A few weeks after he became president, Barack Obama hosted a March 9, 2009, afternoon meeting at The White House for a few hundred DC policy-types (lobbyists, think tankers, association heads, researchers, policy wonks, business association leaders) to discuss his new administration’s approach to reforming one-sixth of the American economy. I felt privileged to be there. The meeting began in the White House East Room with Obama making this bold statement: the first thing we must do is get health-care costs under control; then we can expand access.
I had voted for John McCain, not Obama, in November 2008. But when Obama delivered his opening comments I sat bolt upright in my chair and thought: “He gets it. He really gets it.” I can definitely support our new president’s approach to reforming our convoluted, overpriced, and underperforming healthcare system.
What happened next didn’t exactly conform to Obama’s high-blown rhetoric. He outsourced the legislation to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid who produced the famous – and faltering – Affordable Care Act of 2010, now known as Obamacare. In turning healthcare reform over to the Congress and not sticking to his principles, Obama missed two important opportunities to enact important structural changes that could have delivered real reform.
First, he signed a bill that did the exact opposite of what he promised: Obamacare expanded access first and then worried “too little, too late” about getting costs under control. Second, he missed a splendid opportunity to pursue what many economists – liberals as well as conservatives – acknowledge as the real starting point of serious structural reform: repealing the tax exemption for employer-sponsored health care benefits.
Repealing this tax exemption would have altered the dynamic between doctor and patient in important ways. Most Americans -- who are not on Medicare, Medicaid, or on Veterans’ health-care programs, or who participate through the ACA exchanges -- still get their health insurance through their employer. This approach began by accident during World War II as a way for employers to circumvent wartime wage controls and to compete for scarce talent. Today, the effect of the exemption is to erect a complex third-party payment system that has the wholly unintended cost of delinking the decision to use health insurance from its actual costs. When somebody else pays most or all of the bills, one tends to have a different attitude towards consumption.
What we needed in 2010, and still need today in addition to the government-run programs, is a market-driven approach to health-care decision-making that empowers consumers and providers. Individuals should be free to shop around for the coverage they want (not coverage mandated by an employer, a government, or an exchange) from providers who also have an incentive to keep costs down. Instead, we have the worst of all possible worlds: a system whose incentives operate in a rational and predictable manner to maximize the volume of services provided rather than the value of the services needed.
The underlying healthcare policy question – which always seems to elude policymakers in both major political parties – is this: when we are outspending the rest of the world in health care spending, why aren’t we also outperforming the rest of the world in terms of results? We are nowhere near the best in the world when it comes to healthcare outcomes. Our infant mortality and obesity rates are abysmal, and our longevity rates are on a par with far less-developed nations. We spend some 17 percent of our gross domestic product on health care. France spends a little more than half as much but achieves much better results.
Today’s failed attempts at healthcare reform in the GOP-led Congress (i.e., “repeal and replace Obamacare”) now join tort reform as yet another Washington kabuki game – furious shadow boxing that kicks up lots of dust, generates reams of news coverage, enables incumbent politicians to raise money for their next election, and, at the end of the day, accomplishes precisely nothing. If the politicians were serious, they’d scrap everything and start over with a bill that ends the tax-exemption for employer-sponsored coverage. Don’t hold your breath.
Today, some 44million Americans are on Medicare, and over 74 million receive benefits from the Medicaid and CHIP programs. Both programs are, in effect, single-payer health care programs. Then you have 8.92 million individuals enrolled in the Veterans Administration healthcare system that offers government-provided (single-payer) coverage. What’s left are the uninsured, those who still receive coverage from their employer, and those who receive coverage through the Obamacare exchanges.
What we need is a bipartisan structural approach to reform that starts by repealing the employer-sponsored health-benefits exemption and then puts everything on the table. Our leaders in both political parties should conduct a national discussion about just how much health care we can afford, what procedures and medications will be covered, who pays, how much, and how can we bend the cost curve down while also delivering value rather than just maximizing volume?
The endgame, however, is likely to be different: no structural reform, no bending of the cost curve downwards, and another series of band aid fixes that tinker around the edges but fail to deliver the major structural overhaul our healthcare system needs.
But the fix will probably be just enough to allow most congressional incumbents to raise sufficient campaign contributions to squeak by the next election cycle. Then they can start the fight all over again.
On behalf of the American people.
Charles Kolb served as Deputy Assistant to the President for Domestic Policy from 1990-1992 in the George H.W. Bush White House. He was president of the French-American Foundation – United States from 2012-2014 and president of the Committee for Economic Development from 1997-2012.