The Perpetual Health Care Crisis

There may be no public policy solution to health care.


Lives at Risk: Single-Payer National Health Insurance Around the World, by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick, Lanham, Md.: Rowan & Littlefield, 263 pages, $22.95

Miracle Cure: How to Solve America's Health Care Crisis and Why Canada Isn't the Answer, by Sally C. Pipes, San Francisco: Pacific Research Institute, 219 pages, $14.95

Science writer Gregg Easterbrook once waxed perplexed over Americans' anger with managed-care Health Maintenance Organizations. "It's one thing for the public to loathe an industry whose performance is declining," he mused, "but the health care business is losing stature at a time when its performance is improving. By almost all measures, U.S. public health gets better every year. Americans are living longer than ever before, and heart disease, stroke, hypertension, AIDS, and most forms of cancer are steadily declining."

Easterbrook suffered from a category error that infects many other eggheads contemplating the hideous tangles of our highly regulated health care system: the conflation of health care with health. Health care becomes vital only for people who aren't healthy. Contemplate Easterbrook's list of things that doctors and hospitals don't prevent but only try (often ineffectually) to cope with after they strike. Generally speaking, the more health care you consume, the less healthy you are. The biggest consumers of health care tend to be people in their dying days, tenaciously and heroically holding on to life, but by no normal standards "healthy."

The same dynamic applies to the relation between our consumption of health care systems–the use of governments and other big institutions to manage and manipulate the provision of medical care and health insurance–and the health and wealth of our polity.

Lives At Risk: Single-Payer National Health Insurance Around the World, by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick (all associated with the National Center for Policy Analysis, a Dallas-based think tank), and Miracle Cure: How to Solve America's Health Care Crisis and Why Canada Isn't The Answer, by Sally C. Pipes (who heads the Pacific Research Institute, a San Francisco?based think tank), limn the barriers to the pursuit of fiscal (and sometimes actual) health created by enormous and complicated health care systems. Both provide ammunition for one side in a policy war that is still raging more than a decade after the failure of ClintonCare. It's the war over whether American health care policy should march toward markets, choice, and individual control and responsibility, or deeper into the territory of top-down rationing, price controls, mandatory coverage and payments, and myriad other restrictions on how we buy and sell health care services and insurance.

The books are mostly devoted to positively comparing the American system (while recognizing its many flaws, most of them regulation-related) with the single-payer alternatives much beloved by American progressives. Pipes mainly holds up Canada for comparison; Goodman and his co-authors throw Britain, New Zealand, and some details from Europe into the mix as well.

Goodman and company's book does an especially good job of casting doubt on the common belief that more government control of health care will prove more rational, productive, and fair than our current market-state mix. Lives at Risk shows, for example, that under single-payer systems the amount of preventive care someone receives is still related to class; that rationing from the top down leads to preventable death and misery as patients languish on waiting lists; that single-payer systems control costs by denying services rather than providing them more efficiently; and that enormous gaps in availability and quality of services between well-off majorities and poorer minorities continue, with resources aimed at the needs of the politically powerful middle class rather than the poorest and sickest.

Looming over these collections of facts and figures are highly charged conceptual questions about health care as a public crisis. Whichever side you take in the battle over public vs. private provision, you are apt to frame the issue in terms of cost: We are (or soon will be) spending more than we can reasonably afford on health care.

But who are "we"? My decision, or my need, to spend my money on health care may be a personal problem; it may even become a personal crisis. But it only becomes a public policy crisis when we are all on the hook to pay for everyone else's care, as we largely are in a world of Medicaid, Medicare, and other forms of cost shifting to the insured. That phenomenon is largely a matter of official government spending–America provides $34.5 billion a year of free health care for the uninsured, outside the Medicare system, according to the Urban Institute–but it also reflects the unorganized cost-shifting that results from those who receive hospital care and don't pay their bills, leading to higher prices for those who do, or whose insurance does.

The authors of these books aren't plumping for a perfectly libertarian world with no forced mechanism for shifting costs. As Pipes writes, "the question is no longer whether governments should subsidize the purchase of health insurance, but how?" But they do suggest techniques for achieving the reigning American policy consensus–that everyone's health needs be taken care of, at least minimally, through state action–more affordably. Pipes, for example, wants a world where insurance's tax-deductibility is personal and portable, not attached to our jobs; a world where we personally profit from keeping health insurance and health care costs contained; one where Medicare recipients could shop among competing private insurance plans, as most federal employees already can.

Goodman et al. follow a similar path of emphasizing consumer choices and incentives as a means to keep costs low and quality high. They also lay out how we need to change public policy incentives so we are benefiting, or subsidizing, those who self-insure (or, put another way, punishing or taxing those who don't), while making sure that the amount of the subsidy does not exceed the social value of having them insured. (This, they posit, can be comfortably modeled as the amount we currently spend on free care for the uninsured.) That amount, to complete the long policy circle, should compensate those giving free care to the uninsured. It's still a complicated, state-heavy system they advocate, one with government making many judgments and performing many manipulations to ensure no one goes completely without health care, regardless of ability to pay.

The authors also document that the much-bandied "crisis" numbers for the uninsured don't necessarily indicate widespread and continuous inability to afford insurance. One-third of America's uninsured live in households with more than $50,000 in yearly income. Only 2.5 percent of the uninsured remain so for more than three years straight. Almost half of the last eight years' growth in the uninsured has been in households earning more than $80,000 a year, while the uninsured rate among the poorest has been dropping.

Although these books focus on the faults of single-payer health care, they also consider the problems with our own unwieldy combination of markets and state dictates. Government at all levels in America directly pays for 45 percent of health care spending, with Medicare paying one-third of all hospital fees and 20 percent of doctors' fees. The government also influences health care through malpractice tort law; complicated and deep regulation of hospitals, drug makers, the medical profession, and insurance companies; and tax policies that link medical coverage with jobs (resulting in "insurance" that's more like a discounted prepayment on predictable expenses than a safeguard against unexpected risk). The upshot is a system whose flaws can hardly be attributed to overreliance on free markets.

A comprehensive understanding of that system is not only beyond the purview of these books, but also beyond the capacity of merely human minds. As both books show, the problem of scarce resources cannot be solved by government fiat. No amount of wonkish policy manipulation will create a paradise in which everyone gets all the health care he needs.

One alternative to government rationing is private managed care, which was the hip cost-containment solution of the '80s. By 2000, 92 percent of people insured through their jobs were in some form of managed care. This shift does not seem to have reduced the quality of health care, but it has maximized unhappiness among both patients and doctors by restricting their choices. Lately traditional HMOs have lost market share to the more option-filled PPO (preferred provider organization) model.

Some of the Bush administration's recent health care initiatives move in the direction of more options for providers and consumers. These include an expansion of health savings accounts (HSAs), in which citizens who buy high-deductible catastrophic coverage can save tax-free for future medical needs. With HSAs, money not spent on health care doesn't just line insurers' pockets; it's yours to spend on later medical needs or, after retirement, on whatever you wish (although it would then be taxed upon withdrawal).

HSAs are a step in the right direction, but on their own they will not do much to reduce the government's entanglement with health care. These books' most significant lacuna lies in discussing how the changes they recommend might come to pass. Where is the political constituency for powerful health care change–a constituency concerned and powerful enough to overcome the institutional inertia of the various large forces that have reached a workable and profitable peace with our current jumbled, highly regulated system? One obvious possibility is employers, who are nervous about the cost explosion because they have to obtain and help pay for insurance; 2003 was the third straight year of double-digit insurance premium inflation for families in employer-sponsored plans.

Despite employer unrest over costs, the political chances for a big change in the direction advocated by Pipes, Goodman, and the others seem small right now. The collapse of ClintonCare may have had less to do with Americans' distrust of government control than with resistance to any dramatic change in health care. Since then the only significant move to enhance patient power has been the less-restricted HSAs in the 2003 Medicare Modernization Act–which also contained Bush's prescription drug benefit, the most expensive expansion of government into medicine since the establishment of Medicare itself.

But always remember this when despairing about the prospects of policy reform: Health care systems don't equal health. As Goodman notes, "beyond some basic public health measures, there is not much correlation internationally between health care inputs and the overall health of a population." Our health is far more in our own hands–depending on our own behavior, from exercise to diet to risk taking–than politicians would have us believe. That reality, combined with the fact that we could spend our entire GDP on health care without satisfying all individual demand for it, leads to the conclusion that no policy reforms, even the most market-leaning, will solve all, or even most, of any loosely conceived health care "crisis."

You can always get Americans to complain, when polled, about the system as it stands. For the past two decades, Harris polls have shown between 20?40 percent agreeing that there is so much wrong with our current health care system that it needs to be rebuilt. But support for change in a universal-coverage direction, as high as 62 percent in some polls, evaporates quickly when parameters such as rationing, waiting lists, and restricted choice of doctors are added to the scenario. And no politician has gotten very far campaigning on such a complete overhaul, despite the poll chatter. If there is any efficiency in political markets at all, this should tell us something about how powerfully dissatisfied most Americans really are. (Realizing, as Goodman points out, that 10 percent of the population consumes 72 percent of health care expenditures helps make sense of this–health care is a real crisis for a few, merely an anxiety for the rest of us.)

The economics and politics of medicine can seem both boring and difficult, and neither of these books do much to dispel that notion. That boredom and difficulty help explain why Social Security, and not the far more severe and impending Medicare cost crisis, has become Bush's main political push in his second term.

Social Security already had decades of academics and think tankers, many of them libertarian, working to convince people that Social Security is inevitably doomed, and laying the ideological and political groundwork for segueing out of it. Public awareness and concern over the more complicated Medicare problem hasn't quite reached a tipping point yet. But Medicare's cost spiral also dictates that it can't go on forever, so it's inevitable that attempts to fix it or end it will eventually dominate the policy scene. (It would be very difficult, alas, for a Bush administration to make a crusade out of the inevitable disaster of Medicare in his second term when one of the biggest successes of first term made that disaster far more looming and awful.)

When realization of Medicare's impossibility becomes widespread enough, the entire medical regulatory and financing system will be up for political grabs, and books like these will seem prescient and helpful guides for politicians finally seeing the light of the oncoming train of crushing social costs. Better late than never.?