Seeing through the hype

By Merton C. Bernstein
10/29/2007

A recent CBS poll shows that a majority of Americans support "having one health insurance program covering all Americans that would be administered by the government and paid by taxpayers" instead of "keeping the current system." Covering everyone under Medicare - Medicare-for-All - could fit that bill.

However, the health plans put forward by the presidential candidates do not. The Republicans push "market-based" plans buttressed, inconsistently, with government subsidies. Republicans apparently feel obliged to adhere to their private-profit model, even when it already has failed.

The leading Democrats, meanwhile, build their national health care proposals on the crumbling foundation of private plans.

Not only would it be more democratic to honor the public's preference, but Medicare-for-All also would reduce current per capita costs, making it more affordable than the current high-cost, hit-and-miss mess.

Medicare-for-All would save enormous sums in two ways: by eliminating the expensive non-benefits costs of private insurance - advertising, sales commissions, exorbitant executive salaries and sumptuous profits - and by substituting one billing schedule for the high costs of matching hundreds of millions of bills with the thousands of different plans that insurers and health care providers now must use. The savings on those non-benefits costs could assure all Americans of comprehensive health care.

The Democratic proposals would use subsidies to small businesses and millions of people to make the new coverage appear affordable. But even the plans' sponsors admit that those subsidies would increase program costs by $80 to $160 billion annually.

The Massachusetts plan, fathered but disowned by former Gov. Mitt Romney, and those championed by California Gov. Schwarzenegger, Sen. Hillary Clinton and former Sen. John Edwards supposedly achieve universal coverage by requiring everyone to insure themselves if their jobs don't. Unfortunately, that mandate incurs enormous additional costs in determining who has complied and then compelling the rest to do so. It is an even bigger and more costly job than first appears because of how frequently people and jobs change in America's dynamic economy.

Proponents liken this self-insurance obligation to the liability insurance required of drivers. But so many motorists do not comply or their coverage is so nominal that automobile owners by the millions buy insurance to cover possible losses caused by uninsured and underinsured drivers.

Clinton stresses that her proposal preserves choice. But employers already limit the choices of their workers through their selection of private plans that typically limit patients' ability to choose health care providers.

Edwards' proposal includes "a public plan modeled after Medicare but separate from it." What this really means is that his plan will not participate in and benefit from Medicare's low (2 percent) administrative cost. Clinton says her plan builds toward Medicare-for-All, but because it would add non-benefits costs, her claim is baseless.

Sen. Barack Obama concedes that Medicare-for-All "would make sense" but decides against it because it might interfere with the private plans people have come to rely on. Obama misses the point: The essence of the current health care crisis is that private plans are falling apart and do not curb costs as effectively as Medicare does.

The three Democrats propose to pay for the extra costs of their proposals with yet-to-be-devised computerized patient record keeping, competition (which actually adds costs for advertising and commissions) and more information to enable better patient choices. But recently released information about provider effectiveness, for example, in treating heart attacks showed that most "met expectations," while few exceeded them or underperformed. Not much cost savings available there. Moreover, such "information" is expensive to assemble and highly subjective and must be repeatedly updated, leading to substantial non-benefits expenditures.

The Democratic candidates would help pay for the added costs of their plans by letting the Bush tax cuts expire as scheduled in 2009. That's wise and fair. But there are other neglected needs for which that recaptured revenue could be used, such as maintaining and repairing bridges and roads, improving education at all levels, meeting the needs of veterans and their families and helping ensure Social Security solvency.

The Democrats hardly need fear the tired old Republican attacks. Medicare's use of private insurers to administer the program with private doctors, hospitals and other enterprises refutes the socialized medicine argument.

Many in the health care policy and financing areas sympathize with the cost problems faced by business and industry and had hoped that the business community would join forces in reducing non-benefit costs. To this point, however, employers have addressed the problem mainly by reducing coverage and shifting costs to employees - making coverage unaffordable to millions and, thus, expanding the ranks of the uninsured.

Their approach has been short-sighted. It would be far better for all involved to join hands. There's no need to concoct new and complicated health care plans. Affordable universal health can be acheived by extending a road-tested program that already has addressed thousands of issues that a national program inevitably wil face. It's called Medicare.

Merton C. Bernstein is the Coles Professor of Law Emeritus at the Washington University School of Law. He is a founding board member of the non-partisan National Academy of Social Insurance and served as principal consultant to the National Commission on Social Security Reform.