The logic of healthcare in wake of Obama, Clinton reforms

10 Feb The logic of healthcare in wake of Obama, Clinton reforms

Chicago, Ill. – On primary election day here in Illinois, it would be of interest to discuss healthcare reform, which is an issue that goes head to head with the economy and Iraq as the No. 1 issue facing voters this political season. One sentiment that appears to unite nearly all the candidates is the claim that our health care system is “broken.”
Everybody has a healthcare reform package with the hope – among the Democrats in particular – to solve the huge problem of covering the nation’s 46 million uninsured.
It would be helpful to review – in broad strokes – how our healthcare system works (or as many have stated, doesn’t work). Despite the claim that it is an irrational system, there is in fact a logic that has evolved over the past 60 years. It is a logic that points to why the 1993 Bill Clinton reform plan failed and why both the Barack Obama and “new” Clinton proposals are also potentially doomed.
As a consequence of the wage and price controls instituted during World War II, employer-sponsored healthcare insurance has become – at least until recently – the avenue by which the employed have obtained healthcare coverage. With the 1960s and the Great Society programs, Medicare and Medicaid were enacted to cover the well-recognized gap that developed among the non-working elderly and poor (respectively).
During the 1990s, the State Children’s Health Insurance Program (SCHIP) was brought on board to cover the last apparent gap (namely that of children). In short, our system is actually quite logical and simple. It consists of two parts: businesses pay for the health insurance for the employed, while government pays for everyone else.
Possible fates of Clinton-Obama
Obviously, this is a simplification as taxpayers and businesses, of course, pay into Social Security and Medicare. Nevertheless, it is useful to look at the system broadly along these lines.
While there are many reasons why the 1993 healthcare reform effort failed, it would seem that the core reason was that it would upend a system that had evolved through fits and starts (and occasional bursts) over the past 60 years. In essence, the proposal at that time was that government would pay for and run everything.
Beyond all the usual complaints against “socialized medicine,” such a framework was simply too radical for the logic that was firmly in place. Using this framework, and fast forwarding to the present, we can see that both the Clinton and Obama plans (as summarized very nicely in Paul Krugman’s recent New York Times column) are less radical than that proposed in 1993, but likewise complicate the logic and thus run an equal risk of failing.
Given the premise that there is a large population of uninsured among the working public, a proposal that would fit with this logic would propose that businesses in some form would actually fund healthcare insurance for the uninsured working public.
In essence, both the Clinton and Obama plans would ask (and actually mandate in the case of the Clinton plan) uninsured individuals to pay for their healthcare insurance. Notwithstanding the subsidies that would be involved to make this more or less affordable (as the candidates claim), this would create a more complex and in a certain sense less logical system of three parts. Namely:
1. Some businesses pay for the health insurance for the employed.
2. Uninsured working people (some in the case of the Obama plan) pay for their own insurance and then.
3. Government pays for everyone else.
This three-part system – with the operative terms “some” as indicated – strikes me as an inherently unstable system. The “some” businesses may become more, government gets mixed in with the working public, and the problems that we now lament may look like a party compared to the chaos of the future.
The concept of having businesses pay for the health insurance of the uninsured working public is not a new one. Illinois Gov. Rod Blagojevich tried that – though in a rather crude way – with the proposed “gross receipts tax,” which was roundly defeated. Likewise, California Gov. Arnold Schwarzenegger has attempted that in California. In the latter case, an amalgam of business taxes (including those on hospitals and doctors) sent his proposal to failure as well.
Is there an answer?
So what’s the answer? In 2007, this column – in the wake of the Blagojevich plan – proposed a new form of business tax: the health impact tax. It was expressly designed to fit with the existing logic of our healthcare system.
This would acknowledge that businesses should continue their role in paying for health insurance for the working population. Businesses should be fair with respect to the actual healthcare burden that different firms create on society, and hence also proportional to how much they pay for the uninsured funding pool. It would also provide direct tax incentives for encouraging healthier businesses.
It is important to note that this proposal is not “anti-business” but rather consistent with the established principles of our healthcare system over the past half century. While it aims to preserve the balance that we have created over these years, it’s not a “conservative” plan as it proposes a 21st century health impact tax (akin to a “carbon tax”) that fully and fairly apportions the costs created within our society.
The bottom line is that while we are voting for what appears to be set positions by the various candidates, the debate isn’t yet over. We can do better.
Previous articles by Ogan Gurel
• Ogan Gurel: Innovation versus invention: Why accelerating development makes sense
• Ogan Gurel: Fostering innovation doesn’t occur in a vacuum
• Ogan Gurel: Innovation vs. invention: Knowing the difference makes a difference
• Ogan Gurel: Lessons from the deconstruction of Amgen
• Ogan Gurel: Crazy like a Google? With GE-Abbott deal scrapped, could Google be next buyer?