THE PRESIDENT HITS A HOME RUN AND STRIKES OUT TWICE
ON HEALTH CARE REFORM
Although the war in Iraq has dominated political discourse in the United States, by all objective measures healthcare reform ought to be right up there. If we can’t thank President Bush for the war, we should at least acknowledge his effort to revive the long-stalled debate over healthcare.
Unfortunately, healthcare in the United States has been long encumbered with traditions that do not serve the public good, which has been the most serious barrier to healthcare reform. Whenever public officials debate healthcare they continue to embrace these unquestioned assumptions; partly out of the force of tradition and partly because powerful interest groups profit from maintaining the status quo, often at the expense of the rest of us. President Bush has clearly identified three of these traditions: health insurance purchased through the workplace, third party payment, and using the tax code to engineer social policy. Unfortunately, the President is only batting .333, which is good for a baseball player but not very good for a healthcare reformer. First, let’s give him credit for his solo home run and then we’ll examine his two strikeouts.
The idea of linking healthcare (and retirement) to the workplace was never a very good idea. Throughout the twentieth century, it seemed like a good idea because most Americans were working for large unionized corporations like General Motors, Ford, and General Electric. Because health insurance was being purchased in bulk, it was relatively inexpensive, especially with the help of a generous corporate tax break. If you didn’t work for a major corporation, you could still purchase fairly inexpensive major medical insurance from private insurance companies, often bundled with homeowners, life, and auto insurance.
However, as healthcare providers sought an increasingly larger piece of the pie, and as medical treatment evolved more toward the use of drugs, private insurance companies gradually dropped out of the health insurance market. But did it ever make sense to set up a healthcare system whereby your employer purchases healthcare insurance from one corporation, which in turn purchases your actual healthcare from another corporation? Is there any other industry that insulates buyers from sellers in this way? And why stop there? Why not empower employers to provide homeowners, life, and auto insurance? Why not food, clothing, or shelter?
Of course today, General Motors and Ford are both teetering on the brink of extinction, saddled with soaring healthcare costs for retirees (and generous retirement pensions), and most of General Electric’s products are now manufactured overseas. Most other large corporations are either relocating to other countries or decreasing the quality of their healthcare benefits while raising the employee contribution. So now we are all stuck paying for healthcare insurance that, if given a choice, we would not purchase. In fact, many employees simply refuse to purchase those expensive shoddy products and go without insurance all together. Government could temporarily fix this by increasing the tax write- off for employers, but that would only line the pockets of insurers and providers even more (especially pharmaceutical companies) without addressing the quality issue.
So Bush is right about the need to sever the connection between healthcare and the workplace, and he’s right about phasing out that corporate tax write-off. Unfortunately, he’s dead wrong on the other two traditions.
Our third-party payment system is itself another mindless tradition. If you think about it, it really makes no sense. Again, there was a time when it at least seemed to work. In the early years, healthcare providers liked it because it guaranteed them payment for products and services rendered, regardless of the ability of their patients to pay and regardless of the quality of those services. For centuries, patients had refused to pay for unsuccessful medical treatment, and sometimes even successful medical treatment. Unfortunately this second-party payment system meant that the fees charged by providers would have to be limited to what their patients were willing to pay. And of course, the Hippocratic Oath, at least seemed to imply a duty on the part of physicians to provide healthcare regardless of its cost. So the third-party payment system seemed almost too good to be true.
It was! The historical concept of “insurance” was to provide security against relatively uncommon events, such as unexpected accidents, deaths, fires, floods, etc. The first insurance providers were cooperative enterprises that did not expect to earn a profit. Eventually corporations discovered that they could earn a profit by playing the odds, by setting premiums relative to the degree of risk. Most of the early health insurance products covered mostly hospitalization, which for a while was relatively uncommon. Of course, over time, providers adapted to this reality by increasing their reliance on hospitals. In the 1950s and 60s, my mother spent a week in the hospital for each of her five normal deliveries.
Gradually, the idea of expanding insurance coverage to basic healthcare wormed its way into our culture, government, and the industry, which obviously undermined the original risk-based concept. Let’s face it. We all get sick. Nevertheless, insurance carriers were expected to cover common medical expenses, such as: office visits for minor illnesses, routine tests, pharmaceuticals, vaccinations, psychiatric treatment, birth control pills, and even in vitro fertilization. Eventually, health insurance was transformed from protecting us from uncommon events to protecting us from common events. Predictably, most private insurance companies got out of the healthcare business, but still provided life, auto, and homeowners insurance. As the number of hurricanes in the southeast and as average rainfall on the flood plains increase, we can expect private insurance carriers to raise premiums and/or get out of those markets too: that is, unless government comes to the rescue by providing substantial tax breaks.
Today, a variety of other more specialized corporations, such as HMOs, (not to mention government programs such as Medicare and Medicaid) have attempted to fill the economic void. These corporations earn money by squeezing more out of employers and employees and by providing less coverage for more money. So employers responded by either, saddling employees with an ever-burgeoning share of the costs, or by simply dropping out of the game all together. Healthy employees have responded by refusing to purchase health insurance, and healthcare providers are now faced with the unpleasant reality of having to provide healthcare that patients can actually afford.
Recently, providers temporarily forestalled the inevitable by successfully convincing lawmakers to tighten the federal laws governing healthcare induced bankruptcy. But without expensive major medical insurance, most of us will never be able to pay off those bills. In short, the whole idea of third-party payment needs to be at least overhauled, if not altogether scrapped in order to make any substantial improvement in healthcare.
Finally, we must end the longstanding tradition that invites social engineers to solve perceived problems by manipulating the tax code. It would be bad enough if healthcare and retirement were the only social goods to be funded via the tax code, but look at where we are today. Every year we are inundated with well-intentioned do-gooders that want to raise taxes to fund their own pet project. As a result, most cities now have a long list of tax levies that provide funding for schools, health clinics, mental health facilities, hospitals, zoos, museums, symphonies, and sports stadiums. Even if most of these projects serve the public good, where does it all end?
The federal tax code in the United States is already so convoluted and inscrutable that most of us now hire professionals to file our taxes. Most of the rest of us purchase computer software to help manage this growing morass of social engineering. We already know that politicians are highly skilled at doling out tax breaks to their own constituents and lobbyists, at the expense of everyone else. Look no further than tax deductions for children, mortgages, and college tuition.
Although we all love tax breaks, we really must be more circumspect. As it is, our government now employs an army of under-trained IRS agents who really aren’t any better than the rest of us at deciphering the tax code. But they can enforce compliance (whatever that means) by threatening us with fines and jail time. We dread that IRS audit, which in turn has led to windfall profits for tax preparers and tax lawyers. Now let’s be honest, is it reasonable to add to the complexity of the tax code in order to provide tax relief for buyers and sellers of healthcare?
In sum, let’s thank President Bush for inadvertently pointing the way toward meaningful healthcare reform. In baseball, going one for three with a home run and two strikeouts is exceptional. In healthcare reform it’s a start. So let’s seize this opportunity offered by the President to reassess all three of the traditions that plague our healthcare system: the linkage between healthcare and the workplace, the third-party payment system, and our misguided penchant of using the tax code to socially engineer our society.
Ronald F. White, Ph.D. is a professor of philosophy at the College of Mount St. Joseph. He teaches healthcare ethics, healthcare policy, and business ethics.