Instead of Universal Coverage, Reforms that Will Work

Tens of millions of Americans lack health insurance. Extending coverage to them has been a core goal of health reform proposals since the 1960s. President Richard Nixon offered a universal health plan in his first administration, but since then Republicans have hesitated to commit the nation to so costly an undertaking. Is it time to rethink? Should Republicans accept universal coverage as a goal?  We posed this question to NewMajority’s contributors.

The healthcare debate isn’t going away any time soon. If anything, despite the hue and cry televised at a number of town hall meetings across the country, the demand for reform will only gain momentum in the future. Universal coverage has been the trend in almost every other industrialized nation, and though many of our European and Asian counterparts have adopted some form of expensive, socialized medicine and inefficient central planning others, like the Dutch, have introduced market reforms designed to rein in costs and spur competition.

In the United States, Medicare costs will continue to squeeze the federal budget, and lawmakers will be faced with tough choices between further tax hikes, means-testing, or other reforms to help keep the program solvent, while rising private insurance premiums will continue to place a heavy burden on small businesses. While our healthcare is quite good, our system of providing it is far from where it should be, distorting costs and incentives and leading to out of control spending in the public and private sectors.

It’s time conservatives made health care reform their own – and not by mounting defenses of Medicare or by retreating to the status quo.

Employer provided insurance in the American system is anything but an example of the free market. Fifty different sets of regulations in fifty different states not only makes purchasing insurance on a national market impossible, it creates localized monopolies that drive up costs and create barriers to exit for consumers and barriers to entry for competitors. Employee provided coverage also creates a disconnect between the consumer of healthcare and their healthcare decisions, and that disconnect leads inevitably to higher spending.

Even worse, since employee coverage is the only affordable option for most Americans, health insurance is no longer portable, making mobility in the workplace far riskier than in other industrialized nations. Employee provided health insurance also places a huge financial burden on American companies, making them less competitive in the global economy, and stagnating wages for American workers.

Medicare is a huge, bloated government run healthcare entitlement which will eventually run out of money without major tax hikes or similarly decisive reforms. Yet, RNC chairman Michael Steele, laying out the case for a Senior’s Health Care Bill of Rights, wrote in Monday’s Washington Post,

The Republican Party’s contract with seniors includes tenets that Americans, regardless of political party, should support. First, we need to protect Medicare and not cut it in the name of “health-insurance reform.” As the president frequently, and correctly, points out, Medicare will go deep into the red in less than a decade. But he and congressional Democrats are planning to raid, not aid, Medicare by cutting $500 billion from the program to fund his healthcare experiment. The president also plans to cut hospital payments and Medicare Advantage, all of which will mean fewer treatment options for seniors.

According to the Pacific Research Institute, since 1970, the per-patient costs of all healthcare apart from Medicare and Medicaid have risen from $364 to $7,119, while Medicare’s per-patient costs have risen from $368 to $9,634.” And, since 2000, private “per-patient out-of-pocket costs have risen only 35% since 2000, while Medicare’s per-patient costs have risen 59%.”

This is not a fiscally sound program, and conservatives are wrong to defend it or any other entitlement with a politically inspired Bill of Rights. Imagine a future debate over Social Security and the ensuing Senior Citizens Retirement Bill of Rights. Indeed, Steele’s own argument could be used against him by replacing “senior citizen” with “47 million uninsured”, the common number touted by proponents of the public option.

Defending one entitlement to postpone another might make some political sense, but it puts Republicans on a poor footing to help enact the kind of healthcare reforms that conservatives should be pushing for.

Specifically, conservatives need to push for choices in healthcare, and the two steps most needed to create real healthcare markets are 1) ending huge tax subsidies for employer provided benefits and 2) replacing state-by-state regulations with one national regulator. These will open the door to a much more competitive insurance market, and much lower costs for individuals. Beyond this, there are other ideas conservatives should consider that could help to rein in costs and increase results.

Health savings accounts. Rowan Callick, writing in The American in 2008, discussed Singapore’s health care model which relies heavily on personal health savings accounts to reign in costs. While the Singaporean health care model itself may be too drastic a reform for the American public, finding ways to put the health care consumer back in charge of their own healthcare decisions is a reform that liberals and conservatives can both agree on. Rationing healthcare is necessary, but forcing the consumer to self-ration is the best way to contain costs. Interestingly, even though Singapore has largely socialized healthcare coverage beyond each individual’s own contribution to their Medisave accounts, Singapore’s government spends far less per capita on healthcare – $381 per person, or roughly one seventh what our government spends. The conservative Heritage Foundation ranks Singapore second on their Index of Economic Freedom, right after Hong Kong. The United States ranks 6th.

Vouchers. While Singapore’s health model rids itself of health insurance altogether, the Dutch have adopted an entirely market-based approach and have used smart regulations and government cost-subsidies to allow low income citizens and those with pre-existing conditions to still afford health insurance. Unlike the highly monopolized American system, the Dutch rely on fierce competition to keep costs low. They attain universal coverage but avoid the major government involvement that defenders of a public option are calling for. The government still plays a role, through cost subsidies and reinsurance programs that help level the playing field if one insurer finds itself with a disproportionate number of high-cost customers. Nevertheless, though the Dutch government involves itself very directly in health care, it still spends less per capita then the United States.

Reinsurance. In an article in the Los Angeles Times this April, Harold Luft argued that public and private entities can work together to provide better, cheaper insurance. Rather than setting up a public option to compete against the private market Luft argues that we should “allow private insurers to voluntarily buy into an expanded public pool. This would enable insurers to partner — rather than compete — with a public healthcare plan. This publicly chartered insurance would have the scope to offer bundled payments to physicians and hospitals that volunteer to come together and provide high-quality care to their patients. They would determine among themselves how to allocate resources. Public oversight of the plan would ensure transparency and fairness, and the operational aspects could be contracted to private intermediaries, just as Medicare does today. Medicare could also adopt such a bundled payment approach, reducing its costs while enhancing quality.” Whether or not Luft is right that this would actually reduce costs, it’s an example of a form of government partnership that avoids pitting government monopoly against natural markets. And one way or another, government will be involved in healthcare. The question is how.

In the end, simply doing nothing and playing the role of obstructionist and defender of the status quo is not an option. It may result in short term victories, but as long as meaningful reform doesn’t take place, the war will eventually be lost. Conservative implementation of universal healthcare is possible. Limited government can work to provide this very basic safety net, open up competition, choice, and portability of insurance, and lift major burdens on American business without creating a vast new entitlement. Beyond this, Republicans need to realize that healthcare reform is a moral concern. The problem, as John Avlon wrote earlier this week, “is that Republicans have allowed themselves to be painted as somewhere between agnostic to uncaring on the issue of healthcare reform.” It’s time to make healthcare reform a conservative goal, and this will never happen by defending the status quo or by writing a phony Bill of Rights to defend the already burgeoning entitlements we have now.

To read other contributions to this symposium, click here.