A Realistic Health Care Alternative Going Nowhere
[N/B: See below for a significant update/clarification]
One of the criticisms levied at the alternative health care proposals discussed by E.D. and I over the last few weeks has been that these proposals, which rely heavily on vouchers and/or subsidies, are irrelevant to the debate that is actually taking place. Yet this is not really true – in fact, as it turns out, these proposals are quite similar to Senator Wyden (D-OR)’s bipartisan proposal, which has 14 co-sponsors in the Senate. A good summary of this proposal is here (Wyden’s proposal appears to rely on tax credits, as commenter Willybobo has advocated, rather than vouchers, but the premise is the same). A better discussion that places Wyden’s proposal and the more-dominant “public option” proposal in context is here.
Yet this proposal, despite bi-partisan support, has exactly zero chance of going forward. It has, so far as I can tell, been largely ignored by grassroots advocates of health care reform, who have largely jumped on the “public option” bandwagon, however flawed that legislation will be if it is to become law.
What is so particularly strange about this is that the legislation that is most likely to actually pass will ensure that our health care system places even more emphasis on employer-based health care coverage – even though the employer-based nature of our system is the single biggest cause of that system’s problems.
For all the comparisons between European and American health care, the employer-based nature of the American system is the one element that both sides of the higher echelons of this debate seem to ignore consistently. Yet it is the one element that actually distinguishes the American system from just about any system in the world – and not in a good way.
As Wyden points out in the Slate article above, the employer-based system traps people in jobs that they would otherwise leave, which reduces labor flexibility even as the capacity for employer mobility increases at breakneck speed. Beyond that, as I’ve tried to point out on numerous occasions and as our friend Kip recently pointed out, the employer-based system ensures that the consumer and the customer are two very different entities with two very different sets of interests. Meanwhile, the leading proposal adds ever-more complications to the already too-confusing tax code to raise money to pay for the additional expenditures – and, importantly, these complications are not just as a result of the surtax on the wealthy.
Other countries with very good health care systems have more government involvement than ours, to be sure; but then again, many very good health care systems, including some that are held up by liberals as models for us to follow, have less government involvement in health care. What distinguishes the US system from just about every other system is that, due to an historical accident resulting from WWII-era wage controls, our system is employer-based rather than individual-based.
In response, I often hear that the employer-based system is nonetheless better than an individual-based system because employers have greater negotiating strength against insurance companies. This is simply not true, though – in fact, the differences in per worker premium costs for large and small employers is surprisingly small (see page 5), although the amount of worker contributions varies significantly based on the size of the employer. This makes sense – there are no real economies of scale from insuring 1000 people versus insuring 5 people or even one person; it takes the same amount of work to process a claim by an employee in a large firm as one in a small firm, so there are few savings to pass on in the form of a discount.
Until and unless we address that issue of employer-based health care, any attempts to reform health care will inevitably fail to make any significant improvements to our system, while risking the creation of problems where few currently exist. A reform proposal that further entrenches employer-based health care, however, is a proposal that is virtually guaranteed to do more harm than good; in this case, that harm is further exacerbated by the significant increases in government spending that will only add to the already too-large deficit.
The question in my mind is why the so-called “public option” has all the legislative momentum, while Wyden’s proposal has absolutely none. On that question, I suspect there are a number of answers.
First, although liberals like Ezra Klein acknowledge the problems with the employer-based system, they view it as necessary to shore up that system in order to eventually transition to a truly nationalized system. The trouble with this rationale is that it assumes that a completely nationalized system will be politically feasible once the public option has established itself. As such, this rationale confirms the suspicions of conservatives who fear a single-payer system, which has precious little support from the population at large. Beyond that, in order to pass a public option, that public option will have to be pitched as an end unto itself, rather than as a means to a single-payer system; Americans will be skeptical of attempts to create a single-payer system after having been told that the public option would not be a stepping stone to a single-payer system.
Another reason why the “public option” has gotten all the momentum and the Wyden proposal none is that it is an easier (albeit still very difficult) sell to the American people. As bad as employer-based health care is, it’s still the devil most Americans know. Particularly in the midst of a recession, most Americans aren’t looking to change jobs at a given moment in time, and while they may be vaguely aware of the effects of high healthcare costs on their paychecks, paycheck deductions insure that they don’t truly notice these costs. The Wyden proposal grandfathers existing plans in, but it’s clear that its goal is ultimately to put an end to employer-based health care, whereas the “public option” explicitly claims to preserve that system. In this sense, the Wyden proposal is actually much bolder and more radical than the “public option,” even as it is far simpler and easier to understand.
Next, of course, is the fact that the public option is amenable to interest groups (other than small businesses) in a way that the Wyden proposal simply is not. Unions love the public option because employer-based health care is a huge part of their collective bargaining efforts; health insurance companies can at least tolerate the public option since it preserves the highly profitable separation between customer and consumer while also forcing more employers to provide health care, even as it theoretically introduces lower-cost competition into the market. A shift to individual insurance, however, would be lethal to their business model.
Finally, the Wyden proposal has no momuntum because, unfortunately, Republicans have little interest in acknowledging the problems with the existing system. This is unfortunate, because they would have a politically powerful argument if, instead of simply shouting “Socialism!” they instead proclaimed that the public option is merely a giveaway to Dem interest groups that doubles down on the problems of the existing system.
And this is exactly why I’m increasingly convinced that the public option, as currently constituted, is not only an inferior proposal, but is instead a proposal that will actively make things worse by exacerbating the existing problems while potentially undermining the elements of our system that we already do pretty well. This isn’t throwing the baby out with the bathwater (as I think would be the case in a single-payer system); it’s throwing the baby out, and nothing else. The Wyden proposal, on the other hand, seems to do a pretty good job of just throwing the bathwater out.
UPDATE: Publius astutely and correctly dings me for setting up something of a false dichotomy between a public option and the Wyden legislation, noting that the new version of Wyden’s bill includes a public option. My use of the term “public option” in this post was intended as shorthand for the public option as set out in H.R. 3200, as I hadn’t even really thought about the role of the public option in the newer version of Wyden’s legislation. Still, I think the central point in this post stands – the proposal that will actually stand a chance at becoming law is at least arguably worse than the status quo, while the Wyden proposal, which would be a significant improvement over the current situation with or without a public option, has precious little support to make it into law.
UPDATE II: In the comments to the aforementioned Publius post at Obsidian Wings, commenter J. Michael Neal argues that in spite of outward appearances, HR 3200 will ultimately have the effect of decoupling insurance and employment. I’m not convinced, but it’s a worthy rebuttal to my argument in this post that is well worth a quick read.