Interesting paper on health care reform

In the United States we have a policy, which entitles all children to a publicly financed education from the first grade through high school because of the widespread recognition of the importance of education –not just to individuals, but to society as a whole.

To implement this policy we publicly subsidize our schools with general tax revenues to ensure that they are accessible to all. Everyone who pays taxes contributes to this subsidy – rich people, poor people and middle-income people, people with children and even those who do not have children in school.

And all children, regardless of their economic circumstances, are eligible for publicly subsidized education, and all receive the same “benefit” which, in this case, is the educational experience offered by the primary and secondary school system. There is “universal coverage” for a “basic benefit,” or level of education. Nobody is left out. And the public pays for the same benefit for everyone.

However, parents who wish to give their children additional educational opportunities, a “richer benefit,” if you will, – a tutor, enrollment in a private school – can do so but the cost of these additional “benefits” is not subsidized by the general public. And, of course, this option is not available to everyone and is a function of disposable income. Families with few resources cannot afford a private school and must rely on the
public system to educate their children.


When we face a revenue shortfall in the school budget, what we argue about is the benefit level -- about how much it costs to educate a child, about administrative waste and the need for efficiency. But at the end of the day, inadequate revenue is reflected in what is covered – in larger class sizes, in a shorter school year, in fewer electives. And this reduction in the benefit applies to everyone who is enrolled in the public school system.


What we do not debate is eligibility. We do not say that, in order to balance the budget, we will eliminate grades 11 and 12 for the next school year or that we will turn away children over the age of 16. In other words, we never question our commitment to universal coverage. Everyone remains eligible for the same basic benefit, even if the benefit must be reduced due to fiscal constraints. That is a far cry from our current health care system which was built not around a commitment to universal coverage but, rather, around the concept of categorical eligibility. That is, in order to be eligible for publicly financed health care you must fit into a category. These categories were established by Congress with the enactment of Medicare and Medicaid in 1965.

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However, because our system was built around categorical eligibility rather than universal coverage a huge and growing gap developed between its public and private arms. Into this coverage gap fall those Americans who do not fit into a category: citizens under the age of 65, who do not yet qualify for Medicare; who do not meet the categorical or income eligibility standards for Medicaid; and who are unable to obtain
coverage through their place of employment.

Today, nearly 45 million Americans find themselves in this coverage gap -- a number that grows to over 80 million when those who are without coverage for a part of the year are included. And that doesn’t include the tens of millions of underinsured Americans who are literally one illness away from personal bankruptcy. Indeed, the inability to pay a medical bill is the second leading cause of personal bankruptcy in America today – second only to job loss. And the typical person who faces medical bankruptcy is employed, makes around $40,000 a year, owns a home and has health insurance. But when they go bankrupt they lose not only their home but their health insurance as well and fall into the growing coverage gap.

This gap exists because we have organized our system around categorical eligibility rather than around universal coverage. We have thus avoided explicitly answering the most fundamental of questions: who has the responsibility to pay for the health care needs of those who cannot afford to pay for it themselves? Instead we have, by default, left the economic market to make answer the question for us. But markets are designed to turn a profit, not to foster social responsibility so it should
come as no surprise that no one competes for people who cannot pay. In fact, in today’s market-oriented terminology, people with a payment source are referred to as “market share” and we compete for them. Those who cannot pay are referred to as “liabilities” and, as you know, we seek to avoid them through adverse selection and cost shifting.

The ability to cost shift serves as a kind of pressure valve in the system which reduces accountability – and, thus, the political pressure needed for meaningful reform. And here is how it works. When those without coverage get sick enough, they go to the emergency room where
federal law requires that they be seen and treated. And the resulting uncompensated cost is shifted to both public and private third party payers through incremental increases in their premiums or their bills.

The third party payers, in turn, shift this cost back onto individuals. States manipulate income eligibility to reduce the number of people covered by Medicaid; while employers drop people from coverage altogether, or increase co-payments and deductibles which shifts more out of pocket expenses to employees.

And as more and more people cannot get timely access to primary care in the community they are forced to use the Emergency Room -- often when they are very sick -- where federal law requires that they be seen and treated. And the uncompensated costs are then shifted back onto the third party payers repeating the cycle. So instead of giving everyone coverage for something – as we do with public education - - we give some people coverage for everything and others coverage for nothing. Instead of explicitly making a list of benefits and drawing a line, we implicitly make a list of people and draw a line. That is how we ration health care today in America.

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It is a policy that says we will not pay to manage hypertension in the community, but we will pay to care for the victim of a massive stroke in the hospital; that we will not pay to provide all pregnant women with good prenatal care, but we will pay to resuscitate their 500 gram infants in a neonatal intensive care unit. And this should not be acceptable to any of us.

And it doesn’t have to be. But the only way to stop this madness is to adopt an explicit policy of universal coverage. In other words, we need to approach our health care system with the same eye to equity and sustainability with which we approach public education.

If we did, we would have as our objective a healthy citizenry. To achieve that objective we would adopt an explicit policy of universal coverage for a defined basic benefit of effective health services subsidized with public resources.

All citizens, regardless of their economic circumstances, would be eligible for this publicly subsidized benefit. Poor citizens and rich citizens alike would contribute to the subsidy and all would be covered for the same basic benefit. Citizens who want access to health services not covered by the basic package would, of course, be free to purchase them -- but the cost of these additional benefits would not be subsidized by public resources.