March 4, 2008

UPDATED: The Need for a Bigger Boat

AUTHOR'S NOTE: In comments, reader forhealth points out that the health care and insurance industries are heavily regulated, and contends that therefore, current conditions do not represent a free market exercise. While I have some sympathy for this view from an academic perspective, the reality is that regulation applies to all participants equally and does not prevent competition, making the role of government essentially a market condition. In the strictest terms, there are, in fact, no free markets in the United States in any sector of the economy, since government plays a role in all of them. My usage of the terms "free market" and "market" in this post are intended to convey the common - and more importantly, the political - usage of those terms.

It is a measure of the drag that health care and concerns about insurance coverage put on both individuals and the economy as a whole that - despite the best efforts of the insurance industry and long-running, consistent fear-mongering from its mainly Republican allies - universal health care is now a serious topic of discussion in the 2008 presidential campaign. (At least on the Democratic side.) Since current conditions in many ways represent a failure of the free market - or at least the public perception of failure - it is also an issue that holds the potential to seriously restructure the general debate over the role and effectiveness of government in the United States. Viewed from that perspective, it is no wonder that those who believe that the New Deal is the worst thing to ever happen to this country are so opposed to moving away from the private model.

The free market has had unquestioned success as the engine of our economy, the most powerful the world has ever seen. Given enough time - not to mention callousness toward the human condition - market forces can also dependably arrive at an optimum balance (at least in economic terms) in most every realm in which they're allowed to run their course, including that of social issues. When the toll on human lives is considered however, the time line for the market resolution of complex problems - and health care is today's prime example - is often untenable, as thousands, if not millions, of citizens are adversely affected by suboptimal conditions while the market tries to straighten itself out.

Just how untenable, then, is the current situation? Consider:
  • Nearly 47 million Americans (16% of the population) were without health insurance in 2005, the latest year for which such government data is available.
  • The number of uninsured increased by 2.2 million from 2005 to 2006, and has risen by nearly 9 million people since 2000.
  • Nearly 90 million people - about a third of the population below the age of 65 - spent a portion of either 2006 or 2007 without health coverage.
  • More than 8 in 10 uninsured people come from working families, and the vast majority of them - 80 percent - are native or naturalized citizens.
  • In 2006, only 59% of workers with dependents had employer-provided health insurance, down from 70% percent in 1987, and the lowest level of such coverage in over a decade.
  • There were 8.7 million uninsured children in 2006 - almost 12% of all children in the United States.
  • Nearly 40% of the uninsured live in households earning $50,000 or more, and a growing number of families can't afford health insurance premiums even when coverage is offered by their employers.
Despite the shocking and shameful nature of such statistics for the wealthiest nation on the planet, there remains a good deal of resistance to any form of universal coverage. To be completely honest, anyone who believes that conversion to single-payer and/or government-sponsored universal coverage will be easy, cheap or without pitfalls, is deluding themselves, but it is important to realize that many of the more popular arguments against "socialized medicine" are little more than scare tactics. Jonathan Cohn had an excellent article on this topic in a November issue of The New Republic, and he summarizes the pluses and minuses well:
None of which is to say a universal coverage system couldn't have a chilling effect on innovation while severely pinching access to medical care that is expensive but, arguably, worth it. All it would take was a system that had both a rigid budget and very low funding. The British have such a system, or something approximating it. Even after some recent spending increases, they still devote just 9 percent of the gross domestic product to health care, less than many European nations and a little more than half of what the United States spends. And that shows up in the availability of cutting-edge care. Relative to other highly developed countries, Britain is one of the last to get the latest cancer drugs to its patients. And that probably helps explain why British cancer survival rates generally lag, too.

But few of the plans under discussion in this country would create such a strict budget. And nobody in this country seriously proposes reducing U.S. spending to British levels. Rather, the goal is to reduce our spending moderately and carefully; the savings, most likely, would materialize over time. In the end, we would probably still spend more than what even the higher-spending countries in Europe pay. And that should be enough, given that the citizens of those countries are not exactly missing out on cutting-edge medical treatments. France and Switzerland - traditionally the two highest spenders - get the newest cancer drugs to their patients with virtually the same speed as the United States does. And, when it comes to cancer radiation equipment, France actually has more per person than we do.
Like many policy alternatives, the method of implementation will be key to success or failure, and it remains to be seen how diluted any of the current proposals will be after filtering through the seine of special interests and lobbying that is the United States Congress. Indeed, there is nothing inherently faulty about the current, employer-supplied model, but it is impossible to argue that the present system has not had more than its fair share of chances for reform and failed them all miserably. At this point, a clean break from the past is needed, if for no other reason than to sweep out the entrenched power brokers, byzantine bureaucracy and demonstrated inability to serve both the profit motive and the public good.

If none of these arguments sway you, however, consider a news report from Oregon today: the state is holding a lottery, the prize for which is health insurance coverage. When the basic health of our citizenry has become an exercise in lifeboat ethics and is left to the vagaries of chance, is there any better sign that it's time for a change? To paraphrase the immortal words of Roy Scheider's Chief Brody in Jaws, we need a bigger boat.

For more facts on the state of health care in the U.S. today, be sure to visit the non-partisan National Coalition for Health Care.


forHealth said...

It's interesting that you call one of the most heavily government regulated industries in the country a "failure" of the free market. There is no free market when it comes to insurance.

PBI said...

Thanks for stopping by.

I agree that the health and health insurance industries are heavily regulated in the sense that they are forced to meet certain requirements. Health insurance companies are not, however - at least to the best of my knowledge - prohibited from competing against one another, and the regulations under which they operate are essentially market conditions because they apply to all participants. In truth, there is no such thing as a free market in any industry or sector in the U.S. economy; regulation is simply a matter of degree.

My reason for raising the point that "current conditions in many ways represent a failure of the free market" was to draw a distinction between the private enterprise model which is touted by its proponents (or at least by the people against so-called "socialized medicine") as the path we should continue to follow, and to point out the potential repercussions for the philosophical approach to other issues.