What real comprehensive healthcare reform looks like

By Edward Harrison On Aug 19, 2009

Yesterday I wrote a healthcare polemic which was mostly designed to discuss the politics of healthcare for the President. The essence of my argument was that Barack Obama has not shown enough willingness to fight for specific policies he espoused on the campaign trail. In a poor economic environment, this weakens him politically, as is being made clear on the issue of health insurance reform. I hope my language was sufficiently over-the-top to get my point across.

Today, I want to talk more about the substance of the debate. I have to say upfront that when it comes to the actual policies of healthcare, I am probably more conservative than Democrats are but I do believe serious reform is necessary today.

Let me offer some upfront tactical points. Then I will couch the debate in terms of the social-psychological backdrop and how the Obama strategy fails to address it before offering a strategy of my own. At the end, I have a number of links to good posts on the issue from both conservatives and liberals.

The wrong tactics

If you recall, Hillary Clinton outlined her early 1990s health care initiative in excruciating wonkish detail only to have her political enemies use this detail to pick her plan apart. Hillarycare was torpedoed because opponents of her initiative had a lot of ammunition with which to work. Team Obama seems to be fighting this same battle. They are employing a strategy in which cost reduction was the initial selling point of his reform platform. Moreover, Obama and his administration offer little in upfront detail about actual healthcare goals in order to prevent a recurrence of 1994.

But, this is not 1994. And reducing system-wide costs that trickle down to individuals is not a selling point that engenders any visceral or emotional response from voters. Furthermore, I have been dismayed, as have many in America, that Congress and the President seem to have concocted plans for reform before taking the debate over healthcare to the public to inform themselves as to what we want. The draft legislation came first and then the town hall debates. In fact, these debates never would have occurred had the President had his way with a vote before Congress’ summer recess. This seems very high-handed. Why didn’t we have town hall meetings followed by drafted legislation?

The social psychology of economic depression

We are in a deep economic contraction and people are afraid. What Americans want is economic security, not cost reduction. Obama must offer a healthcare plan that provides increased economic security to the majority of Americans if he wants greater public support.

Most people in America are satisfied with their health insurance and their health care. As they see it, no change is necessary there. Telling people the healthcare system in France, Britain or Canada is just as good as ours and we should switch to their model is a losing proposition.

On the other hand, Americans do feel a general sense of economic insecurity. The unemployment rate and foreclosure rates have risen astronomically. Meanwhile, houses, the main asset for most Americans, have declined in value tremendously, as have stocks. Americans are poorer both in terms of income coming in the door and wealth on their balance sheet. No wonder, the word depression is used to describe a major economic downturn.

And there is an increasing sense of anxiety about paying large out-of-pocket expenses despite having insurance. Here, I am talking about money for specific visits and procedures that one has to reach into one’s pocket and pay out here and now. That’s the kind of ‘cost’ that gets people’s attention – abstract system-wide costs, not so much.

Getting people onboard for reform

Given this array of forces bearing down on average Americans, healthcare reform must have increasing economic security for the insured as as the principal rallying call. We need to allay people’s sense of fear and anxiety by demonstrating that change will make them more secure economically. This is what insurance is all about: reducing economic risk. And right now, given other money problems, most people feel the risk reduction they are receiving is not adequate.

So, reduction of out-of-pocket expenses for those already insured must be the principal selling point of any reform. Mind you, I believe universal coverage is the most pressing need. But, quite frankly, telling people we need to give something to other people in a time of economic distress is not the sort of thing that makes one want to jump up and shout.

Beyond just reducing the risk associated with out-of-pocket expenses, there are other issues of insecurity – the risk of losing coverage or paying more money when losing or changing a job, the risk of dropped coverage due to pre-existing health conditions, and the risk of exceeding yearly or lifetime caps. If the healthcare plan that the President and Congress present to the American people can credibly claim to reduce these risks to those already insured, we would be more likely to accept reform on other issues which I am about to address.

To recap, most Americans like their health care, but feel there are significant gaps in their health insurance. Obama has made a savvy move in switching the debate of late from care to insurance. In reforming American health insurance, four issues will gain widespread support:

Capping per visit and yearly co-payments fees.
Allowing every worker to remain with the same health insurance provider and paying largely the same premium had they remained with the same employer regardless of employment situation.
Preventing health insurance companies from dropping coverage for pre-existing conditions.
Providing all employees with a health insurance policy option without annual or lifetime caps and making the caps explicit for other options.

Two other reform issues to be addressed

With the issues established that will get most Americans onboard, reform can turn to other agenda items. The first issue is clearly the lack of insurance for tens of millions. This is an issue which is easy to demagogue due to stereotypes about just who has no insurance in the United States (illegals, Blacks, Latinos, the extraordinarily sick, or the young and healthy). But the true purpose of health care reform has to be insuring all those working in America and their families against large and unexpected healthcare expenses and to promote universal basic preventive care. If we pass a health care bill without substantially all Americans being covered against catastrophic healthcare loss, you can deem the legislation a failure.

However, there is one other issue of importance as well. James Pethokoukis had a good blog post yesterday “A healthcare plan to save Obama’s presidency” which encapsulated this idea. First he agrees that universal coverage is necessary. But, he also adds an important bit regarding our employer-based system.

Make health insurance mandatory and subsidize those who can’t afford it. (That’s the blue part.) But at the same time dismantle employer-based health plans, which prevent consumers from understanding the true costs of their healthcare decisions. In any case, employer plans are just an accident of history. (That’s the red part.)

The simplest way of dismantling them, according to an analysis by McKinsey, would be to make the money spent on health insurance by employers available as cash, tax free, to employees. “Insurers would then compete for customers with policies that offer better value for the money,” according to McKinsey. “The combination of invigorated supply and demand is the only healthcare reform plan that will avert the economic disaster that otherwise awaits us.”

A Purple Plan for the centrist – or purple — president many Americans thought they were voting for. It would bolster the president’s popularity, lift American spirits and help restore the economy.

If I run a business in the United States in competition globally, why should I be forced to provide healthcare to my employees unlike businesses in no other country. This clearly puts American businesses at a disadvantage and is a legacy of a system that needs to end.

What’s more is dismantling the employer-based health insurance system would have a huge stimulative effect on the economy and financial assets. Every listed company in the United States would instantly be worth more and have more money available to provide for investment. But, of course, the devil is in the details because this measure would effective be a tax cut for business. Where is the revenue to support this cut? If the President and Congress could find a legitimate way to recoup this revenue that makes the health care initiative relatively deficit neutral, there would be bipartisan support for such a provision.

Recap

The healthcare debate has been a fiasco. It was begun without any input from the American people. Obama and many in Congress even attempted to pass legislation before the summer recess when serious debate could happen. We saw this tactic under Bush when Hank Paulson tried to fast track the TARP legislation.

As a result, the debates have often not been very substantive and have degenerated into an emotional demagoguing of this key issue. Better messaging would be nice as well. What’s in it for me? And what are your goals in passing this legislation? These are two questions neither Obama or many in Congress can answer.

Below are twenty articles I found informative. They run the gamut from very conservative to very liberal (Patrick Buchanan to Robert Reich, if that gives you a better flavour). I am adding them here for your attention as well. Comments are appreciated.