will also divert time and effort from other issues, some of which simply cannot wait or that offer greater opportunities for success than large-scale health care reform does.

The ‘Big Bang’ Approach to Health Reform is the Wrong Strategy. Congress is unlikely to change how the entire U.S. health care industry operates with one bill. And if it did so, it would probably make a hash of the job. The U.S. health care system is as large as the entire economy of France. Differences among the states in the cost and style of delivery of health care approximate those of the European Union. More importantly, apart from periods after major wars or depression, democracies typically make large social and economic changes gradually, through laws enacted successively over many years.

So, rather than ‘betting the administration’ on one shot, the sensible strategy would be to enunciate a broad vision for reform and propose practical steps to move in the envisioned direction. Get them through Congress, see what works and what doesn’t, and then move forward again. Obama has already clearly articulated his vision. Here are four initial steps.

Expand S-CHIP. Call upon Congress to once again pass the legislation President Bush vetoed that would have extended the State Child Health Insurance Program (S-CHIP) to an additional 5 million children. Though such legislation would not fully implement Senator Obama’s promise to provide health insurance for every child, it would cover about 96 percent of them.

Start Testing Effectiveness. Earmark one percent of Medicare revenues and a similar share of private health care outlays to evaluating treatments and to establishing a national electronic database on medical outcomes. Most of the trillions spent on health care goes for services that have never been rigorously analyzed. The failure of the nation to invest in these studies is scandalous. Sensible cost control will remain nothing more than a topic of earnest conversation until information on what works and what does not work is available.

Encourage States’ Efforts. Today, only Massachusetts has a comprehensive plan to extend coverage to the uninsured. Massachusetts is confronting–and, at least so far, solving–financial and administrative problems that any national program must address. If the federal government encouraged such state efforts, including some financial protection during economic slowdowns when state revenues drop and health spending does not, additional states would take the plunge, helping to pave the way for national legislation.

Create a National Health Insurance Clearing House. At a minimum, such an entity should regulate how health insurance is sold, so that buyers could easily compare features and prices. This inexpensive step would greatly improve the capacity of buyers to shop intelligently and encourage insurers to compete based on service. Massachusetts has created such an entity, called the Health Connector. Eventually, the clearing house could regulate health insurance prices, narrowing the huge variations that now make individual private insurance unaffordable for high-risk enrollees–the elderly and those with preexisting conditions. Over time, it could become a channel through which all or most people get coverage and that administers the subsidies that make insurance affordable.

No element of this program should face insuperable legislative obstacles. The S-CHIP extension has already won majority support in Congress, failing only because of a presidential veto. The challenge to effectiveness research is less passing it than sustaining it when, as is inevitable, studies show that procedures, drugs, or devices backed by influential investors or practitioners are ineffective or excessively costly. To enable an agency to publish controversial findings and survive politically, the key is funding that is independent of annual appropriations and governance by directors appointed by lengthy, staggered terms and removable only for cause. Legislation to encourage state action already enjoys widespread bipartisan support–one House and two Senate bills have been introduced, all with bipartisan co-sponsorship–and would pass readily if backed by a popular president. The health insurance clearing house was spawned in a conservative think tank, but is an element of Senator Obama’s campaign program.

These four reforms would not by themselves achieve universal coverage, end sub-standard care, or stop excessive growth of health care spending. But they would make material advances on all fronts and carry far less risk of political failure than the ‘big bang’ approach. They would immediately increase the number of insured Americans by about ten million and set the stage for covering millions more. And they would provide information that will eventually make cost control possible and sustainable. Democrats should beware of once again approaching health care reform the way Charlie Brown always approached the football that Lucy held–heedless of experience, credulously hopeful, and flat on their backs.