No Health Care Before Its Time

Liberal Democrats used to bring up the issue of universal health care, dust it off and parade it in front of the American public every four years. But in a bizarre twist of the Paul Masson Doctrine, they never managed to sell the notion that all Americans deserve medical attention--regardless of ability to pay--to the public, even though its time had long since arrived.

For whatever reason--maybe it's because health care eats up 13 percent of our gross national product--we bought it this year. While universal care seemed a pipe dream when Sen. Bob Kerrey first injected it into the 1992 campaign, Bill Clinton and Paul Tsongas soon jumped on the bandwagon. Support for universal health care, in one form or another, differentiated the Arkansasan from President Bush, who supported tax incentives to expand coverage but wouldn't guarantee everyone a health plan. Polls show that health care stuck out more than any other issue in the minds of Clinton voters.

But you might get the impression that, given voters' endorsement of universal care, the health debate is over. By and large, critics have disappeared or shut up, and proponents clamor for an acceleration of the process.

But it's the details that matter most and selling the public on the general issue is only half the battle. You hear the phrases "managed competition" and "Canadian-style system" being chanted like opposing mantras by different camps--Bush's inadequate tax-credit plan is dead in the water--but when you look beneath the rhetoric you find that the fine points remain unresolved.

There's an evolving consensus that managed competition, the alternative Clinton supports, is either preferable or inevitable, and even the Health Insurance Association of America (HIAA) has signed on. Managed competition means that regional private insurers would offer competing benefit packages and that employers would choose among them. Another stock phrase, "pay-or-play," applies here, too.

The government will tax employers who don't buy one of these competing plans and use the resulting revenues to pay for Medicare-style insurance for these companies' employees. Presumably the unemployed will draw from the same fund.

The benefit, say proponents of managed competition, is that health care will remain a fundamentally private enterprise in which government interference is minimal. No lining up for open-heart surgery or magnetic resonance imaging, say the proponents. No stepping on doctors' toes. Fewer bureaucrats pumping unnecessary paper into the system and a lower level of governmental involvement in general would characterize the new approach.

Can a Canadian-style system, in which a single state-operated insurer pays all medical bills, match these advantages? No, probably not, but it's unclear whether managed competition can achieve what its fans say it will.

Utilization will increase no matter what. Our health care system now rations treatment on the basis of an insurer's or a patient's own ability to pay. No money, no treatment. It's inhumane, but it doesn't strain the system. One unpleasant reality of health care coverage is that, regardless of which plan eventually goes into operation, simply adding the approximately 33 million Americans currently uncovered to the rolls of the insured will vastly increase the demand for health services.

Moreover, these individuals may well use, for two reasons, more health services per capita than those currently insured. First, it's safe to assume that the 33 million uninsured are among America's poorest citizens. As a result, their living conditions and, for those who are employed, their working conditions are more likely to be substandard. In addition, uninsured Americans can't afford preventative medicine, and consequently a new system must devote disproportionate amount of resources to remedy conditions that have gone untreated for years. Second, cost-sharing by the currently uninsured may be impossible--again because these are 33 million of America's least wealthy--and free care may be necessary. Basic Ec 10 tells us that people who pay nothing for health services will try to use them more often.

Also, effects upon health care providers may complicate any reform plan. The American Medical Association's support for managed competition suggests that physicians consider it the least damaging universal health care proposal. "We've supported that for years," says the AMA spokesperson, although a recent New York Times staff editorial suggests otherwise.

In any case, managed competition may not be superior, at least from the doctors' point of view. The administrative costs of a Canadian-style single-payer system will likely be lower than those in a managed-competition system with a redundancy of providers, computer systems and paperwork. A recent study in Health Daily suggests that a single-payer system would reduce physicians' administrative costs by 26 percent and hospitals' by 14.

And while many physicians object to the idea of a government agency that sets fees, some managed competition plans, including the influential HIAA's proposal, suggest a strong government role in designing insurance coverage. According to HIAA spokesperson Richard P. Coorsh, "we are asking that the federal government play a part...to help determine what should be in a standard package." And the Times urges that doctors be allowed to join only one plan lest the competitive aspects of managed competition be neutralized. Whether physicians will breathe more easily under managed competition or a Canadian-style system remains an unsettled issue.

Finally, the question of government interference doesn't necessarily favor managed competition, either. The administrative cost issue, after all, shores up the argument for the Canadianstyle system. A second point is more complicated: if you simultaneously support universal health care and employer-based funding, you have to favor a government-run, tax-supported default fund--a large-scale Medicare--for the unemployed and those whose bosses choose to pay rather than to play. One proposal even suggests taxes upon private health benefits to provide partial funding for the creation of this Medicare-plus.

So where's the problem? Employers who provide health care now do so through private insurers, and there are certain search and negotiation costs associated with finding an insurer. Given the chance to pay a quick and easy play-or-pay tax, some employers might funnel their workers into the public system. While it's impossible to know how many employers will opt out--since there are no precedents for managed competition--it's conceivable that the default insurance will cover far more than 33 million Americans. And despite the best efforts of Clinton, insurers and health providers, government may find itself paying for an ever-growing throng of patients.

Would Paul Masson approve of the progress of the health-care debate? Probably not. Democrats sold Clinton to the public partly on the strength of a long-overdue national health plan, but they never addressed these major problems that will afflict either of the two major proposals.

This doesn't mean that universal health care is a bad idea. It's not. It doesn't mean that managed competition isn't better than Canada's system. It probably is.

What it does mean is that something more fundamental than the tax code or the insurance industry has to change. We'll simply have to alter our conceptions about the American health care system. The AMA spokesperson says that Americans "have certain expectations...When you're told that you've got to wait six months for coronary bypass surgery, you get upset." This extreme case paints in sharp relief the potential shortcomings of universal care.

Given that most of us--the majority of Americans--can get health care on demand because we can afford health insurance, queuing up briefly while the new system begins to prioritize by medical need rather than financial strength may frustrate us. But this may be an inevitable consequence of health care reform.

There's a lesson here for policymakers, too. Sometimes politicians make decisions without the benefit of hard facts. The foibles of the Canadian system are well-documented, but managed competition is an unknown quantity. Health care is a big, technical, complex issue, and you can't talk about it without sweating all the numbers.

Universal care's time has come, but we've got to know what we're buying.