Back to Basics on Health Care : When we resume the battle next year, the nation must remember why reform was needed in the first place.
By now you’ve read all the convoluted reasons health-care reform officially died for 1994. It’s because Harry and Louise were more believable than that other fun couple, Hillary (Rodham Clinton) and Ira (C. Magaziner). It’s because Senate Minority Leader Bob Dole (R-Kan.) makes Haitian Lt. Gen. Raoul Cedras seem like a reasonable guy. It’s because Rep. Dan Rostenkowski (D-Ill.) was caught giving away official chairs. It’s because voters want change but only if nothing is different. It’s because President Bill Clinton got distracted by events in Lower Koda-Chromistan and the crisis over amphibian rights. And so on and on.
Yet, the most important factor has been missed in last week’s zillions of words of commentary. This reason is the simplest: All parties lost sight of why health-care reform was needed in the first place.
There are two underlying reasons for significant reform of the health-care system. One is the moral imperative of universal coverage: both to protect the 37 million Americans who lack health insurance, and to guarantee that those who have insurance don’t lose it if they change jobs. The second reason is the U.S. approach to health care costs too much.
Throughout this year’s debate, the U.S. health-care system has been variously portrayed by the Hillary Clinton faction as falling apart at the seams, by the Dole faction as totally peachy-keen. Both views diverge from the clinical reality. In terms of quality, American health care is ab-fab (absolutely fabulous, if you missed this summer’s slang). But not everybody qualifies, and for those who do, the price is too high--14% of U.S. gross domestic product vs. 9% to 10% in countries like France and Switzerland, which offer just as much high-tech care, yet insure everyone at lower cost.
The worst flaw of the President’s plan was that rather than offer a simple system of cost controls specified by the federal government but carried out by the private sector, Clinton would have created multiple new bureaucracies to attack the wrong question in health care. The bureaucracies would have gone after care delivery--generally, the ab-fab part of the system--while skirting the core problem, the price of care.
As the debate progressed, the White House abandoned cost controls, putting its energies behind what were, in effect, new taxes (the “employer mandate”) on the assumption that since health costs can never come down, universal coverage means spending must go up, and for that, somebody must pay.
This represents at once a spectacular misreading of public sentiment on taxes and of proven ideas that have worked in countries with high-tech universal care at reasonable prices. Focusing on universal coverage and lower costs could have allowed a far more intelligent, politically appealing reform proposal to emerge and be enacted last year. But first, let’s look at the lessons learned from the health-care collapse:
* Don’t propose 1,400-page ideas. The initial Hillary Clinton-Magaziner package was so overwrought with mandates and formulas that, from the moment the forklift lowered it to the President’s desk, there existed zero chance it could be enacted. Whatever health plan rises from this year’s ashes must be simple, focusing on the two things that matter--universal coverage and cutting costs.
* Washington should mandate goals, but leave the details to the people in the field. In the Clinton plan, hundreds of pages of details were supposed to micromanage every aspect of hospital and physician life. Give it up! Next year’s health-reform plan must take the federalist approach of setting a few vital goals but leaving doctors, hospital administrators and other professionals to achieve those goals using superior knowledge of what happens in the real world.
* Forget the Medicare magic asterisk. Both Democratic and GOP alternatives to the Clinton plan seemed nice in that they imposed no new taxes, but lacking cost controls sought to finance themselves in a preposterous way--by assuming unspecified future cuts in Medicare spending. But in the past decade, typical Medicare fees paid to doctors and hospitals have already declined to about 60% of typical private-pay fees.
Rather than cutting Medicare, health-care reform ought to drive private-pay fees toward the Medicare level. It is important to note that about 60% of the U.S. private-pay level is about where medical fees in France and Germany now sit. At this level, doctors still are affluent, but social costs for health care are within reason and universal care is affordable.
* Get business on board. This seems impossible to believe a mere year later, but at the outset of the Clinton proposals, most big business supported health reform--its eyes focused on the fact that the price of U.S. health care is too high. But when Hillary’s faction became wedded to new taxes on employers and new layers of bureaucracy, the Fortune 500 jumped ship. This group must be back on board well before the next sailing time.
* Cut the fat, not the lean. Though well-intentioned, the Clinton plan contained one deeply cynical aspect. Because the White House was terrified of proposing the fee-setting system that has restrained medical prices in Western Europe, the Administration offered up limits on total regional spending (“global budgets”) and on how much insurers could charge policyholders. But if fees by doctors and hospitals stay high while the total pool of money to be spent is capped, what is the only way health costs can be restrained? Rationing.
Had Clinton’s plan passed, most Americans would have been compelled to join HMOs, which, in turn, would have been compelled to ration care--with the blame then seeming to fall on the HMOs. It would be far better for Washington to take the blame for a simple system of setting medical fees that would control costs through lower prices, not rationing.
* Go after the insurers, not the docs and the druggists. For reasons that escape everyone, Hillary Clinton and Magaziner decided early on to attack physicians (who may charge too much but who night and day do genuine work of lasting value) and pharmaceutical companies (whose products may be overpriced but save thousands of lives annually) while making nicey-nicey with health insurers (who are, at best, paper shufflers).
This weird strategy imploded when the insurance lobby, knowing itself to be the most featherbedded medical sector, merrily stabbed the White House in the back. The Health Insurance Assn. of America, sponsor of those simpleton Harry and Louise ads, became the new National Rifle Assn., brazenly distorting the Clinton plan.
* The docs were moving forward while everybody else peddled back. Through the closing months of the health-care debate, only one major interest group said anything that did not serve its own financial interest--the doctors. The AMA warmly endorsed universal care and signaled to the White House it would accept some restrictions on fees in return for malpractice revisions and dropping the plan’s micromanagement aspect. Somehow, it went unnoticed when, in February, the American College of Surgeons--representing the best-paid doctors--endorsed a Canadian-style “single-payer” system.
Why would the leading surgeons’ group endorse the Canadian approach? Because Canadian medicine (and the similar French, German and Swiss systems) offers realistic prices, free choice of private practitioners, traditional fee-for-service arrangements, high-tech care and physician autonomy--which to the surgeons sounds like a pretty good combination. It is--and it ought to be the focus of next year’s plan. Here’s how:
Suppose next year’s health-care package did these things: achieved universal coverage by abolishing Medicaid, a monstrously complicated, state-run, federally financed program that doesn’t work, then making everyone not covered by a private health plan eligible for Medicare, a sensible, privately run, federally financed program that does work; made private insurance accessible at lower-cost by imposing standard benefit packages sold to all at uniform premiums, regardless of “pre-existing conditions;” required employers either to provide standard plans or pay the equivalent cost per worker into Medicare support; created a National Health Board, run by doctors, hospital executives and neutral parties, that cuts the fees physicians, hospitals and drug companies may charge, and otherwise left medicine alone. No big bureaucracy; doctors remain private practitioners, patients retain choice over who treats them.
Sound like wishful thinking? This is basically a description of medicine as organized in Germany, the former Western part. German medicine, covering 100% of citizens plus all illegal immigrants, costs $1,750 per capita; U.S. medicine, covering only 85% of the legal population, costs $3,000 per capita. German medicine employs the same technology as U.S. medicine and is delivered on-demand, without the queues that plague the English system. German medicine offers more hospital beds per capita than the United States, an important measure of on-demand capacity; average hospital stays are longer in Germany than in the United States, because lower costs mean there is no need for the American philosophy of rocket-propelled discharge. Life expectancies, infant mortality and other measures of health-care success in Germany are the same as, or slightly better than, in the United States.
Meanwhile, German doctors work for themselves, not government; insurers are private. They do about the same number and type of procedures as U.S. doctors, but following federal fee schedules, simply charge less. Because fees and insurance provisions are standard, doctors can practice without endless hassles regarding paperwork. Because paperwork burdens are few, doctors can earn handsome livings from lower fees, as they need not subsidize huge accounting departments.
How does Germany do it? The key is federally set fee schedules for health-care providers. Government sets the fees, using a surprisingly small bureaucracy: The private sector does everything else--from selling reasonably standardized insurance policies to running the hospitals and doctor’s offices. German medicine, covering everyone, costs slightly less than 10% of GDP, versus about 14.2% in the United States. Physicians in (West) Germany still are well-paid, averaging $110,000 annually, around three-quarters of what U.S. physicians make.
Suppose U.S. health spending were reduced, mainly through federally set fee schedules, halfway to the level of German spending: declining to about 12% of GDP, which would still leave U.S. medicine the world’s most expensive. This would save a phenomenal $130 billion per year--more than enough to pay for universal coverage; to expand coverage for mental illness and long-term care, and still leave the U.S. system less expensive than today.
The solution to the U.S. health-care dilemma is not more bureaucracy and taxes, as Clinton proposed, nor pretending that no problem exists, as the Republican obstructionists say. The solution is what works in Germany, France and Switzerland: federally set reductions in medical fees combined with universal coverage. A bill to accomplish this in the United States would run far less than 1,400 pages.
