Monday, April 02, 2007


Strange (Hospital) Bedfellows

Here is an article from The New York Times Magazine about the tentative alliance between business and union leaders to provide universal health care to Americans. It focuses on the efforts of Safeway CEO Steve Burd, along with Service Employees International Union head Andy Stern and Oregon Senator Ron Wyden, to come up with a workable health care plan. The article takes a historical overview of the health care situation, touching on past trends that I have discussed before in this blog.

Dramatic medical advances in the 1920's pushed up the cost of health care beyond the reach of many patients, especially during the Great Depression. Franklin Roosevelt rejected including universal health care in his New Deal program, reputedly because he anticipated opposition from "organized medicine". Yet organized medicine itself pioneered group health insurance, through Blue Cross-Blue Shield type coverage plans. Inspired by the success of such plans, which were initially non-profit, entrepreneurs began to turn to health insurance as a profit-making activity. The cost of insurance inevitably rose. Organized medicine later introduced managed care - as in HMOs - to reduce costs, but when these, too, were co-opted or copied by commercial providers, costs started to rise once again.

When the Clintons attempted to introduce their own plan for universal health insurance, they sought the support of business leaders to help shoulder the burden by contributing to a universal health care fund. The U.S. Chamber of Commerce initially supported the plan, but opposition from small business organizations help shoot it down. Unlike large corporations, which had provided employee health care coverage in the past, small businesses often provided little or no coverage. For them to contribute to a mandatory universal fund would impose costs on them they had not been forced to absorb before.

Steve Burd, as CEO of Safeway, ran a "low-margin" business, a nationwide chain of grocery stores that required a minimum of overhead to survive commercially. Safeway was, in other words, a big corporation that faced the problems of a small business, which gave Mr. Burd insight into how the health care issues faced American businesses at both ends of spectrum. Burd concluded that universal health care was necessary all across the board, but that overly "generous" benefits should be replaced by slightly less coverage with more emphasis on fitness and prevention. According to the article, "even though employers would no longer be insuring their employees, they would get financial incentives to set up wellness and fitness programs, while employees would get insurance discounts for enrolling in them." This would reduce the tax on business to support universal health care for the poor, and help reduce the strain on the entire health care system. Employees, in the meantime, would receive the cash currently withheld to pay for corporate health benefits and spend it on private health care programs whose costs would be regulated by the government.

The plan introduced by Burd, Wyden and Stern remains leary of single payer health insurance. Nonetheless, the article concludes by stating that the single payer system may actually be more economically efficient than a multitude of private insurers. It would eliminate the need for marketing costs to remain competitive, as well as the duplication of administrative costs when all health care is provided by a single entity.

"What’s the One Thing Big Business and the Left Have in Common?" from The New York Times (Registration may be required)

Hey Patrick --

Good summary of the NYT piece. With respect to single-payer... Personally, I'm a fan of those sorts of proposals (and there are many), but here's the rub: Enacting single-payer would essentially abolish the private health insurance industry, wipe out hundreds of billions in market capitalization, and make thousands of people unemployed.

So, it's no wonder that they're pretty controversial.

The question for us is this: What's the goal? Should we be absolutists, holding out for the "perfect" financing scheme? Or should first we achieve the goal of universal, high-quality, affordable, comprehensive, nondiscriminatory, health care?

Personally, I think we can't wait another 50 years after Harry Truman first proposed national health care. We've waited long enough.

There's lots more info about Senator Wyden's plan for affordable, non-discriminatory, comprehensive, high-quality, universal health care reform over here.

Full disclosure: My company built Senator Wyden's website - but I don't speak for him or his staff.

Good point! Even an industry that can hobble the profitability of other industries - not to mention the economic welfare of millions of private citizens - is an employer of hundreds of thousands of individuals who will need work if that industry is destroyed. Economic issues are inherently so complex that there is almost always a costly tradeoff no matter which course you take. Of course, I could always be a wiseass and suggest that many of the veterans of the health care industry could be absorbed into the single-payer system as civil servants, both high and low. But since one of the major advantages of the single-payer system is that it would eliminate the duplication of resources, not all health care veterans would be able remain in their field. But c'est la vie. The IT field has seen a major shakeout due to outsourcing in recent years, so why should other industries remain unscathed by the changing times?

As a matter of fact, why not cut the overhead of providing health insurance by outsourcing some of its labor costs to India? (If that's not already being done.) That would put many U.S. health insurance workers out of work, but the industry would survive and its products could become more affordable.

Personally, I believe that the commercial health insurance industry will survive, although it will need to be significantly modified. I would advocate higher deductibles and copayments on some aspects of routine coverage, but catastrophic and emergency coverage should not be diminished. These latter costs are what really bankrupt people anyway. The higher deductibles and copayments for the routine stuff would put a greater burden on younger people with families, but it might also induce health insurance companies to make policies more affordable to young people in general, thereby improving the overall health of the risk pool and ultimately bringing down costs for everyone.

For the poor however, there must be some way to subsidize their health care without burdening hospitals and clinics with 100 percent of the cost - and that's where government assistance will need to come into play.

Patrick Hellwood
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