While cooling my preadolescent heels in the family doctor’s office forty-odd years ago, I was given to studying a Victorian Era print that hung on the waiting room wall. The Doctor was its title. A young woman, bare arm flung helplessly toward the viewer, lay stretched on chairs in, apparently, the family parlor. The tailcoated doctor gazed down on her with great concern. Family members hovered nearby. Matters looked grave. “What was the young lady’s affliction? And, equally to the point, what was the likelihood of recovery? The artist offered no hints. That was not, of course, the point of the painting.
The point was, here is medicine. In a moment of extremity, patient and healer join in near-spiritual communion. There is something of the sacred in it all. Pay? Remuneration? The doctor had not come for these. Anyway, the parties, with nods and murmurs, would afterwards arrange matters to their mutual satisfaction. No computers would spit out the reckoning, no committee’s review arid stamp of approval.
There is a purity about The Doctor that is more beguiling now than when it fascinated me in the 50’s—an age more akin, in spirit, to the 1890’s than the 1990’s. Doctors healed, and monetary matters somehow took care of themselves. This is not to idealize a bygone time when cholera, tuberculosis, childbirth, and malaria swept away thousands whose cure today could be taken more or less for granted. The problem then was the comparatively primitive character of medicine. The problem today is lack of funds. We cannot afford the wondrous hospital rooms, with the wondrous facilities and wondrous medicines now available to us.
Health care in 1992 is the best, most sophisticated ever—and the most expensive, not just ever but anywhere, accounting for nearly 12 percent of the Gross National Product. Though inflation in the larger economy seems mostly under control, health care costs rise sharply each year. What to do? Again and again one encounters the familiar nostrum: national, centralized health care. The government would be in charge, paying the piper, calling the tune. Hawkers of this sweet-smelling patent medicine abound in modern America. “The penalties for not developing a national health care policy are severe, and growing,” say four health care specialists in a recent book, The Crisis in Health Care. What is needed, they contend, is “a coherent federal policy.”
The Heritage Foundation itself, fountainhead of so many market-oriented policy initiatives in the 1980’s, supports a “compact between the U.S. government and its citizens.” Under this compact the government would “devise a market-based system” of health care; in return, the citizens would accept “mandatory family protection,” the obligation to buy health insurance or else enroll in a prepaid health plan. You may recall “mandatory.” It was for 70 years the basis of daily life in the Soviet Union.
None of this has quite the freshness of morning dew. College debaters of my vintage will recall batting around back in the Kennedy years the topic of national health care and whether the United States should institute such care. For two decades Senator Edward Kennedy has argued “yes, we should.”
The latest Kennedy plan would force employers to either offer health insurance or pay into a government-sponsored plan called, patriotically, AmeriCare. The new plan would largely replace Medicaid, the federal health care program for the poor. The sponsors project first-year costs of $6 billion with subsequent savings of $78 billion thanks to “cost-containment” requirements. We eat our cake and have it, too. The collapse of the Soviet Union as an active adversary will redouble the agitation for siphoning defense dollars into health care.
The Democrats start with an incontestable datum: millions of Americans (estimates range from thirty to thirty seven million) lack health insurance, hence affordable access to medical care. This suggests, to those of a certain turn of mind, a federal solution: twist arms, bawl orders, tell people what they’re going to do for their own good. Democrats would order employers to make health insurance available to their workers. This the employers could do by purchasing insurance out of their own resources or paying a special tax for the purpose, a seductively cheap 7 percent of payroll cost has been proposed. The obvious incentive, private plans being much more expensive, is to confide the whole health care problem to Uncle Sam.
The Democrats anticipate that health care will be a pivotal factor in the 1992 elections. A New York Times/CBS News poll released last October says Americans believe, 2 to 1, that a Democratic President would do more than George Bush “to improve health care.” Why, say political orators and op-ed writers, Canada is already doing what we should be doing. Actually, the Canadian health care “system,” as Edmund F. Haislmaier of the Heritage Foundation explains, is “a collection of separate, although very similar, provincial systems.” Each provides universal health care in accordance with national guidelines. A recent poll by the Wall Street Journal and NBC News purported to show that 69 percent of American voters favored the establishment of such a system here. There might have been less enthusiasm had it been widely known that such a system, applied here, would be grossly expensive (requiring an extra $189-339 billion) and that the wait in Canada for major, nonemergency surgery can be long (an average of five months for heart patients in British Columbia).
How interesting all of this is. And how useless and retrograde. Nothing very surprising is going on with health care, given the way the system is organized. The problem: a lack of marketplace incentives. The solution: incentives. To see this we need only to don our spectacles.
In the days of The Doctor, finance was no complicated matter. A small bill went from the individual doctor to the individual patient, who paid it out of household resources. Much has changed since then. This is not the same nation it was, medically speaking, any more than it is the same nation culturally, politically, economically, or religiously. Since the end of World War II, Americans have depended more on health insurance and less on their own resources. For this development, government policy, and the general bureaucratization of American life, seem chiefly responsible. Patients pay out of their own pockets only 28 cents of every dollar charged by the doctor, 10 cents of every dollar on the hospital bill. How wonderful! you exclaim. But wait.
Employer-provided health insurance is a major workplace benefit. Many people stick to jobs they dislike for fear of losing their health insurance. An old friend of mine, a communications industry executive, turned down an excellent business opportunity with more money and prestige. His wife suffered from breast cancer; no insurance carrier in the world would have sought or accepted her business. Layoffs are sorely feared for just this reason.
The tax code has contributed to this distortion of effort and purpose. Since income taxes are steep compared to twenty-five years ago, and health insurance is not taxable to the employee or the company, insurance can be treated as an employee benefit—on a par somewhat with the Christmas turkey of old. It is generally forgotten that the money so spent is, like the Social Security deduction, money unavailable for salaries. Accepting it, the employee loses his freedom of action. He has no incentive to shop around for medical benefits. He takes, what the company offers, which increasingly is a health maintenance organization (HMO), practicing impersonal if (in my own limited experience) decent medicine.
So the health care industry escapes marketplace disciplines. Hospital “A” sends the bill, insurance carrier “B” forks over. The carrier, to appease the stockholders, raises its charges to the company. The company, sensitive to its own stockholders’ reaction, raises employee premiums and/or its own contribution; the latter remedy, which sounds less painful, actually reduces money available for salary increases. For classic anticompetitiveness, you can’t beat this. There is no way to know the true marketplace cost of medical care, because only the most limited kind of marketplace exists. How could there possibly be much incentive to hold down costs?
What goes for the private sector goes in spades for the public sector. The two large government insurance programs are Medicare for the elderly and Medicaid for the poor. Both are hideously expensive. Both, by fostering an artificial demand for medical services, have brought about gross and rapid overexpansion of medical facilities and services, just as the availability of loans, along with federal deposit guarantees, created an artificial demand for new buildings in the 1980’s. Medicare costs are rising so sharply, and the population aging so rapidly, that the federal Health Care Financing Administration has adopted a proposal, effective the first of this year, designed to control costs by limiting reimbursement to the doctors. The government itself stipulates what a given service is worth. The Heritage Foundation predicts that the plan “will result in an increasing number of doctors refusing to accept Medicare patients” and in higher bills for non-Medicare patients. Meanwhile Medicaid, painfully underfinanced, normally pays 50 cents on the dollar. Again the customers suffer; doctors will not take them on. Too much hassle, not enough money, too much government entanglement.
It is a curious thing: while the ex-communist bloc struggles to throw off the incubus of state control, American politicians and businessmen rush to its fetid embrace. Alarm bells should clang from every steeple whenever the breathless argument is made that bureaucracy can fix a problem whose origin is bureaucracy. Why not equally expect moths to patch up a coat sleeve? One thing and one alone will work in the health policy context. That thing is reversion, insofar as possible, to the economic ethos of The Doctor and its era. Let no one, or at least as few as possible, stand economically between doctor and patient. Let the marketplace work.
But cold as a stethoscope the counterargument will come: a Honda Accord is a commodity; a red snapper fillet is a commodity; health insurance is not a commodity; you can’t shop, compare, evaluate it in the same objective, experiential way. Maybe not, but you can do some robust tire-kicking with the hospital and the insurance company. The fundamental idea that one increasingly hears, by way of answer to the national health care lobby, is to trust employees to buy their own health insurance—the kind and quantity they want, at the cost they prefer, with the carrier of their own choice. “Every year,” writes Regina E. Herzlinger in the September 1991 Atlantic, “employers would transfer the money they now spend on health insurance to their employees, who would use it to buy their own policies.” Qualified health care expenses could be deducted from taxes up to the amount of the transfer.
A task force of market-oriented experts from major think tanks says let’s permit people to set up tax-free medical savings accounts for small medical expenses. Furthermore, hospitals, before admitting patients, would talk prices with them. It would be possible at last to say, “no, don’t do that to me, it’s not worth the money, do this instead”—not unlike telling the car salesman you don’t really need magnesium wheel covers. The task force, coordinated by the National Center for Policy Analysis, based in Dallas, lays out at meticulous length its plan for letting people buy what they can afford and shun what they can’t afford or don’t need. A certain meticulousness is required in scholarly circles, but the simplicity of the thing sticks fastest in the mind.
What a fine 20th-century formulation—that we own our bodies. What a logical answer to the health care mess, granting us permission to care for those bodies as we think best. Choice in schools, choice in health care, choice in—how much else? The possibilities are infinite once you get started. Hardly a department of modern life is uncircumscribed by government rules and regulations. Economic and social distortion seems our lot in life. Maybe our forebears had to lie around in parlors rather than in fresh-smelling hospital rooms with remote-controlled TV, costing two hundred dollars a day. Still, these forebears had an instinct for liberty of mind and independence of action. A glorious and salubrious tonic, human freedom. Too bad we ever entrusted the prescription to Washington, D.C.
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