I have lamented the difference between the reality of the public option as advertised and as proposed before but I have also in my last posts left the impression that there would be choice for individuals between a public and private plan, even if that public plan would be weak and purposely made unattractive.  In almost every version of reform near passage, most people will not even have any choice of a public plan or a private plan.  Instead the public plan will function as a “stopgap” where people who do not have access to private insurance will be offered the public plan.

In Sullivan’s post, he points out that too many in the news media have not called attention to the fact that the public option will not operate as an option.  The slippery slope between what is called for and what is offered has many people fooled and allows there to be a wide range of “fantasies” (meaning it’s left to wishful thinking) about what the public option actually will be.  ”It’s public and it’s optional, so I’m for it!”  Sullivan points out that pollsters have promoted this range of interpretations.  In the single poll that asks about the “rump” public option now on the table, the level of support is below 25%.  The 65% of the public obviously thought that they would have a choice of a private and a public plan.

Sen. Ron Wyden, has been most critical of the lack of choices and seems particularly exercised about this not because he is attached to the notion of public health insurance but more attached to the notion of choice in the sense of choice of insurers (choice category “1″ in my typology of consumer choice in healthcare).

I would agree with Sullivan that this has the appearance of a bait-and-switch by the leadership of the reform effort.  It appears as though the questionable logic behind the bait and switch, for those who are aware of it, goes as follows:

1. “we must get a publicly delivered insurance program into health reform no matter how weak and inaccessible”
2. “it is OK to blur the differences between a “buy into Medicare” option and the weak public option.  It is a white lie.”
3. “Strengthen an existing, even failing, program is easier than starting over with a strong one.”

I believe this is the wrong way to build public support for effective healthcare reform.  Telling the truth is a good place to start but also as I have pointed out in previous posts, we need to learn from existing universal healthcare systems and not try to “reinvent the wheel”.

Thus consumer choice in healthcare can be subdivided into 5 categories:

1. Choice of Insuring Entity
2. Choice of Plans
3. Choice of Healthcare provider
4. Choice of Treatments
5. Choice of Wellness/Preventative Health Programs

In practical terms, the choice of insuring entity will only have an effect on consumer healthcare experience if:

1. Any insurer is allowed to reject your application due to medical conditions.
2. Any insurer is allowed to terminate your coverage unilaterally due to medical conditions
3. Different insurers offer different plans (this seems obvious but in all-payer systems not so obvious)
4. Different insurers offer coverage for different treatments
5. There are “in-network” and “out-of-network” providers or the insurer is integrated with a healthcare delivery system
6. Insurers differ in terms of their treatment of delinquency of payment or other financial disputes
7. Insurers differ in terms of access to subsidies for lower income subscribers.
8. Will become insolvent or go out of business during the term of your contract
9. Has symbolic meaning for you in terms of political orientation or status

The “public option” policy proposal actually hinges on a choice of “insuring entity” in that the public insurer is supposed to behave like a private insurer except be “public”.   As the playing field is supposedly leveled between the public option and private insurers, this would mean that any rules that applied to private insurers would also apply to the public option.

Ron Wyden’s approach that overlaps to some degree with Republican (not necessarily serious) calls for market-based solutions to health reform puts an enormous emphasis on choice of insurer, not just the choice of public and private insurance but choice between private insurers and therefore competition between them.

If under the proposed healthcare reforms, all insurers will be mandated to adopt similar rules with regard to accepting subscribers, payment policy, and subsidy, the differences between private and public insurers will be diminished.   Furthermore, we do not know yet about insurers being allowed to fail in the new regime as they will be both recipients of mandated payments and maybe will be able to compensate for adverse selection (a sicker population) by getting risk equalization payments from a pool.  What will happen to the insurance policies of those who have paid into an insurer who goes bankrupt?  The latter is not likely to happen in the first place, if the evolution of universal health care systems is any guide.

In my next post I will explore how choice looks in the successful universal health care systems in a number of countries.  As we will see, you get more effective or substantive choice in most areas of healthcare in these systems that nevertheless have much more government involvement in structuring the healthcare system.

Senator Ron Wyden (D) of Oregon, more than many advocates of the public option, is entirely "sold" on the notion that competition in and of itself will result in lower health care costs and a "better deal" for Americans. In this, he is within the mainstream of current American political thinking but shows, as do many American politicians of both parties, a woeful ignorance of how existing universal healthcare systems contain costs and guarantee access.

The public option saga continues as Senate committees vote on health reform bills that to varying degrees support or omit a public option.  These bills are about to be argued about and voted upon the Senate floor.  The House of Representatives is thought to be a stronghold of supporters of the public option and perhaps a bill that emerges from that body will contain a stronger version.  What bill will finally make it to President Obama’s desk is now in the hands of our representatives in Congress.

In the previous post on this blog, I have pointed out that the public option debate is in policy terms a sideshow or even a potential hindrance to substantive health reform:  whether the government, representing the common good to the greatest degree possible, will either become the direct insurer for all Americans for a standardized package of basic health insurance (single-payer) or will regulate insurers to a degree where they deliver, on a non-profit basis, a standardized, risk-equalized health insurance package backed by a standardized medical rate reimbursement package (all-payer).  Both all-payer and single-payer involve subsidy via tax revenues to enable affordability for lower income groups.  The public option, unless it is explicitly an on-ramp to a single-payer system, a.k.a. Medicare for all, gets us no closer to either of these solutions.

To explain this briefly, the public option is non-functional as advertised (“competition for the private insurers”, “keeping them honest”, self-funding through premiums, “level playing field”, no leveraging Medicare rates) because of these issues:

1. Successful universal health systems that contain costs have a standardized universal billing menu (could be fee for service or other payment forms) which cuts costs for healthcare providers by as much as 30%, as they can radically streamline their billing procedures.  The public option in combination with private plans would leave the chaos of medical billing as it currently exists in place.
2. The pitch for the public option misapplies the data about the INTERNAL efficiencies of a public insuring entity (US Medicare) over a private insurer, leaving the abovementioned EXTERNAL, systemic efficiencies out of the picture.  Medicare’s internal billing efficiency is mistakenly attributed entirely to its public ownership rather than its universality for seniors.  Doubtless a public entity will not have to turn a profit but it will need to market itself and the public option will probably not have Medicare’s 2 to 3% administrative cost overhead.
3. To ensure a “level playing field” with private insurers, the public option as proposed will not be able to leverage most of the advantages of being public.  It will not allowed to use the considerable bargaining power of the government to lower costs and will not be allowed to use subsidy to its benefit.  Accepting these premises built into the structure of the public option, enables private insurers and politicians who believe in the myth of markets as a panacea to control the discussion of how the public option should collect revenues.  This will make the public option more expensive than equivalent public or heavily regulated mandated basic health insurance in other countries.
4. The public option is premised on “competition” as the motive force of cutting costs in healthcare rather than efficient overall system design and the budgetary overview allowed by a unified national healthcare budget, under the watchful eye of taxpayers and their representatives.
5. The public option will probably, even with proposed regulations of private insurers in various health care bills that ban consideration of pre-existing conditions and dropping people if they get sick, attract a population with historically higher medical risks that have a distrust of private insurers.  This will raise costs endangering the public insurer that is supposed to self-fund using its premiums; it will need to raise premiums thereby becoming less competitive with the private insurers.  A similar fate might await one of the private or non-profit insurers on the market, leading to the need for systemic risk equalization as is done in all-payer systems.  The latter problem of unequal insurer risk gives the lie to the notion of competition between independent financing entities as the engine of healthcare cost containment.

The public option would only be functional if it were essentially an affordable “buy-in” to Medicare for those under 65 with no eligibility restrictions.  Most observers and the general public know that this will eventually wipe out almost all of the private insurers’ basic health insurance business, as a large portion of the population would gravitate to the security of Medicare, with its 92% satisfaction rate among seniors.   This is the “on-ramp to single payer” which is disowned by every advocate of the public option who have bought into and reinforced the competition “meme” in the context of health care.

The public option puts progressives, some of whom don’t know it yet, into an untenable political bind:

1) be true to their rhetoric and support a policy that will likely fail (a public imitation of a private health insurance plan that has been sufficiently weakened to not be “unfair” to private insurers).  The failure of a public option in this context is not a commentary on the efficiency of public provision of social goods and more specifically basic health insurance but merely the premise that competition in a private market is an inefficient means of delivering basic health insurance.

OR

2)  try to be “sneaky” and disown that the public option is an on-ramp to single-payer, while supporting it as such (tax subsidies, Medicare-based reimbursement rates).  Single-payer is the superior product to both private insurance and a publicly-run imitation of a private insurer due to its efficiency and security.

The public option puts progressives into a double bind: the effective form of the policy undermines its political purpose, i.e. to avoid the appearance of advocating for Medicare for all. It's politically "useful" form, in which compromises are struck with conservative Democrats and Republicans, is to make the policy offering not particularly attractive to potential policyholders to shield private insurers from too much "competition". It would only work well as an "on-ramp" to a single-payer system.

Progressives have been lured into this bind by their own efforts to pander to more centrist elements in their own party as well as moderates and independents in the electorate, who, they feel, are unwilling to institute a Canadian-style single-payer system here. Understandably, they are trying to avoid the longer process of challenging the market fundamentalist political and economic common sense of the last quarter century.  However, there is no way around challenging the basic tenets and many of the more subtle corollaries of that common sense if we want to institute an effective health reform policy.

While the public option is a non-functional policy in any form that is now proposed let alone likely to pass, there still is a rational political basis for it that unfortunately contradicts the viability of the policy itself.  The people who support this policy are not totally out-to-lunch at least in this regard:  consumers like choice, or at least the idea of choice, and to appear to be reducing choices in any form has been a tough row to hoe politically.   In late 20th Century and early 21st Century America, choice has gained the status of an undifferentiated quasi-religious belief which must be examined more critically to arrive at a just, high quality, and affordable healthcare system. Naming their strategy and plan the public option, indicates that this is a matter of increasing the number of choices on the health insurance marketplace, thereby increasing choices overall.  Swimming with the political and cultural flow seemed like a good idea, but striving to offer a multiplicity of options in healthcare finance may actually, as it turns out, endanger the areas of effective choice that matter most to healthcare consumers.

Subscribing to the dictum of increasing undifferentiated choice, the current progressive leadership has turned away from single-payer, the health care system of our near neighbor to the north, and all-payer regulation, which involves standardizing choices in the area of basic insurance.  However, before we discuss choice in the effective universal healthcare systems, I would like to define more precisely what IS choice for healthcare consumers.

Sidebar:  What’s the Matter with Good Intentions?

At this point, some weary progressive readers and friends might protest:  “what do you have against the public option?”  “Why are you attacking the ‘better’ people in the health care debate?”  “Look at the Republican and conservative Democrat defenders of the insurance industry…aren’t they awful?”  I might agree with many of these sentiments but personal tastes in people and politicians are not as interesting, I believe, as thoughtful analysis.  I do however believe that good intentions are not enough, that you can sometimes actually get a worse result if you don’t pair good intentions with effective policy or action of some kind.

I thought the lore about the "primrose path" was a bit of out-of-date moralizing, until I noticed the degree to which people allow good intentions to substitute for effective action. Good intentions are definitely not enough, if we want to build a cost-effective universal healthcare system.

The old saw about the primrose path being paved with good intentions has some justification, though is in my mind unnecessarily fatalistic. Good intentions are very seductive for both people who want to make the world a better place as well as  those whose purposes are more suspect.  I believe therefore that directing my attention upon the “public option” and its potentially disastrous effect on either the health care debate or enacted health care policy is a potentially valuable service to whomever reads this.  The “public option” is vacuuming up all that idealism and those good intentions and directing them towards what likely is an ineffective policy rather than towards one of the two real solutions, single-payer and all-payer.

An interesting tendency in conservative circles is that they seem to automatically discount good intentions and mock them; they seem to be looking for support for their own fatalistic philosophy of life.  This is not my approach: I am more concerned about people with basically good intentions getting misled by either their own wish to do good, or by their own underestimation of the difficulties and tradeoffs involved in making something good come to pass.

So my take on the “public option” is that it mobilizes good intentions for a faulty policy framework and therefore deserves a lot more scrutiny and analysis than the obvious wrong-doing of health reform obstructionists.  What if the energy behind those good intentions were directed towards more effective ends?  End of sidebar…

An “Anatomy” of Consumer Choice in Healthcare

The attraction to and pitch for the public option idea has revolved around the notion of increasing consumer choice in health plans.  Not only could people choose a private plan, but also choose between a public and multiple private plans.  An alternative proposal, Sen. Ron Wyden’s Healthy Americans Act and his Free Choice Amendment, is not contingent upon a public option but hinges equally or more so upon the notion that increasing choice among health plans will solve our health care access and cost problems.  The flipside of consumer choice is competition between providers or plans, and both Wyden’s and the various public option plans hinge upon competition as the motive force for efficiency and quality in health care.  The latter is a questionable assumption which I will explore in more depth in another post; for the time being I would like to focus on the “utility”, the usefulness of choice to consumers.

Arraying health insurance or healthcare options like products on a supermarket shelf is for a number of reasons not an effective means of decreasing the cost of healthcare. One of the key reasons is that the product is a lot more complex and it's effectiveness is many times more difficult to evaluate than, for instance, a brand of beer.

In endorsing choice as an undifferentiated and unalloyed good, we run into a number of problems, including whether more choice is in and of itself good.  Behavioral economist Barry Schwartz has pointed out in his essential work “The Paradox of Choice” that too many choices of a given product or service can overburden consumers.  If consumers are to approach consumption rationally, in theory, each choice and each option within each choice should be subjected to “due diligence”, which can involve a great deal of time and mental effort that needs to diverted from other tasks and activities.  Schwartz in the end argues for putting choice in perspective and adopting a “satisficing” rather than a utility-maximizing approach to everyday consumer choice.  Furthermore, an implication of his work from systemic perspective, is that building a system that is contingent upon consumers making informed but largely unaided choices among a profusion of complex products is a high risk policy.

Leaving aside the issue of whether more choice is always better, what is the nature of choice in health care?  Here in my view are the relevant areas of choice in healthcare that impact the quality of the patient and consumer experience:

1. Choice of health plan and coverages
   1. A feature of a choice in coverages is one can choose to spend more or less on health care depending on the value one places on healthcare.  So a choice of health plans implies financial choice in terms of a gross amount paid out.
   2. Another feature is that one as a consumer is saying that one believes one needs one type of coverage rather than another, anticipating future expenses and illnesses or preventative treatments and NOT paying for others.
   3. A position outside the mainstream of the current discussion though still active in Republican and libertarian circles is to opt out of insurance altogether and go entirely “out of pocket” in paying for medical care, perhaps getting tax benefits for these expenditures through health savings accounts.
2. Choice of physicians/health care providers
   1. Choice of physicians within a specialty (if you don’t like one, you can go to the next)
   2. Choice of physicians among a broad range of specializations and sub-specialties (ability to see specialists)
   3. Choice of non-physician and alternative physician specialists such as dentists, podiatrists, nurse practitioners, chiropractors, acupuncturists, psychologists, social workers, naturopaths, Ayurvedic physicians.
3. Choice of treatments, if prescribed by a qualified healthcare professional
   1. Among treatments for physical ailments there are some areas of broad agreement among physicians and some areas of controversy.  If choice were maximized, patients would have access to competing treatments.
   2. Among treatments for mental ailments there are in many areas broad disagreements or tracks depending on who is diagnosing and prescribing treatment.  If choice were maximized, patients would have access to multiple approaches to a mental ailment within some bound of “reasonableness” as there are tens if not hundreds of approaches to the biopsychosocial matrix of mental suffering.
4. Choice of wellness and preventative health programs
   1. Preventative programs are easily seen as extensions of healthcare as currently defined in the US (mammograms, Pap tests, heart and lung tests, colonoscopies, vaccines, etc.)
   2. Wellness programs may or may not be considered part of the medical system, as they involve lifestyle choices, food choices, and fitness programs that involve an expansion of the notion of health care.  Within these areas there are choices that involve personal tastes as well as competing philosophies about health, nutrition, right-living, etc that sometimes originate in different cultures (Ayurveda, traditional Chinese medicine).

If more choice is good, then more choices in all of these areas would/should lead to better outcomes and/or healthier and happier healthcare consumers.

Real Constraints on Choice

As mentioned above, we Americans like to think of choice as an unbounded, unlimited thing, there are in healthcare as in other areas, limits and constraints on how many choices any given person has.  As noted above, we have problems processing too many choices if they are offered to us and can suffer because of too much choice and decision-making effort and time commitment, i.e. the paradox of choice.  Greater personal wealth, in general, facilitates the availability of more choices in the area of material goods and services; lesser personal wealth constrains choice.  Greater social or national wealth also enables more choices which in turn interacts with individual differences in wealth;  a very rich person in a desperately poor country arguably has fewer choices than a somewhat less rich person in an overall much richer country.

To offer choice in medicine requires for some diagnostic techniques and procedures the use of some very expensive equipment as well as highly qualified professionals to use them. The total investment in this infrastructure by a combination of public and private entities is huge, leading to distributional specialization and inequities by geography and by income.

From the perspective of the SUPPLY of healthcare and wellness programs or the healthcare system as a whole, providing more choices means providing a larger healthcare infrastructure inclusive of trained healthcare professional staff in as many places as possible.  For sparsely populated areas, this creates a situation where choice will of necessity be less, even if we can legally and ethically mandate more telemedicine and long-distance provision of health-promotion programs.  Even in more densely populated areas, with the some ideal roughly equivalent distribution of resources, the number of choices in the areas of treatments and healthcare facilities is constrained by our overall social wealth in combination with our level of commitment of resources to healthcare; each choice represents the commitment of physical and human resources to a given institution or modality of treatment.

Furthermore, if we go to a universal health system of some description be it the non-functional varieties currently proposed or an effective system like single-payer or all-payer, there will emerge the problem of “free riders” as symbolized to opponents of reform by illegal immigrants but just as well anybody who is allowed to “opt-out” of paying into the system and then gets sick.  A universal healthcare system involves both the provision of a benefit but also the obligation to pull your weight through either paying premiums or tax dollars.  There is dispute now about whether this obligation should subsidize private insurers’ profits which in single-payer and all-payer systems is not a problem in that mandated insurance is non-profit.  Individual and employer mandates are all limitations of choice and will be treated politically by libertarians as a violation of the ideal of unbounded choice.  Tax subsidy is also a limitation of choice for those who oppose a universal tax-subsidized system.  There is no way around mandates and/or tax subsidies if we build any universal health care system; somewhere individual choice is constrained.

So if maximizing choice has limits both on the individual consumer information-processing and decision-making end and on the end of supply of those options, people need to prioritize choice and arrive at what are the most EFFECTIVE types of choice for health outcomes and wellbeing.  Similarly the necessity of mandates and/or tax subsidy of healthcare further compartmentalizes consumer choice.  Remaining with the myth of unlimited choice or even celebration of choice as the motive force of health reform only postpones the day when we engage in a larger discussion of what choices with regard to healthcare matter more than other choices.  Sometimes this is discussed via the politically loaded word “rationing” but this word is misleading as it already assumes the division between a rationing agent and the recipient of rationed goods and services.  In a democracy these two groups are supposed to overlap:  we need to decide what is important to us as a society and then make what is important a reality through legislation and enactment of effective policy.

The Left-Right Polarization of Healthcare Choice

During his 2008 campaign for the Republican nomination, Rudy Giuliani staked out a position in the center of that party in favor of health savings accounts and tax credits for health expenditures. The "Right"-most position in the political debate about healthcare believes that healthcare finance should be budgeted individual by individual rather than through public or even privately offered insurance. "Out of pocket" is the ideal type of this type of health care finance.

In political discussions of choice and within the 4 categories of consumer choice within healthcare, there has developed a division of labor that is often not discussed openly and frankly as such in the public sphere.  The conservative or at least market-oriented approach to health care reform emphasizes a range of choice in finance mechanisms for health care or consumer choice area “1” in the list above.  Conservatives and/or those who believe purchasing decisions of insurance are the motive force in healthcare reform talk about or actually propose a proliferation of finance products and plans for healthcare.  Believing that healthcare finance is a market like that for televisions or cars, Sen. Wyden, many Republicans, and conservative Democrats believe or speak as if they believe that consumer purchasing choices will drive innovation and efficiency gains.

The “Left” of the healthcare debate has been not nearly as vigorous in claiming “choice” for themselves even though they do believe in enhancing consumer choice.  For single-payer and the few all-payer advocates the emphasis is on choice of physicians and financial accessibility within a universal system.  So the “Left” side of the debate favors choice area “2” choice of physician within a universal system where costs and medical reimbursements are standardized.  Of course, the “Left” is also concerned about the distribution of choice and believes that more equitable distribution of benefits will in net create more and better choices overall for the entire society.  The “Right” would claim this area as being their concern as well but feel that this will flow from area “1” of choice, in that a broader market of financial instruments will create a broader set of choices in area “2”, the number of providers available to any given consumer.

Area “3” or choice of treatments appears to be neither a Left nor a Right issue, in that the former group could claim that greater access will lead to greater choice for consumers while the latter group will claim that market forces empower consumers to make decisions based on the information provided to them.  An extreme libertarian position that eschews private insurance in favor of out of pocket payment for medical services, would claim that this type of arrangement gives maximal control to patients over their treatment within their means to pay.

Area “4” might as well tend “Left” as an issue, in that in a socialized or national health insurance system, there will be greater incentives to fund preventative health and wellness programs because the healthcare finance system will be responsible for individuals for life; the inevitable changing of the guard among insurers that will happen in a market system of independent insurers will remain a disincentive for independent insurers to invest in subscribers for the long-term.  Furthermore, the libertarian attacks on Big Government and the “nanny state” will put a pejorative emphasis on this type of government or insurer involvement in lifestyle and long-term care issues.

The Public Option and Sen Wyden’s Proposals Favor the Conservative Definition of Consumer Choice in Healthcare

The public option is an attempt to conform to or appeal to the more conservative definition of consumer choice in health care, i.e. a proliferation of financing schemes and competing healthcare finance institutions.  Ron Wyden’s “Healthy Americans Act” and his “Free Choice Amendment” are premised even more firmly and completely on the conservative definition of choice within health care as choice of healthcare financial products that compete with each other by offering better value on the dollar relative to other competing products on an health insurance “exchange”.  The public option is supposed to enhance choice in the area of finance mechanisms for health care, operating in the “exchanges” alongside private offerings.  All of these proposals ignore the self-imposed limitations placed on the public insurance option (that it should be modeled on a private insurer) and rest on the faulty premise that competition for subscribers between healthcare financing entities is going to lead to greater efficiency and cut medical costs.

Without a single-payer like Medicare or all-payer regulation of the healthcare system, the mélange of healthcare financing plans that would be expanded under the guise of increasing choice of plans are not likely to increase effective choice of providers, of treatments or of preventative health measures, choice areas “2”, “3”, and “4” above.  If they do somehow increase choice in these areas, they will not be able to contain costs as well as single-payer or all-payer; it is more likely that we will continue to see an explosion of costs.

In my next post on consumer choice in health care, I will explore how consumer choice operates in single-payer and all-payer systems.

While committing to the ultimately disastrous Vietnam war, Lyndon Baines Johnson embarked on the most ambitious domestic social agenda since the 1930's in his 5 years in office. Unlike President Obama, President Johnson was known for his backroom style of "arm-twisting" legislators to pass among other monumental pieces of legislation, Medicare.

Currently President Obama has dug himself into a health reform package that appears as though it might temporarily offer some level of security to people buying private health insurance but will not deliver a significant check on the costs of medical care.  Rising costs according to almost every analyst, will end up upending any health security in the middle and longer term.  The President’s preference for compromise and comity has led him not to openly confront any of the major players in the debate.  He seems to be attempting to reconcile the views and positions of those who would ordinarily oppose health reform while discounting the views of those who are in favor of substantive reform.  Evidence of behind the scenes “arm-twisting” a la President Lyndon Johnson during the passage of Medicare in the 1960′s, is also scarce.

Commentators are divided about the Baucus bill which is thought to most closely resemble the Obama Administration’s stance in the health care debate.  Some see it as a “down-payment” on health reform offering consumer protections to those in the private insurance market but some feel it is an unnecessary give-away to the insurers and the medical industry with potentially catastrophic impacts.  The latter group also emphasize that subsidies to help the less well-off buy insurance are subsidies for the inefficient health care system as it stands.  All agree that it does not contain any significant controls on costs, though there are apparently some exploratory efforts to promote cost-effectiveness research.

It looks for all intents and purposes that the public option at least in its stronger forms, which was supposed to compete with private insurers as a lower cost alternative, may be sacrificed for political reasons, which means that the major, intended largely theoretical cost control mechanism will not be built into this version of Washington health reform.  The probability is high that at least in this round of health care reform, a public option if included at all will be relegated to a “trigger” option that will be called in if all else fails to contain costs.  Furthermore, and almost tragically for its supporters, the public option may never have been able to deliver on cost savings if it were not to become essentially the gateway to a single-payer system, which has always been denied by almost all of its advocates.  I am actually heartened to hear the exasperated and vociferous advocates a public option like the progressive radio and TV host Ed Schultz, interject more frequently positive mention of single-payer along with his usual calls for a public option.

As mention of other health care systems comes into the debate, we are seeing more information come out at least in the progressive blogosphere about the true nature of health reforms in other countries.  Sen. Kent Conrad, for instance, argues against a public option by pointing out that in Germany and France that delivery of health insurance is “private”.  Ezra Klein and others have pointed out that this is misleading to say the least because in both countries’ all-payer systems, the “independent” organizations that administer health insurance plans are funded largely or entirely by tax dollars and are heavily supervised by the government to a degree unknown in the US.   The scantiness of the knowledge base of the people designing our health reform as well as placing themselves in the role of media pundits on health reform is staggering.

In my estimation, whatever the ultimate fate of reform in the current Congress, if all-payer and single-payer represent the possible positive end-games for universal healthcare, we need to look outside of the Washington consensus to find significant steps towards substantive health reform.  The debate on the national level, though I am hoping that I will be proved wrong, has been corrupted both by big money from industry players, by intellectual laziness on Capitol Hill and in the White House, but also by a willingness of progressives to exclude the only viable options from discussion.

The Public Option as Decoy

As someone who strongly supports the role of government in managing a modern health care system yet is highly critical of the public option, I am not personally motivated to go to the streets to defend it as it becomes weakened or cut.  The public option was in my view designed as a sacrificial lamb because in the end, it was a bogus alternative to the real public alternative, which is single-payer health insurance.  To go out on the hustings for the public option, in my mind puts one in a shaky position of being in “bad faith” if one knows something about health care reform around the world.  Those who believe in public provision of basic health insurance dealt themselves a defeat when they signed on to the public option idea in the first place and agreed implicitly or explicitly that single-payer was an unreasonable demand.

By setting up the debate as “public option vs. no public option”, both Obama and progressives put themselves into a position where government provision of health insurance was not represented by a solid, battle-tested alternative, i.e. American or Australian or Canadian Medicare, (or French, German, or Japanese all-payer regulation for non-profit insurers) but by a newfangled idea that was supposed to “not scare” conservatives and people who are afraid of losing the coverage they believe they now have.  In fact, supporting a public option puts progressives in the position of either showing naïvete about health policy or telling what they feel to be “white lies”, if they do know a thing or two.

Some of the scare tactics of Republican opponents of the public option contain significant elements of truth which are denied by most of its supporters:  it would only work and it would only be effective if it DID in fact take advantage of being a government program to outcompete private insurers.  Competition in health insurance has historically only had marginal benefit for cost containment; most effective are systemic efforts to control costs via government programs, making the provision of basic insurance a non-profit business, and very strong regulation that leads to cost containment.  The public option is premised on the notion that this is about “more choice” rather than better choice or just simply a better health finance system as a whole.  Furthermore, I personally would support a public option if it were in fact and advertised as, horror of horrors, the “entering wedge” for a single payer program, a fear which conservatives shout about.

Now, when President Obama says that he is open to dropping the public option because what matters is the effect of the program (i.e. cost containment) and not the specifics of the program, I am going to have to break ranks with my progressive friends and say, he’s (sort of) right.  The way the debate has been set up, the idea of a public option is…how to say it…optional!  If President Obama were to actually introduce a set of all-payer regulations (which he is not doing) this would be far more effective than the public option as has been proposed in Congress.  So President Obama by promoting the idea of a public option and receiving progressive support for it has, intentionally or unintentionally, made the progressive wing of the Democratic party and those outside it, irrelevant to the discussion.  They now support an ineffective decoy of a policy and are at least temporarily reduced to being sitting ducks in the debate.

The Public Option Adventure: Letting Politics Dictate Policy

Supporters of the public option shouldn’t feel too bad about being, in essence, fooled by the proposers and designers of this policy proposal, because they are not alone among progressives in allowing their initial policy proposal be pre-shaped by market fundamentalism within the Washington political consensus.  Climate change policy has, in my opinion, over the past two decades been shaped by pre-measurement of a political consensus about the role of markets in the economy.  Now progressives vociferously defend cap and trade policy as if it is “their idea” even though it is a policy based on a misapplication of a trading mechanism to the problem of reducing carbon emissions.  Progressives have been attempting to avoid the label of being stern regulators or taxers by embracing the cap and trade instrument, even though it

Berkeley and now Yale Political Scientist Jacob Hacker invented the "public option" idea, which has since been transformed into a much weaker concept by the Congress and Administration. Hacker's attraction to the idea that competition would of necessity bring down costs is an instance of how the misapplication of certain general economic principles has distorted government policy and the social sciences when dealing with specific social problems.

Progressives have latched onto the public option even though it is based on the speculations of a political scientist (Jacob Hacker) rather than the track record of universal health care systems as they have emerged around the world.  In all fairness to Hacker, his initial proposal of the public option saw the program as a massive government insurer that would cover approximately 1/3^rd the US population and might very well become a single-payer system as the employment-based insurance system continues to weaken.  However, the offering of an “option” created an opening for politicians to “right-size” the proposal by making it as small and weak as politically convenient to both attract or at least neutralize liberal support but also appease conservatives and established players in the medical industrial complex.  Unfortunately or fortunately policy in this area as in many others, does not allow for every shade of political gray between what is considered “Left” and “Right”, to become a workable program.

One of the pivotal problems with the public option notion is that it hinges on the idea that competition in the medical field will reduce costs, as if the medical field will behave like other markets, just with a government entry competing on the market.  The idea is based on the notion that there is both a postal service and private courier services that compete with one another.   In most health reform efforts as well as in the day to day operation of health care systems, there is little evidence to show that competition in and of itself contributes substantially to reducing costs and may add to those costs as insurers need to devote energy and money to competing with each other, which eventually gets passed on in premium dollars.  Fundamentally, the problem with the healthcare system and insurance markets is that future costs are unknowable or at least not computable or comprehensible by individuals, leading to a high likelihood of faulty individual decision-making due to this information problem.  The idea that a competitive marketplace, whether mixed public/private or all private, will via competition cut costs is a thought experiment that ignores the history of health care economics and reform.  Markets and competition are not panaceas, which is still a heretical notion in economics and our current political climate.

The major challenge facing progressives who try to tailor policy proposals to current political norms is that “anti-government” sentiment has been overblown by politicians and the media in the United States over the last 30 years.  Over the past century, progressives have generally believed that government can be an instrument of good but have had to hide this belief in their policy prescriptions during the last 20 years, trying where they can to appear as though they are giving private economic actors priority over public initiative.

In the case of healthcare reform, government is now already intimately involved in most aspects of our current health care system but this involvement has been soft-pedaled by advocates of reform including the Obama Administration.  In other countries, government is even more involved in health care finance and, in some places, the delivery of health care itself.   We need to move in the direction to erect either an all-payer or more likely, a single-payer system.

So artful efforts to soft-pedal or hide a more direct involvement of government in at least the delivery of payments for health services has led progressives to tie themselves into knots.  One doesn’t have to believe that government is the solution to all problems to believe that some sectors of the economy unequivocally require more government or more effective government involvement.  Eventually, the basis of these types of policy determinations should be based on a better social science not on the sum of political prejudices of either the Left or the Right.

I don’t want to give out the impression here that single-payer and all-payer systems have all the problems of health care costs whipped; far from it.  All health care systems in industrialized countries are experiencing rising costs as treatments become more technologically advanced and populations age.  We in the US can however benefit  from a much more efficient system where we could make serious inroads into some of the durable problems of the cost of high-technology medicine.

States Can Lead the Way

An encouraging grassroots movement with great moral authority is the "Mad as Hell Doctors" who advocate for single-payer insurance. It is unfortunate that there are not at this point in time, more movements equivalent to the MAH Doctors that are making their voices heard above the fray, at this crucial time during the health care debate. The ultimately moral questions surrounding true healthcare reform have been only tentatively grasped by the Administration and by the liberal supporters of a public option.

There is movement afoot in Washington and in certain states by progressives to allow states to establish their own health finance systems if they so choose.  Michael Corcoran reporting in the September 10^th Christian Science Monitor points out that Rep. Dennis Kucinich of Ohio has added a rider to health reform bills that will waive federal laws that might inhibit states from enacting a single-payer system.  Sen. Bernie Sanders has introduced similar legislation in the Senate.  The Democratic majorities in the Vermont and California state legislatures have been trying for a number of years to establish single-payer systems only to be thwarted by Republican governors. Corcoran reports that New Mexico, Illinois, Pennsylvania, and Montana also have strong single-payer movements.  Usually I am concerned about the inefficiencies involved in state-by-state efforts to implement reforms that, on the face of it, have not so much to do with geography as with the human condition.  However these efforts echo historically the way health reform happened in Canada and therefore there is more historical precedent for this strategy than pressing for a weak public option on a national level.  Furthermore, the political polarization or our country is such that consensus building in Washington is proving to be a major roadblock to substantive reform on many fronts.

Canada’s single-payer system is actually composed of 13 provincial single-payer systems coordinated and partly funded by Health Canada, the federal health ministry.  Canadian universal health care started with a movement in the province of Saskatchewan for a single-payer system founded on the principle of “Humanity First” of the farmer-labor socialist Cooperative Commonwealth Federation or CCF, led by the Baptist minister Tommy Douglas.   In the mid-1940’s, Saskatchewan built the first single-payer hospitalization program in North America, which ended up being such a success that other provinces followed suit.  Medicare was instituted throughout Canada in 1966 and updated in 1984 by the current Canada Health Act.

While there are inefficiencies in formally breaking up health reform by region, it allows states with more progressive leadership or more pressing health insurance problems to address those more directly, though of course there are dangers.  Firstly, states are not allowed to run budget deficits which, in the building of a health care system might be required because of start up costs.  Furthermore states do not usually collect much revenue as compared to the federal government, so a lack of coordination between federal and regional taxation or premium collection will perhaps create certain classes of people who are at least temporarily differentially effected by a state single-payer initative.

In the long run, given the superiority of the single-payer “product” over the current health insurance products, these difficulties will be ironed out.  If for some reason, activists and legislators in a state decide to design a more complex all-payer system, that too could be brought into the mix and we might see a patchwork of different systems across the states.  Luckily, a single-payer and an all-payer system in different states could theoretically be integrated via standardized payment mechanisms which would allow a single medical services “tariff-book” to streamline billing across both systems.

I am hoping that Ted Kennedy's will and spirit to improve access to healthcare in the US will endure more than the specifics of his latest policy proposals. The Senate HELP committee's proposal, as are most other proposals in Congress, is not based on the realities of designing a universal health care access system, about which we can learn so much from other industrialized countries.

Instead, like many health policy advocates of whom I am critical, I am going to offer an endorsement a set of policies prior to laying the groundwork for that policy recommendation.  These two models of policy have become the standard ways to reimburse, to guarantee access and to control costs in healthcare in various countries around the world.  I would prefer to first establish, in a leisurely run-up, the scientific and analytic context for why these are the stable forms of universal healthcare in industrial democracies but will have to explore these issues later on.

For what it’s worth, I am endorsing two existing models of health (finance) design because, unlike most of the proposals that are being considered by the Administration and the Congressional leadership currently, these systems already have a long track record in other countries in providing universal or near-universal access to health care at affordable rates for the population, in providing a level of care equivalent to or better than that already enjoyed by the American middle class, and providing this care at an overall social cost well below our current health care spending.  We also already have the a very large instance of one of the systems in the US, so at least one is not totally “foreign” to us.  We may not reproduce exactly these results if we adopted these systems in total but it is quite foolish for us to look away from the mechanisms that actually work.

Single-Payer Systems

Single-payer is a system where there is a single health insurer, usually a government agency or an independent authority mandated and funded by the government either on a regional or a national level.   Single-payer is a not very attractive label and, in the US context, should be called something like “Medicare for all”.  The government may have excluded private insurance entirely from the market or it might cover all basic insurance needs while health care system users able to buy optional private plans to supplement.  The single payer is usually funded by a combination of premium payments and tax dollars with the assumption that the richer in society pay a portion of the costs for the poorer members of society (or in the case of the truly indigent, all the costs).  A single-payer system is by definition non-profit.

In a single-payer system, health care itself is delivered by private, public and non-profit entities that are reimbursed by the single-payer.  The payments in a single payer system can be standardized a number of different ways depending on how the single payer law has been structured: some may be paid on a fee for service basis while others may be paid a capitation fee (by the number of people for which they may be responsible).  Amounts for these payments have been determined by national or regional contracts, which are the result of negotiations between providers and the single payer/government.  Medicare is a single-payer system in the US for seniors only, where providers are reimbursed on a fee for service basis.

Tommy Douglas, a Baptist minister and the one-time Premier of Saskatchewan, was voted the "Greatest Canadian" in 2004, in part because of his key role in creating Canada's single-payer health insurance system. The slogan of his left of center Cooperative Commonwealth Federation that later became part of the current New Democratic Party, was "Humanity First". Instituting either a single-payer or an all-payer system requires a similar ethic of putting sustaining human life during times of illness before private material gain in the fundamental design of a health care finance system.

While to conservatives in the US, a single payer system (that is not Medicare) may seem radical, single-payer systems are not socialized medicine, i.e. public ownership of healthcare delivery itself.   In socialized medicine, the government actually owns most of the clinics and hospitals.  The most famous example of a socialized medical system is the British National Health Service.  Italy, Spain, and some Scandinavian countries also have substantial government-run health services.  The Veterans Administration system in the US is socialized medicine.  By contrast, in a single payer system, clinics and doctors are independent economic entities as they are in the US, though they mostly deal with just one insurance company, the single payer.  Socialized medical systems tend to be even less expensive than single payer systems though, on international comparison, single payer systems generally have higher patient satisfaction ratings.  However, recently, in response to the inflated claims of the cruelty and inefficiency of socialized medicine by US conservatives, Britons have been provoked into defending their NHS, which a vast majority would not trade for the US system.

Canada, Australia, and Taiwan all have single payer systems which have been instituted within the last 40 years.

Less often discussed but equally important is that, relative to the US healthcare status quo, single payer represents a philosophical turn towards a health care system and industry that subordinates the search for profits to healthcare as a social commitment, the financial accessibility of healthcare and the containment of its costs.  A single-payer system banishes profit from basic health insurance coverage and puts the profit-seeking of providers, and drug and device makers directly in negotiation with the government’s health budgets.  The system-wide cost savings from single-payer come in part from the confrontation between people’s wants for care with the budgetary limitations of government;  a richer package of benefits means more taxes.  Still single-payer has not “solved” the question of how to control costs in the face of ever more sophisticated and expensive treatments for illnesses both bothersome and life-threatening.

For physicians who are primarily concerned with helping patients this would be, depending on the design of the single-payer system, a relief.  For other American physicians, who have designed their careers and practices around profit-maximization or princely compensation, single-payer or other thorough-going reform represents a challenge.

All-payer Systems

A less well-known designation than single-payer is an “all-payer” system, which is a label known to various health care wonks and few others.  ”All-payer” systems are diverse but usually consist of highly regulated independent insurers that all offer a standard basic universal medical plan, determined in its coverages and cost by law, as well as additional plans that are supplementary to that basic plan.  The key to all-payer systems is the standardization of provider reimbursement schedules between all insurers, allowing all-payer to achieve almost the same level of efficiency as single-payer.  Furthermore, in all existing all-payer systems there is system-wide risk pooling on the level of basic insurance:  if higher risk patients are concentrated in one insurer or area than another, there is a balancing of revenues between all the insurers in the system.  All-payer systems are considerably more complex than single payer systems.

The largest "sickness fund" in the German all-payer system is the 125-year-old Allgemeine Ortskrankenkasse or AOK, which provides a third of Germany with the mandated basic health care package. In Germany, basic health insurance is an entirely different "market" than other types of insurance, including supplementary and optional health insurance, which are provided by for-profit insurance companies. In an all-payer system, non-profit organizations like AOK still market themselves to maintain and grow their base of insureds, in this case AOK attracting clientele by branding itself the "Health Fund", a reversal of the generic "sickness fund" label.

All-payer offers more potential for small differences in branding and also suggests more explicitly than single-payer that on top of basic coverage will be various supplementary plans that may offer insureds different or better services that are not part of the mandated package.  All-payer also does not necessarily exclude profit making in the insurance industry though most all-payer systems abroad regulate non-profit insurers for basic health insurance coverage provision.  However, unlike the proposals currently considered in the US Congress that involve the regulation of insurers, none remotely resemble the structure of all-payer systems, within which independent insurers are in the area of basic insurance basically delivery vehicles for a government-structured insurance package.

All-payer, which is a fairly uncommon term, is actually a much older type of system than single-payer systems, which are are at most 40 years old.   In general, all-payer systems are built piece by piece as various groups are brought into the mandated insurance system, so do not stem as often from a single government health care bill or a grand policy strategy, as can single-payer.

The first legally mandated health care system which became an all-payer system, the non-profit German Krankenkassen, were instituted by Bismarck and Kaiser Wilhelm I in 1881, as a response to a rising workers’ movement and the Social Democratic Party.  Gradually in Germany over a almost a century, various social groups were brought into the mandated system, which covers all residents of Germany since the 1970′s.  In Germany now there is a basic mandated public insurance offered by a slew of non-profit Krankenkassen, as well as private insurance that offers more deluxe accommodations, greater choice of providers, and priority for certain elective procedures.

The French all-payer system, which is closer to single payer than the German system, has multiple non-profit insurers which ultimately receive most of their revenue via taxes.  The Dutch had prior to 2006 more of a combination of a socialized and single-payer system but in 2006, however, decided to go more towards an all-payer system, though it might be considered it’s own hybrid between a single payer and socialized long-term care system and a competitive but subsidized and risk-equalized market for basic insurance and “curative” medicine.  The Dutch system is attempting to harness the competitive pressures of a market to cut costs and also improve access to some of the costlier procedures, for which in the previous system there had been long waiting lists.  It is still too early to use the Dutch system as a model as it only in its 3rd year of existence.

All-payer, like single payer, is not just a technical payment mechanism but represents relative to the US standard, a subordination of profit-seeking to universal access and affordability both to individuals and to the society as a whole.  Profits may not be entirely banished from the provision of basic insurance (though often are) but throughout the system are constrained by government’s ultimate authority in defining a basic package, equalizing risk between insurers and price-setting for products and procedures.   Relative to single-payer, there is in the looser design of an all-payer system more “niches” available for potential profit-seeking by insurers, but physicians, for instance, may actually see lower (though still substantially above average) income in an all-payer system (Japan and France) than in single payer (Canada).

Commonalities between All-Payer and Single-Payer

Both single-payer and all-payer have standardized rate structures and both have a basic, mandated minimum package.  Both also require that the government establish a framework within which health care is a right, carrying basic non-profit insurance is a responsibility, and coverage therefore is universal.  If private health insurers are allowed to operate in the market, in both all-payer and single-payer they must take a backseat to the requirements that an affordable basic insurance plan be made available to all.

Both all-payer and single-payer, relative to either the current US situation or the leading proposals, make the organizational interests of health insurers, including where allowed profit, secondary to the financing and delivery of care.  Most all-payer systems like single payer, exclude profit from the business of basic but not supplementary health insurance.  Both all-payer and single-payer are departures from the idea that it is always best that markets determine the prices of goods and services (though the Dutch system is attempting to apply markets to a portion of the basic insurance premium market).

Both all-payer and single-payer are universal systems and do not create a second-class policy for the poor, like Medicaid; both enable subsidies to be distributed to the poorest and to the middle-classes without differentiating the care that they get.  Both, from the point of view of individuals, remove the “stochastic” or luck-driven element of being able to pay for healthcare coverage and reduce that element in health outcomes if one’s illness is amenable to treatment.  In both single-payer and all-payer, if compensation is designed appropriately, physicians should be able to focus on patient care and very little upon billing, allowing many small medical offices to go without any non-medical staff at all.

Differences between Single-Payer and All-Payer

Single-payer is by its nature a government-run or publicly-run insurer as is U.S. Medicare.  All-payer might include public insurers in the mix but the primary role of government is as regulator, risk-equalizer, and guarantor of the pool of health insurers, not the purveyor of insurance itself.  In single-payer, providers need to negotiate directly with the government for changes in the rate structure. In all-payer, rate and payment negotiations include government, health care providers, and a third party, the non-profit or for-profit insurers who may turn either to the government or to providers to reduce, raise or restructure rates.  Single payer is generally easier for patients and doctors because most transactions are covered through the single-payer system.

From the perspective of convinced single-payer advocates, all-payer looks dangerously like our current US system, while for advocates of only minor changes to our current system, both all-payer and single-payer look like a dangerous departure from the principles of markets setting prices and the belief that competition will of necessity lead to cheaper and better goods.  The famous economist Kenneth Arrow’s contention that for-profit basic health insurance is by its nature a faulty product would tend to support single-payer’s guarantee of an entirely non-profit basic health insurance industry.  All-payer systems may be designed to either reinforce this idea of health care being fundamentally a calling, which secondarily requires compensation, or attempt to provide an area of compromise between profit seeking and the delivery of health care.  All payer systems are much more complex than a single payer system, especially in an era when a large single payer would be enabled by computer databases that can handle millions of records with ease.

Advantages of All-Payer and Single-Payer vs. the US Status Quo

• They both remove a substantial portion of paperwork and financial overhead for providers as rates are predetermined  (perhaps as much as 25-30% reduction in provider costs)
• They largely eliminate the cost-center of underwriting and claims review in basic insurance.
• They reduce or eliminate the role of profit in mandated basic health insurance (not an advantage if you believe that profit has a role in health insurance).  Certainly margins on basic insurance coverage will be either very small or non-existent leading to resistance to either alternative by the US health insurance industry.
• Pool risks across the entire society
• Enable economies of scale in negotiations between payers and providers, drug, and device makers
• Give basic health security to all (people need to worry only WHEN they get sick not IF they get sick).  Eliminates one element of risk in getting ill.
• Increases choice of medical providers and treatments for a vast majority of the US population.

Advantages of Single Payer over All-Payer for the US

• We already have a single-payer system for seniors (Medicare) which is well-liked (though needs some changes, as does almost every health care finance and delivery system in the world).
• Single payer can be instituted in a systematic way more easily than all-payer which “happens” more as an accretion of partial measures and events and seems to need a substantial welfare state as a background support and socialized treatment of long-term illnesses and disabilities.
• There already exists a single-payer bill in Congress, HR 676, which has some strong supporters in the House of Representatives.  Rep. Anthony Wiener of New York has gotten the House leadership to agree to a vote on HR 676 this fall.
• Single-payer has the potential to be much simpler than all-payer with a guarantee of low insurance-related overhead for providers.   Simple means that it is easier to sell politically and also provides complexity-weary onlookers relief from the current policy mess on Capitol Hill.
• Single-payer has the potential to be less expensive overall than all-payer because of its simplicity and the exclusion of profit from the basic insurance business.
• - Single-payer sets the powerful insurance lobby outside the main policy discussion which is an advantage if you believe that for-profit basic health insurance is by its nature a faulty product.  The insurance lobby would then not at least formally be in a key position to shape the end product.
• -Single-payer has a greater potential to bargain for lower prices with health supply industries (though some complain that it would have the power of monopsony, a single-buyer market) as a unitary single insurer.
• Single-payer provides a single “account” within which premium revenues, medical expenditures, and tax subsidies can be tracked more easily than in all-payer.  Single-payer then has the potential for greater political transparency than all-payer.
• Some single-payer systems can allow for choice of insurance products where most people want it, in the area of supplemental coverages and more choice in elective procedures, while avoids illusory choice in the area of “commodity” insurance coverage.

Advantages of All-Payer over Single-Payer

• Current international health care system ratings put existing all-payer systems (France, Netherlands) at a slightly higher level than single payer systems (Canada, Australia), though the results from the Netherlands need to be taken with a grain of salt as the current reform is just 3 years old.  As noted above, these countries have a much more substantial welfare state than does the US in areas other than health.
• Access to specialists and wait times for elective procedures are generally better in all-payer vs. single-payer systems.
• All-payer is superficially closer to the current US below-65 insurance system with multiple independent insurers, some of whom are for-profit, some non-profit (could be considered a disadvantage if you think we need a clean break with the past).
• All-payer allows for a maintenance of choice of insurer in basic coverage as well as by nature allows for supplementary insurances, both of which support many Americans’ strong preferences for the ideal of choice on as many levels as possible.
• All-payer systems can coexist and benefit from single-payer (Medicare) and socialized (Veterans Administration) components in a the overall social system; they have usually emerged as part of a comprehensive welfare state.
• In all-payer systems, the independent insurers at least theoretically provide an intermediate layer of “negotiators” between government and providers in addition to competing in various forms for market share of insureds.  This allows for at least the potential of “market-like” flexibility and service-orientation within the health care finance system.

Political Diagnosis:  Which Way to Go?

Right now the discussion of health care reform has gotten sidetracked by the political chamber of horrors that has come out against health reform as well as the demonizing of the person of President Obama as well as of government itself.  This sideshow is a very unfortunate diversion from the main task of getting the policy right.  Defending against these ugly manifestations of ignorance, blind fear, and racism is important but has not that much to do with designing a viable health care system with universal access and controlled costs.  We are seeing a similar phenomenon in the controversies surrounding the very weak and from many appearances retrogressive climate bill now in Congress.  The Waxman-Markey bill has provoked a storm of largely irrelevant attacks from Republicans who deny the reality of climate change which has made debate about the substance of policy difficult in the public sphere:  one is either for or against the “idea” of the policy but cannot engage in a sustained debate about whether it is the right policy for the task.

Some reflexively defend the public option idea, or at least whatever the Obama Administration is currently supporting, as the true or at least the only politically acceptable “progressive” or forward-looking alternative.   As I don’t see the “public option” as advertised,  the public competitor to private plans, as having the necessary effects that the President says it would, and, if “weak”, potentially a policy disaster for the public provision of health insurance, I turn to either all-payer or single-payer as being the only alternatives that we should be considering.  The only function of the public option that I would support would be as an entering wedge for a single-payer system, a function which has been the object of attack by the insurance lobby and conservatives and explicitly disowned by Democrats.  Supporting either of these proposals that reduces the role of profit-making and markets in health insurance, puts this position somewhat to the “Left” of the mainstream debate.  A crude Left-Right scale distorts however, because effective reform rather than reform for appearance’s sake is simply saving capitalism from its own excesses.

The problem with considering both all-payer and single-payer here as acceptable outcomes in the health reform debate is that I am not providing a unified political position from which reformers can bring together some of the warring factions and influence the mainstream discussion.  We can still find health policy wonks who will advocate for any and every position, except for perhaps, what for us would be a “far left” alternative of expanding socialized medicine in the US.

Now is a time of political opportunity for a new political position to refashion the debate on actual health care reform.  The Administration and members of Congress have been tying themselves in knots with the complexity of the issue and also have been violating the spirit of Mr. Obama’s candidacy in making a few conservative Senators, i.e. those Washington insiders, decide the shape of our future health system behind closed doors.   Mr. Obama’s readiness, as a starting position, to compromise with the major health care industry players while claiming a wavering allegiance to the public plan option makes him seem at least overly pliable if not downright compromised with regard to some of his own stated ideals.

Political Area of Common Ground between Single-Payer and All-Payer

While some all-payer advocates might protest, the political commonality between single-payer and all-payer is that the health insurance industry will come almost entirely under strong government regulation and the pretense of markets and competition setting prices for essential services and insurance premiums in the area of health care are dispensed with.  Profit in health insurance would be either greatly diminished or excluded from basic mandatory insurance coverages.  One way or another the for-profit health insurance industry would be thoroughly refashioned rather than used as the model for a public plan.   Both all-payer and single-payer in their effective forms mean no quid pro quo with the health insurers but simply a sizable contraction in the market for that industry and therefore a political fight with them.

Both single-payer and all-payer offer non-health care related businesses the assurances of a controlled health care costs, which is an area of political opportunity for reformers.  The themes of American competitiveness in businesses other than healthcare and therefore alliances with other business sectors have been largely unexplored by the leadership of the health reform efforts.  Either a single-payer or an all-payer system if not designed to “limousine” specifications would attract the interest of non-insurance, non-health industry businesses.  But the application of a crude Left-Right paradigm within which one is either “for” or “against” business interests by the opponents of reform has intimidated reformers away from this political avenue.

The notion of “keeping insurers honest” by competing with them via a public option is a notion that has been designed for political consumption but has little justification in the economic and practical reality of how insurance and especially universal insurance systems work.  The only acceptable form of a public option is, as the conservatives fear, as an entering wedge for a single payer plan.   The public option as competition is an abdication of the role of government to regulate health insurance as well as collect revenue for that insurance if the twin goals of universal insurance and cost containment in healthcare are held honestly.

Single-payer as the Next Step

Rep. Anthony Weiner of Queens, NY has taken a courageous stand in favor of single payer legislation this summer. He is an articulate spokesman for common sense in the area of health insurance reform. We will see how many in the media and in Washington will listen to his message during the coming weeks and months.

While single-payer is actually the more radical transformation of the insurance industry, I believe it is a political position that is more tenable than all-payer for a number of reasons.   Both positions, though, are substantially outside the current debate and at least in superficial terms to it’s “left”.

• I trust our government to administer a well-designed Medicare-for-all program more than I trust our government to heavily regulate and restructure an existing industry into transformed form required in all-payer.  The Obama Administration and previous Administrations have not shown an ability to enact strong regulations and rein in private industries.
• It is much simpler to talk about single-payer than all-payer, in part due to the existence of Medicare; it should be called “Medicare-for-all” anyway.
• It would be OK if the threat of single-payer convinced the health insurance industry to submit to an effective all-payer system, though their profits would nevertheless be significantly diminished.
• We could transition to an all-payer system later on, if we encounter problems with specialist access or wait-times for elective procedures.
• While President Obama talks about single-payer requiring such a difficult transition (that as some people are happy with what they have through their employers we don’t want to change much), I believe this is a rhetorical decoy; a transition to single-payer would be one of the easier transitions.  A transition to all-payer requires a number of sets of three-way negotiations and the potential for multiple attempts at subversion of its purposes by large industry players.  A transition to public option plus exchanges is equally fraught with complexity and a long period of uncertainty.
• A “rich” single payer system using current levels of health care expenditure (50% more money per person than Canada) and higher than current Medicare reimbursement rates could help convince providers and medical supply industries that their businesses will do just fine.
• Any substantial reform effort is going to be sold via criticism of the existing private health insurance industry and the logical consequence of those criticisms is single-payer.  All-payer requires a greater imaginative leap involving the abstractions of strong government regulation and price setting; it means turning the insurance industry into something it is now not.
• There are existing advocates both in Congress and outside government that advocate for single payer.   All-payer is currently known to only a few insiders.
• With poor public information and media analysis, a counterfeit all-payer system could be presented by the opponents of reform as change but could turn essentially into a continuation of the status quo.  There is little risk that a single-payer system proposal could be so presented or corrupted.  An all-payer system may be too subtle for us as a political culture.

Barack Obama can be a brilliant communicator but has been oddly inarticulate and indirect in his speeches on health care reform. He has been unable to articulate a consistent positive vision of the substance of what health care reform should look like, including mentions of what other health care systems have done right.

The process by which health care reform has unfolded this year has been odd and by the estimation of many, hamstrung by its own disorganization and lack of guiding principles.  There has not been a period of study or a declaration of ground-rules from which health care reform would issue.  The Obama Administration, an almost too literal-minded student of the failures of the Clinton Administration’s reform efforts, decided to hand over the construction of health care to Congressional committees that have since then produced a number of divergent ideas about what health reform should look like.  Now there are calls to mobilize the liberal/progressive base in favor of a plan that has not yet been emerged; people are being asked to fight for something that has no declared shape or substance.  Alarmingly the field operations of the anti-reform efforts seem to have gotten the jump on a noticeable pro-reform movement.

As health reform in the US has been tried a number of times over the past 60 years, it appears as though Congress and the Administration acted as if there was an implicit agreement about what is considered to be sound health care reform.  It is true that there are interest groups and think tanks that have waited the 15 or so years since the last effort for this moment to once again influence the proceedings but these interest groups have divergent views of what should happen.  In the swirl of proposals and demands, no clear picture has emerged as to what will really constitute health care reform.

One of the most troubling aspects in both the official pronouncements by reformers and in the supporting analyses by well-known media pundits, is that there has been no organized effort to learn lessons from the experience of other countries in implementing health care reform.   The contrast with Taiwan’s efforts to learn from foreign health reform in the 1990′s is stark, as the leaders of US efforts conspicuously avoid mention of and open borrowings from the 140 years of health reform around the world.  Maybe we, as Americans, are supposed to already be familiar with these lessons and have somehow advanced way beyond them.

As reformers have treated world (and US) efforts to deliver health care more equitably and more efficiently as if they were a dirty secret, the mostly Republican opposition to  reform has been free to define existing health reform as it sees fit and to treat what might be the greatest strength of reformers as a chink in their armor.  Republicans and other opponents of health care reform have been able to spread a cocktail of anecdotes plus outright disinformation about Canada, England, France and others, while Democrats and health reform leaders have largely remained silent on the triumphs of both US and international health system design.  (In another post I will address how reformers ignore our domestic nationwide health care reforms now 40 years old and older.)  In any case, to date, opponents of health care reform, in the political minority, have been able to define the “terms of the discourse” about non-US health care.

The examples of positive health care reform or delivery most frequently cited by reformers are regional American institutions whose names are repeated enough to suggest a paucity of deep thought about the entire subject of health care reform.  The Mayo Clinic and the Cleveland Clinic are invariably brought up as stellar examples of how to deliver health care without reference to the experience clinics or whole health finance systems that have existed outside our borders for decades or even over a century.  It’s as though, somehow the rules completely change outside our borders, that people in other countries somehow live in entirely different worlds when it comes to healthcare.  Apparently the designers of the Taiwanese system were not nearly so narrow-minded as we are.

The Current Bills in Congress:  Mostly Invented-Here

Current bills are composed mostly of homegrown American ideas which some may view as a sign of good old American ingenuity while others may see this in a less positive light.

• The notion of a public option that is modeled on a private insurance plan and competes with private insurance plans is a uniquely American invention.  In industrialized countries with universal coverage there are either non-profit plans that are highly regulated, a universal public plan, or highly regulated private insurers delivering a mandated and pretty uniform basic plan.
• The notion of maintaining a patchwork of employment based combined with individual based rights to health insurance is also a uniquely American institution.  All other industrialized countries have established an a priori right to universal coverage after which financing has been drawn from individual and business payments into the system.
• Americans are stumbling into a mandate to carry health insurance as a necessity, though there is still some disagreement about this.  Other countries have mandated health insurance as a matter of course, with subsidies for the less fortunate.
• The design of the proposed insurance exchanges is uniquely American.  The new Dutch system as of 2006 might be considered one big exchange, with the difference being that this exchange has a) risk equalization between private companies b) encompasses the entire society c) has a tax-supported public welfare system that absorbs the costly chronic illnesses and hospitalizations, and d) a regulated mandatory minimum plan that has a fixed cost with subsidies for the less well-off.  The US exchange system is conceived of as a market in its current versions (though again it is unknown its exact future form) which is supposed to represent a stopgap between employer based care and public insurance like Medicare, Medicaid and the VA system.
• A variant of the exchange system is the Wyden-Bennett Healthy Americans Act or the amendment modeled on the HAA to the existing bills, which would also treat insurance as essentially a market with independent actors in it, individual mandates and subsidies for purchase of all private insurance.  Wyden Bennett has some similarities with the newer Dutch system but without risk balancing and, of course, the overall context of a strong welfare state.

Either our Congresspeople and their staff have been slumbering health reform prodigies, who can within a space of months invent the future out of whole cloth, or they are studiously trying to avoid the appearance of building on the experience of previous health reforms.  Why not do the simple thing and learn from history and from our friends and allies outside our borders?

Why it Makes Sense to Learn from Abroad

While the Taiwanese learned from Western medical systems in designing the finance mechanisms for health care, Taiwanese physicians and nurses are relatively free to build on both Eastern and Western medicine. Here nursing students in Taipei learn traditional Chinese foot reflexology.

People who are immersed in health care reform tend to assume that everybody knows the basic facts of where healthcare systems rank and act as though everybody already knows the basics.  This is an “inside the Beltway” assumption that we all know somewhere what is essentially the “right thing to do” and are either working towards “the right thing” or are disingenuously working against it.  However this is far from the case.  So why is it a serious lapse of judgment NOT to learn from non-US health systems?

Most prominent are the latest rankings of the World Health Organization from the year 2000, in which among health care systems in the world, systems with the highest ratings spend as little as 50-60% of what the 37th-ranked US system spends per person.  In 2000 France’s largely publicly funded system ranked 1st with Italy’s likewise mostly publicly funded system coming in 2nd.  Responding to Michael Moore’s “Sicko” which makes prominent use of the WHO’s findings, the Cato Institute has attacked the WHO’s study as “ideological” for its consideration of financial accessibility of health care.

Even if we disregard the WHO study, and opponents of health reform would like us to do, polls of satisfaction with the health care systems in various countries have shown that popular satisfaction with the health care system is usually higher in most industrialized nations than it is in the US.  A recent poll shows 65% of  Canadians have a positive view of their own health care system while the same poll found that only 43% of respondents  in the US had a positive view of the US system.  In the 2007 Commonwealth Fund survey of seven nations (US, UK, Germany, Canada, Netherlands, Australia, and New Zealand), the US came out last in overall evaluation of the healthcare system, with 34% of respondents saying that they thought that the US health care system needed to be rebuilt from the ground up, as contrasted with a range of 9% to 27% for the other 6 countries.

These ratings do not even account for the fact that overall health expenditures in the US are 15.2% of GDP which is by far the highest among industrialized nations; while more highly ranked systems of care spend at most 11.6% (Switzerland) but are more likely to spend somewhere in the range of 7% to 11% of GDP (top ranked France spends 10.4% and second-ranked Italy, 8.4%).   Therefore, if we look away from the negative overall ratings of the US system, the ratings of the US health system as the equal to or even slightly superior on certain disease outcomes (certain types of cancer) of other countries can be viewed as arrived at via inefficient means.

There is then in the current atmosphere surrounding reform an assumption that “people know” the background story of our inefficiency, inequality, insecurity, and mediocre outcomes given the expense, but this assumption is not borne out by the tenor of the actual political arguments that go on.  The Republican discourse that health care is miserable and dangerous in other countries has captured a portion of American mindshare which contradicts this health insider assumption.  So it would seem that a full scale national “course” in how health care is organized is in order.  At this point in the current process this is unlikely and furthermore there is the strange unwillingness of reformers to make

Why US Reformers Avoid International Comparison and Inspiration

I’ve come up with these “theses” that attempt to explain the studious avoidance of international comparisons and linkages to existing health care systems

Thesis 1:  Extremely poor public information about other countries

The BBC is one of the world's leading international news agencies, covering events in areas of the developing world in often astounding depth. Perhaps a residua of the British Empire, the British public funds the BBC to do this work, even if most Britons do not listen to the detailed reports from abroad. In the US, those with an interest in the details of events in other countries must either rely on the BBC or put together their own information "channel" through the Internet.

One reason that US reformers may have allowed opponents of reform and/or conservative pseudo-reformers to dominate discussion of Canada, Great Britain, etc., is that Americans are for the most part incredibly poorly informed about life in other countries.  The American media, in general, has abominable coverage of politics and daily life in other countries with only a very small fraction of our country seeking out information from sources that give a detailed view of what it is like, for instance, to deal with health care in France, England, or even our immediate neighbors to the North.

With the advent of the Internet, most people in the US now have access to basic information about other health care systems.  Furthermore there is now motivation, given that health reform is now a matter of financial survival or perceived threat for many, to learn about other health systems, if trusted experts on TV or other sources made the connection between Americans and people in other countries.

However just the existence of access to information is not the same thing as having a motivation or framework to put that information into and make it meaningful.

Thesis 2:  American Exceptionalism/Provincialism

With the theoretical ability to access the world’s information in even remote areas, what then might then stand in the way may be something between a lack of inclination, an assumption of American superiority in all things, and even a prejudice against things foreign.   Americans’ own American-centrism has been observed often by both domestic and foreign critics of American culture: we often think or assume we are the best in all things without reference to confirmatory data.  While from the middle to the end of the 20th Century we had considerable economic, political and military advantages, the accompanying attitude of superiority may no longer be warranted and was perhaps never applicable to every aspect of our society.

Thesis 3:  Lingering Grip of the Idea that Government is Always Ineffective and/or Malevolent

Ronald Reagan was one of the authors of the still dominant political "common sense" that government is almost always bad except as a domestic and international enforcer and private enterprise is an unalloyed good. Some conservatives are now trying to back away from the politically highly successful but now problematic ideology which he propounded.

While there is a political prejudice in the US that people who label themselves or who are labeled as liberals are all for government intervention in the economy and conservatives opposed, there have been surprisingly few open and enthusiastic defenders of government’s role in American society over the last 2 decades.  Until very recently, a consensus forged by Reagan, Thatcher, conservative economists, and conservative social movements in the 1970′s and 80′s remained largely unchallenged by liberals.  Many liberals, including Bill Clinton, were only too ready to agree that minimizing government’s role was ideal.

All universal health care systems extant involve a still greater role for government than is present in the American system, so avoiding positive mention of them may be a way by reformers disown intentions that they represent an increased role for government in healthcare.  Reformers’ confrontation with the more general idea that the government is always bad and/or ineffective is then, in their minds, postponed.  However, as is apparent by the passion of the congressional and on-the-ground opposition, opponents try at every turn to activate the narrative that government is always bad and fails.

Thesis 4: Conservative Tilt of Contemporary US Politics

Related to number 3 above, the US has a generally more Right-leaning political spectrum than can be found in many industrialized countries, especially since 1980.  Generally in the last half-century, a positive view of government’s role in domestic affairs has been considered “Left” though now parts of the opposition to health care reform are also attempting to paint reformers and the Obama Administration as having a right authoritarian, “Nazi”, tendency as well as a “socialistic” tendency.

Other industrialized countries in post-1980 America are considered to have dangerous socialistic tendencies, in part associated with the larger role of their governments in domestic affairs.  So reformers have acceded to this popular stereotyping by not associating our situation in the US with the dangerously left-leaning foreign world.

As part and parcel of the conservative tilt of US politics, talk of things like a “right to health care” or a social commitment to helping others are considered to be off-limits, not part of current common sense.  In most countries, even under right-leaning governments, universal health care systems continue to be discussed in terms of basic human rights.

Thesis 5:  Fear of the Politics of Anecdote

Floyd Brown, the conservative media advisor, devised the "Willie Horton" ad campaign that helped George H.W. Bush defeat Michael Dukakis in 1988. Brown exploited Americans' marked preference for thinking in stories and anecdotes rather than in statistics to help support Bush's contention that Dukakis was lax when it came to criminal justice. So-called "negative" or "gotcha" campaigning relies on many people's preference for anecdotes and vignettes rather than statistical arguments.

Many Americans are not comfortable with statistics, which remain dry abstractions if they are understood at all.  On the other hand, stories about the lives of individuals are powerful but misleading “evidence” for almost everybody of either triumphs or tragedies.  Reformers may be terrified that if they indicate that they have learned from a real existing health care system, that opponents will dredge up anecdotes, including witnesses of the malfeasance of that health care system.  If, for instance, reformers were to model their health care proposals on Canada, the fear is that opponents would bring in a stream of individual horror stories from Canada.  Despite the overwhelmingly positive feelings that Canadians have for their health care system, reformers might feel that they would not be able to outweigh the negative effects of individual stories.

Thesis 6:  Domestic Industry Players and Political Donors are Threatened by Reform Elsewhere

The US health insurance and medical industries have been invited in on the ground floor of current reform efforts.  Reformers including the Obama Administration seem want to avoid at almost any cost incurring the wrath or discomfiture of some of the major healthcare players as if THEY and not the legislative and executive branches ruled the country.  Reform overseas appears to have started from the premise that the general interest should, where appropriate, prevail over private interests.  So reformers avoid comparison with reform practices that may threaten these protected groups as well as place their own roles in a less than flattering light.

Reformers, at the least the Administration and some of its closest allies, have viewed the possibility that industry funded ads like “Harry and Louise” of the 1990′s will turn against reform and once again turn American opinion against it.  Instead we have the actor and actress that played “Harry and Louise”  speaking for reform in their 2009 ads but warning that we need “a little less politics” to actually achieve it.

Thesis 7:  Overall Political Fearfulness and Lack of Passion

Running throughout the preceding theses are a politics driven by fear and an apparent lack of passion for the subject matter.  If reformers were motivated to do the best for the country, surely they would draw upon all the available data to come up with the best possible plan for the US.  However fear and an apparent lack of passion for the subject matter, healthcare, health economics, and overall health, seem to have driven reformers into what appears to be a political corner.

While the shaping of policy is still open, the dominant trend in the way policy has been presented is about what it is NOT.  The President has gone out of his way to assure everybody that very little is going to change for almost all the stakeholders in the health care system.  Health care reform has been pursued through a politics of fear rather than a passionate attachment to a positive ideal of universal coverage and health system efficiency.  Whether this is out of conscious (but faulty) political calculation or out of a lack of an internal understanding of policies that will actually work, this remains a barrier to convincing the American people that what is being proposed is a net benefit to them.

Even if We Start Out with Homegrown…

I would prefer that any health reform bill that ultimately gets signed into law would have received the benefit of the experience of health reform throughout the world.  If Congress passes a bill that at least superficially has “all-American” parts to it, the implementation of that bill will run into many of the challenges that other nations have faced in giving their entire population affordable access to most medical services.   I hope in writing this blog to summarize what are the reality constraints of any health policy that go beyond current political calculations and preferences to focus as much as possible on the actual terrain of healthcare delivery, health promotion, and healthcare finance.

I’m writing this blog to try to make a “map” of health care reform both for myself and for any readers who drop by.  While occasionally you can read a particularly insightful analysis by a reporter or a pundit, in general these analyses get washed under in the tide of talk in the media about who is allied with whom and the details of the politics but not the policy of health care reform.

While we tend to find the conflicts and drama of politics more entertaining than the gray theory of policy, we who live outside the Beltway are actually affected more by the policy than the (relatively) colorful clash of personalities in Washington.  This blog is an effort to highlight the relevant policy implications of what is going on and perhaps in a small way influence the debate on healthcare.  My goals are ambitious:

1. Define what health care is as an economic and social phenomenon
2. Define differences between the delivery of health care and the promotion of public and individual health (a big one)
3. Define what are principles of sound policy in the area of health care
4. Support those policy proposals that recognize the reality of health care delivery and finance and are recognizable sound policy.

I guess I’m taking on some big issues here but I feel that current debates and policy proposals are taking swaths of the “terrain” of health care without having a reliable “map” of that terrain.  I’m hoping at the end to provide readers with a way of evaluating what will no doubt be a complex set of laws and programs which may or may not serve to transform American health care for the better.

My personal belief is that we could in terms of the design of our health care system not do much worse than what we have now in terms of cost controls, payments, and revenue collection for that system.   On the other hand  Reform of some type is inevitable though we could go through a dark period of either stifled reform or reform based on misguided principles.

My interest in health care stems from a number of experiences and interests of mine which are not directly related to health care.

• I have a general interest in improving the quality of our social science, which I believe has failed us in a number of endeavors over the past decades.
• In an earlier part of my career, I have worked in health care delivery and research both funded by the government and funded by private funds.
• I have been a patient in the US and in Germany, which has a different health care system.
• I have a general professional interest in good policy, particularly in the area of energy and climate, where I see analogies with what is going on in health care.  I am wondering if we are capable now of putting together any effective and thorough-going reform in any area of policy.
• I want to have good, secure health care for myself, my family and my friends that will not bust our or our nation’s budgets now and in the future.

With this introduction, I’ll start blogging…  Enjoy!