Liberals and conservatives on healthcare reform

March 23, 2009


– Stephen M. Davidson, a professor at Boston University’s School of Management, is author of “In Urgent Need of Reform: Saving the U.S. Healthcare System,” to be published later this year. The views expressed are his own. –

Stories about healthcare reform often contain opposing statements from liberals and conservatives. Liberals would use government; conservatives, a market in which private insurers would compete for subscribers. Liberals say a big public-sector role is needed to rein in costs and achieve universal coverage; conservatives say that approach would face opposition from most, if not all, Republicans.

Perhaps unwittingly, that kind of juxtaposition creates the impression that there are two equally viable paths to the three main goals of healthcare reform – financial access to care for all; reduction in the rate of increase of healthcare spending; and more reliable quality of care. But the notion that these are two paths to the same end is false. In fact, competition among private insurers will always produce large numbers of uninsured people –- now at 47 million and climbing — and always produce higher spending than necessary. Here’s why.

To get employers to choose their policies for employees, insurers offer lower premiums, which vary mostly because the policies differ. Covered services usually vary as do charges subscribers must pay (in addition to their share of the premium) when they actually use services. Insurers’ profits are determined not by the number of policies they sell but by the share of revenues paid out when policyholders use covered services. And that figure becomes known only at year’s end when bills for the services policyholders used are added up and deducted from total revenues.

So what can insurers do to increase the probability they’ll finish the year in the black? The fact is they have few tools. Revenues are determined when policies are sold, but most costs represent payments for covered services used by subscribers, so insurers need to keep those payments down. To do that, insurance innovation has taken two main tacks. The surest approach is segmenting the market to induce disproportionate numbers of healthy people to buy policies and, more importantly, to discourage unhealthy ones from buying. The other is setting rules and procedures making it harder both for subscribers to use services and providers to furnish them.

This isn’t the kind of innovation that produces better, faster, and cheaper computers (or other products) for which American ingenuity is justifiably esteemed. It may benefit shareholders, but it doesn’t provide enough benefit to the public to justify a struggle to preserve it.

Moreover, the size of the insurance bill discourages many employers from even offering coverage, their share of the premium discourages many employees from buying insurance when it is offered, and the out-of-pocket costs at the point of service discourage many who have insurance from actually using services. Finally, such a competitive, fragmented system requires higher administrative costs to support it — and higher public-sector costs for people left out of the private market.

In contrast, Congress can achieve the first goal (assuring financial access to care) simply by passing a law requiring everyone to have coverage, then creating mechanisms and rules to make it happen — including ones that will contain future spending. So the key question is not whether to use government or a competitive market, but what goals do we really want to achieve.

The market cannot be the chosen approach to achieve those three main goals. If those are the objectives, government must play a significant role. But different people may have different preferences on a range of other related issues.

Do we want a single-payer option in which everyone has public coverage and a government agency pays providers directly for care? (If so, we could expand Medicare to all Americans.) Another alternative is to create a government-funded program providing vouchers that entitle everyone to sign up with a private health plan which, in turn, would provide the services. If private health plans are used, more decisions would be needed, like requiring them to accept anyone who wanted to enroll and paying them risk-adjusted amounts so they would not be disadvantaged if a disproportionate number of high-risk, high-cost people signed up. And, of course, how to finance the program.

Bottom line: When Republicans say they oppose any government solution and insist on using the market, what they are really saying (whether they realize it or not) is that they don’t want to guarantee financial access to care to everyone or to contain healthcare spending. Competition has a long and honored place in the American economy, but in this sector it won’t serve us well.


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One could flood the earth with nurse scholarships to make that cost go down.

One could market our services to wealthy foreign citizens.

One could have an all commercial, all clinical study, sponsored hospital.

We could have a medical scratch ticket or a scholarship scratch ticket.

We could have three tracks: maintenance elderly, emergent/rare.

We could focus on prevention insurance.

We could sell an insurance policy that gives a large amount of cash if you jsut stay home and die or miraculously recover you get the money.

Posted by Sean | Report as abusive

A fine point of view. Today system is a corrupt one. We need a system which covers ALL americans. A medicare for ALL americans regardless of their age and income.

Posted by RICK N | Report as abusive

I think the real problem with healthcare is quite simple. It is an almost entirely inelastic market with ever rising costs due to an explosion of research investment over the past 20 years. It is pretty hard to keep costs down when drug makers and hospitals are for profit businesses trying to develop ever higher quality products to sell for ever higher cash flow and profits. A sure way to slow down costs would be to put caps on drug costs and on procedural costs to the end user. I have seen single doses of medicines costing as must as $3,000. Which of course was covered by the state sponsored insurance. Caping sales prices would make drug makers seriously reconsider a no holds barred approach to research spending. Some would argue this would stifle innovation and progress in the medical field. I believe the medical field has created a bubble of its’ own the past 10 years that needs to be popped. It is really disingenious to believe we can have a for profit industry for an inelastic service such as healthcare. Another simple example of such a thing is college textbooks. Students are required to buy the books; and guess what? The books cost 4 times what you believe to be a reasonable price.

Posted by Mike | Report as abusive

An excellent article and the points mentioned are quite clear. Health care is not a business but rather a service that all should have access too. Unfortunately in the US, we have allowed for such a bubble to be created and as all bubbles, it will soon burst as we have seen similar affects within the real estate market. A human life and health care accessibility should not be left to the market therefore; a balance between the public and the private sector must be reached. For instance, drug prices are out of control in the US where one can purchase the same drug elsewhere such as Canada at a much lower cost. Why should Americans bear the blunt of such costs? We spend the most on health care and have the worst system in place with many not even having access to such services, with myself and family included after I lost my job over a year ago.

Posted by Shahin | Report as abusive

Let me see if I can name all the health programs the government currently runs for certain Americans. SCHIP, Medicare, Medicaid, VA, FEHBP (for congress!)… did I miss any? How about preventative care and I can only think of one, WIC. I am certain I am missing some, maybe State and Local health care programs. I know the VNA operates in the county I live in, and there is the county board of health which provides health services the community too. So the neo-cons expect us to believe that all of these fragmented programs couldn’t be rolled up into one for roughly the same cost in current government funds with the added funds people pay for insurance already? Uh huh. They think the cost of people not gettiing preventative care, being dropped by their carrier after they cost too much, not seeking needed medical treatment, or being driven to bankruptcy by illness is a better way as long as the corrupt insurance companies and ‘for profit’ hospitals keep raking in the cash? Making obscene profits from people’s illness and disease is simply a sadistic practice and violates every ethical principal upon which the practice of medicine was founded!

Posted by J | Report as abusive

Simply create governmental alternative, which offers health coverage to all, and let private insurance to exist too. It will work exactly like the postal services now – whoever wants and can afford private and presumably better health treatment, will be able to purchase it, but no one will be left off the board.

Health services are completely nonelastic goods, people always get sick. And pure free market never works well with such goods – read any economic textbook.

Posted by Ananke | Report as abusive

Create a government alternative? Big government unions and big government bureaucracies will not “fix” the problem, nor will more laws or agencies regulating the existing health deliver system. The ONLY long term solution is health education and mandatory sports in the school system. Learn that smoking will cause cancer (visit a cancer ward in the hospital), fast food will kill you (see Supersize Me video), and recreational drugs along with alcohol binges will cause parts of your body, as well as your brain to fail. Eliminate the cost of these factors on the health deliver system and we could save 50% off the top — as well as increase industrial productivity. Throw a lifetime of regular exercise in the mix, and we will all be better off for it. Now that WILL fix the health care system. Smarten up America – quit blaming the system and take personal responsibility for your own health. There will then be plenty left over to help those who truly cannot help themselves.

Posted by JH Been | Report as abusive

To get the U.S. back on track and save itself from years of terrible choices, corruption and outright corporate greed, two basic tenets must be accepted as essential in governing. One, the middle class is the goose that lays the gold eggs. Not the wealthy and super rich and not government. Two, the more the U.S. has policies similar to Western Europe with regard to health care, education, social services, corporate governance, the better off we’ll be. Now that Reaganism and the Republicans are in retreat and near extinction the time has come to make the U.S. a better nation than it has been for a very long time. It may be our last chance.

Posted by Steve Bonser | Report as abusive

Why does everyone always say gov’t subsidies of privaye insurance is any kind of a solution? So, instead of getting sapped w/ a medical or insurance bill, we’d pay it in taxes then have that handed over to the corporations? Gov’t subsidized profits–yippee. If Americans paid into a national pool to same amount we spend on healthcare insurance, we could have have a non-profit healthcare insurance pool. Cut out the middle man. Easy. But, no one will consider for a second even trying to get that past the insurance company puppets in Congress.

Posted by BS | Report as abusive

The fundamental problem will not be solved as long as the patient is someone who is fed into the doctor –> pharmaceutical –> insurance loop to be fleeced of every last cent. The system was hijacked 90 years ago when chemical healthcare producers took over the healthcare system. It then became a matter of money not health.
If I got sick I think I would prefer the disease rather than the cure.

Posted by Chris | Report as abusive

THE PROBLEM: Almost nobody who buys medicine or medical services actually pays the bill themselves; directly. Either you have insurance – and they pay most or all of the cost. Or you dont have insurance, and you dont pay all or some of your bill – charity may pay some – but most is eaten by the provider who is forced to overcharge other customers – the paying – including insurance companies. There is no incentive to compare services and prices. You do not benefit from a good deal. Also the quality of service is difficult to compare.

THE FIX: 17% of US GDP is healthcare spending. Thats about $2.5 trillion per year! That is about $8,300 per person! 1) cancel every government medical program and associated taxes required to raise funds. 2) Mandate that all workers pay %15 of their income towards a national health savings account (HSA). The government could purchase a high deductable insurance plan for every person in america ($8,300 deductable). By buying in extreme bulk the cost per person would be low. The remaining amount would go in to individual HSA. Easily $5000 per person per year in an account that could only be spent on health – until retirement. Young people could build a nest egg – while they are healthy. The money in the HSA accounts could be invested by individuals as it waited until you needed it. The real money – that the individuals could keep when they retired would be spent wisely and invested wisely. Competition!!! Also a customer review process could be instituted to measure the quality of health care vendors. The cost of health care would go down and in time the health tax rate could be lowered. An owenership society would grow where even poor people would have thousands of dollars to invest. This is the fix.

Posted by David | Report as abusive

Statistically, the most money spent on a persons health care in the USA is spent in the last two weeks of life.
By that time most of the insurance companies have bowed out, and it is one of the government programs, funded by you and me, as mentioned by ‘J’ above, that pays.
Don’t forget the Indian Health Service. Native Americans are the only people in America with guaranteed cradle to grave health care. This multi Billion and counting program is run by the government. This totally separate health care system, with layers and layers of ‘old buddy’ management, can now bill Medicare, Medicaid and the VA for any of its patients who qualify for these benefits, in addition to receiving government funding to run it’s own hospitals and clinics. It has been run by an ‘Indian Preference’ management for 50 years. Are these people healthy? These ‘managers’ would scream bloody murder if you tried to put them under the ‘all inclusive’ health care system, and got rid of those duplicate jobs. They complain all the time “our health care is not the same as other Americans”. You got that right-the rest of us don’t have ANY health care.
Germany has some sort of program where an individual is enrolled in a ‘company’ that administers the health care benefits, the AKO is the biggest one, for Miners there is the Knappschaft, and so on. Belonging to one of these is not an optional activity; I think Massachusetts has a health care plan sort of like this. I am not sure how the government pays in for the unemployed and poor, but obviously there is a way. If you want more ‘fancy’ accommodations in hospital (private room, more art work, ect.) you pay for additional private insurance, AND hospitals have a separate section for ‘Private Pay’ patients. I like this touch-this give the ‘bennies’ to those who pay for them, not the Medicaid patients with the biggest mouth (you can tell I work in the health care field!)

Posted by QueZen | Report as abusive

There’s three main reasons healthcare is ballooning in cost.

1. Insurance Companies.
The concept of insurance for doctors, drugs and hospital visits was a good one back in 1940 or whenever it was first introduced. But not any longer. What has happened is that the entire healthcare industry has become drunk and addicted to the insurance payout system. Healthcare providers don’t have to set prices and agree to set rates because they just bill the insurance company whatever they want. Imaging if you owned a business and instead of giving your customer an estimate and agreeing to it in advance you simply billed a third party who was happy to pay the bill whatever is was. Think you may just raise your rates a little or maybe a lot?

2. Lawyers.
Well, maybe not individual lawyers, but the system in general is wacked. It’s simply too easy to sue a doc or a hospital and get away with millions. This has to stop. Remove quack docs and punish them with fines but the entire malpractice industry, which is also propped up by insurance companies, needs an overhaul.

3. You and Me.
What? Yes that’s right. Most of us have gotten fat and out of shape. One third of all army recruits are rejected because of their weight. That is just ridiculous. We need a national nutrition and exercise program that is tied to our national healthcare plan. Just like welfare reform, everyone needs to pull their own weight and get out of this rut we’re in. A major cultural shift is in order.

So there it is. Easy as 1, 2, 3. Of course we’ve got a huge battle on our hands with the insurance companies, the malpractice industry and the chain smoking fatties. But it’s a fight long in coming and I welcome it.

Posted by M Smith | Report as abusive

Simply put the rest of the world cannot be stupid and we Armicans smart after having created the global meltdown. So when it comes to social needs of humanity private sector has little or no incentives except profit hence non-profit organzations exists. Bottom line a single payer system with modifcations to medicare that emphasizes Primary Care vs specialist care is the way to go. I have yet to hear an elderly person complain that Medicare does not work even though it is not perfect it is better that no coverage.

Most products in the “free” markets are optional for the normal purchaser which creates competition but that is not an option for the purchaser of health care that has a normal fear of pain, death or disabling disease. That eliminates a lot of free market competition especially when Congress passes laws like the Medicare Prescription Drug benefit which forbids any real competition in the market and dictates that by law even Medicare and the VA can’t shop around for lower drug prices. So we have a “world” economy but can’t import U.S. made pharmaceuticals from Canada that would provide a 50% savings even after the round robin trip. We have the hubris to label this free enterprise? Yes, as bought and paid for by big pharmco.
Our health care system is a fraud and a shame perpetrated by lying congressional champions of “free enterprise.”
It’s disgusting, deadly and needs comprehensive reform immediately. Nationalize it like civilized countries do.

Posted by Ray | Report as abusive

Supply and Demand. The quantity of Healthcare provided (quantity supplied) at a fixed (controlled) price will create a severe shortage of care. Employer based healthcare sucks, but ignoring market forces in your solution like this is dangerous.

Posted by Jason | Report as abusive

Professor, the choice is not between liberal or conservative ideologies. And the proposition that Liberal would use government control, conservative would use market control is also false.

The choice is: Is human health, specifically remedial medical care, a fundamental civil right? Yes or no.

The rest is details.

Posted by The Real Deal | Report as abusive

Article: Do we want a single-payer option in which everyone has public coverage and a government agency pays providers directly for care? (If so, we could expand Medicare to all Americans.) Another alternative is to create a government-funded program providing vouchers that entitle everyone to sign up with a private health plan which, in turn, would provide the services.

I suspect that this author, like most Americans, has not understood why their HC-system is so expensive. It is because it is a Service Sector component of our economy, and like most such sectors, the labor component is expensive. An average doctor in America earns $150,000 a year. Multiply that average by the number of doctors and you have just an idea of the cost of one component to health care.

Why do Americans pay twice as much as Europeans, per capita, for health care services? Because, in Europe, the National Health Care systems mandate the cost of HC services practiced by physicians. Those fees are intended to assure the profession an honest pay for more than an eight-hour day.

And, why did the World Health Organization place 10 of Europe’s National Health Systems in the top fifteen? (Whilst the US finds itself at 36th place.) Because a key criteria in their study was “easy access” to health care services. Easy access is jargon for low-cost. In France, I pay $30 to see my GP for a consultation. How much do you pay?

This lower cost is crucial to a program with the onus on Preventive Health Care that detects an illness before it becomes serious. Remedial Health Care is costly, so preventing serious illness is worth its wait in gold.

The US should do the same as Europe. Why not have Health Care provided by Civil Servants paid Civil Service scale rates in government run hospitals? That’s the way the military does it, and it has THE finest health care system in America.

Just a thought …

Posted by LAFAYETTE | Report as abusive

There must be a reason why Americans flock to Canadian pharmacies to fill prescriptions, and Canadians (the ones who can afford, and not only Canadians) flock to USA for treatment.
The most important question is, what health care as such is? A human right, or a market based service?
Say it’s a right, and then all the liberal plans are not only a possibility, but the only way to go. With all the consequences. Since equal distribution is a requirement, the whole distribution system (inherently bureaucratic) must be built – and paid for. The more the bureaucracy costs, the less money will be available for treatment. The less will be doctor’s income – either as a contractor of the government-based system, or as direct government employee. The less will be motivation for bright young people to go to medical school, if they can later get more money for less work somewhere else. An American medical student will become a rarity just as an American engineering student is. Soon America will have to import doctors and nurses just like Britain has – and mostly from countries like Pakistan. Remember some British doctors of Muslim origin that planted car bombs in England a few years ago concurrently with (or instead of) treating British patients? With all the consequences to the quality of American health care as a product – just as we see decline of the quality of American manufacturing products. That’s on service providing side.
On the consumer side, you’ll be stuck with whatever health care services are rationed to you by some local bureaucrat, and whatever providers you are assigned to by the same bureaucrat. You might be lucky to get assigned to someone who is a Doctor by Cod’s grace. Or you can get someone whose accent you can’t comprehend. If you have enough money, you’d be able to go to one of the few remaining private practitioners working outside of government based system (definitely not an option affordable to middle – and even upper-middle class). Or you can travel for health care to some low cost location like India – doesn’t this look like outsourcing and offshoring of yet another American industry? And again, inequity – if you can afford, you’d get that quality of life enhancing joint replacement, or that life saving heart surgery, when you need it, and by provider of your choice. You can’t afford – and you wait for years in the wheelchair. Or you die while on waiting list. Or you die under the knife of that fresh from the school (or from foreign diploma evaluation) surgeon. Just ask all the foreigners who come to America to seek medical treatment and pay for it, even though they have a robust public health care system in their home countries like EU or Canada, and they’ll tell you why.
Who will really lose – that’s exactly the poor who now qualify for Medicaid. Now they’re treated within the same system as privately insured or self-paying patients. If that system gets nationalized and overloaded by the ones currently outside of it, it’s the poor that’ll get the short shrift. While the ones with more resources will be able to postpone buying a new car or forego vacation to get necessary treatment outside the government-administered system, the poor will get stuck.

Posted by Anonymous | Report as abusive

A few years ago a relative of mine needed an expensive $60,000 surgury. This was followed up by about $100,000 in medications over a period of 2 years. Because he/she was insured, the total that the insurance company paid the hospital for the surgury was approx. $16,000. He/she paid nothing. If he/she had not been insured, the total that he/she would have had to pay out would have probably been the full total of $60,000. So, how about the medications? The insurance company paid for virtually all of the medications at full cost of $100,000. What this tells me is the political power that insurance companys have over hospitals, but more surprisingly, the power that the drug companies have over the insurance industry. Another small but salient example of the power of drug companies are the adds you see on television (during prime time!!!!) promoting drugs that enhance a man’s ability to get a erection. It is amazing what the general public will except, but it also shows the incredible power that the pharmaceutical companies have. Power and influence, power and influence…..

Posted by Jaun R | Report as abusive