Friendly Fire: Evolution vs. Revolution in Health Care

I've advocated an evolutionary approach toward health reform. As a result bloggers and commenters have called me a "hard right" "shill for the insurance companies," among other things. Now John Edwards recently made a proposal along similar lines, and somebody I admire has lacerated him for it.

I stand by my position. Single-minded advocates of single-payer government coverage risk losing a historic opportunity for health care reform - a reform will either evolve toward their goal, or accomplish the same things in a different way. And they're overlooking enormous forces that will swamp any initiatives that move too far, too fast.

I have no problem with single-payer healthcare as a concept. It's cheaper, it works, and its problems (e.g. informal rationing) are minor compared with out system's. Those who point to the British system and other national health insurance programs overlook a profound fact, however: The American health economy is bigger than the entire British economy.

Radically restructuring this enormous economy is going to have some major unintended consequences, if done too rapidly and without careful planning. (I made that point in more detail here.)

Like the Canadian system? Me, too - but our health economy's twice the size of Canada's entire economy. (You can check my figures using this table. I'm going with 16% of GNP as the figure we spend for health.)

Nationalizing the U.S. system is therefore the economic equivalent of completely socializing the entire British economy. What's more, neither the British, the Canadians, or any other country with single-payer care have had to face the problem of changing and breaking down a massive healthcare economy in order to put their systems in place. Like it or not (and who does?), we have a unique challenge in front of us.

That gets me to the John Edwards health plan. Since I wrote my favorable initial review Paul Krugman has commented very favorably on the plan as well, making many of the same points I did. (I'm always willing to comment on health economics, since I've worked in that field, but it's reassuring to have my points supported by someone who is, you know, a distinguished economist.)

I haven't endorsed the Edwards plan as unequivocally as Krugman, because I want to see more detail on the "individual responsibility" segment of the plan to make sure it doesn't place unfair burdens on the working poor. But overall, it's an excellent start.

That's why I regret having to differ with Rose Ann DeMoro, who's done some terrific work as the head of the California Nurses Association. But she's wrong about the Edwards plan. She writes:

... the Edwards plan looks a lot like the healthcare plans being touted by other decidedly non-populist politicians including George Bush, Mitt Romney and Arnold Schwarzenegger, in addition to Hillary Clinton's dismal 1993 plan.

That's factually incorrect in one very important way: The Edwards plan would allow Americans to buy into the public healthcare (Medicare/Medicaid) system. The other plans she mentions don't do that, and it's a huge difference.

This model, which I've been in favor of for some time, avoids some unintended economic consequences (e.g. sudden cost shifts from the private to public systems), and also does something significant: It forces insurance companies to either beat the public system in cost and efficiency - without alienating their members - or wither away as a result of competitive forces.

I'm no fan of the state reforms that have been proposed so far. Regarding the Massachusetts plan, I wrote at the time that it was probably a "mirage" - that it was an exercise in self-congratulation for the politicians involved. If\ felt it was more likely to penalize people at lower income levels than to help them, and that it would hurt small businesses at the expense of larger ones, too. Now the Massachusetts plan's board is looking at dropping drug coverage from the mandatory plan, which is a sign of the weakness of the whole proposal.

Ms. DeMoro writes that "the Edwards plan fails to crack down on insurance premiums." It's true that there's no mention of overt rate controls, and maybe that should be considered. But insurers will have to compete with a public system that has lower overhead, and much greater negotiating power with hospitals and other health care providers. That will force them to lower rates or lose enrollment, while giving Americans a lower-cost option to today's private insurance.

Echoing other single-payer advocates, Ms. DeMoro writes "... if a public program, as (Edwards) implies, is more likely to assure affordable alternatives to the private insurance model, why get off in Chicago when your plane is going to New York?"

There are lots of reasons, including the possibility that you don't have enough fuel to make it to New York. Some of the passengers on the plane may not want to go to New York, either,. Many Americans would choose to preserve their current choice, access, and other options.

The analogy's an imperfect one, in any case, since "single-payer" isn't a destination: it's a vehicle, one that's intended to get us to a place where every American has access to decent healthcare. If those ends can be achieved by other approaches, why cling to the means instead of focusing on the end?

Ms. DeMoro adds, "Repeated polls have shown that wide majority of Americans want the US to move to a universal healthcare system that guarantees quality care for all patients 'like Medicare.'" But, like it or not, the insurance industry hasn't started to fight back yet. A single-payer program will face stiff political opposition, and the "Harry and Louise" campaign is only a mild foretaste of what would come as the result an immediate, revolutionary (vs. evolutionary) single-payer proposal.

Doctors haven't weighed in on the single-payer concept as a group yet, either. Once the idea moves past the talking stage, doctors will begin to confront the fact that a single-payer system will dramatically cut into their income and freedoms to practice. U.S. doctors make nearly three times as much as physicians in other developed countries with single-payer systems ($199,000 vs. $70,324, according to Reinhardt et al). Some high-paying surgical specialties seem to be driving the demand for their own services, which can result in overtreatment that would be likely to disappear under a single-payer system (see the studies of John Wennberg, M.D. et al). That might be a good thing, according to many studies, but physicians will nonetheless resist.

I imagine Ms. DeMoro is referring to people like Ezra Klein, Paul Krugman, and me when she writes: "Edwards should step away from the policy wonks and the purveyors of realpolitik who are working feverishly to sabotage the only healthcare reform that will actually work."

This is sadly typical of the hostile rhetoric coming from the "single-payer-or-nothing" crowd. Aiming their cannons at others who hope for meaningful reform doesn't help us find a workable solution. This friendly fire only prevents those of us with a common goal - universal healthcare - from working together more effectively.

My biggest problem with this group isn't the "single payer" part of their position. It's the "or nothing" part. Judging from the experience of Clinton's proposed 1994 reforms (which were far milder than Edwards'), "nothing" is exactly what we'll get.

If we fail to enact meaningful reform, the millions of uninsured and underinsured Americans who could benefit from a plan like the Edwards proposal will lose out. And that would be tragic.

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