IT'S TIME FOR UNIVERSAL HEALTH CARE

There is an excellent chance that California will soon have universal health care. If our largest state can have it, why not the nation? The governor's plan is very flawed.


^1/12/07: Golden State Gamble

By PAUL KRUGMAN

A few days ago. Gov. Arnold Schwarzenegger unveiled an ambitious
plan to bring universal health insurance to California. And I'm of two
minds about it.

On one side, it's very encouraging to see another Republican governor
endorse the principle that all Americans are entitled to essential
health care. Not long ago we were wondering whether the Bush
administration would succeed in dismantling Social Security. Now we're
discussing proposals for universal health care. What a difference two
years makes!

And if California - America's biggest state, with a higher-than-average
percentage of uninsured residents -- can achieve universal coverage, so
can the nation as a whole.

On the other side, Mr. Schwarzenegger's plan has serious flaws. Maybe
those flaws could be fixed once the principle of universal coverage was
established -- but there's also the chance that we would end up stuck
with those flaws, the way we ended up stuck with a dysfunctional system
of insurance tied to employment.

Furthermore, in the end health care should be a federal responsibility.
State-level plans should be seen as pilot projects, not substitutes for
a national system. Otherwise, some states just won't do the right thing.
Remember, almost 25 percent of Texans are uninsured.

To understand both what's right and what's wrong with Mr.
Schwarzenegger's plan, let's compare what he's proposing with the plan
he rejected. Last summer, the California Legislature passed a bill that
would have created a single-payer health insurance system for the state
-- that is, a system similar to Medicare, under which residents would
have paid fees into a state fund, which would then have provided
insurance to everyone.

But the governor vetoed that bill, which would have bypassed private
insurance companies. He appears to sincerely want universal coverage,
but he also wants to keep insurance companies in the loop. As a result,
he came up with a plan that, like the failed Clinton health care plan of
the early 1990s, is best described as a Rube Goldberg device -- a
complicated, indirect way of achieving what a single-payer system would
accomplish simply and directly.

There are three main reasons why many Americans lack health insurance.
Some healthy people decide to save money and take their chances (and end
up being treated in emergency rooms, at the public's expense, if their
luck runs out); some people are too poor to afford coverage; some people
can't get coverage, at least without paying exorbitant rates, because of
pre-existing conditions.

Single-payer insurance solves all three problems at a stroke. The
Schwarzenegger plan, by contrast, is a series of patches. It forces
everyone to buy health insurance, whether they think they need it or
not; it provides financial aid to low-income families, to help them bear
the cost; and it imposes "community rating" on insurance companies,
basically requiring them to sell insurance to everyone at the same price.

As a result, the plan requires a much more intrusive government role
than a single-payer system. Instead of reducing paperwork, the plan adds
three new bureaucracies: one to police individuals to make sure they buy
insurance, one to determine if they're poor enough to receive aid, and
one to police insurers to make sure they don't discriminate against the
unwell.

The plan's supporters say that it would save money all the same. Those
who are currently uninsured would receive preventive care, which is
often cheaper than waiting until they show up in emergency rooms.
Insurers would spend less money trying to weed out high-risk clients and
more money actually paying for health care: the plan would require that
insurers spend at least 85 percent of premiums on health care,
considerably more than most of them do now.

Still, why all the complexity? The smart, well-intentioned economists
who devised the plan think they're being more politically realistic than
single-payer advocates -- that it's necessary to placate the insurers.
But that's what Bill and Hillary Clinton thought, too -- only to find
that their plan's complexity confused the public, while the insurance
industry went all-out to defeat it anyway.

So am I for or against the Schwarzenegger plan? That's a tough question.
As a practical matter, however, I suspect that the real question is what
to do after the plan founders from its own complexity. And the answer
is, damn the insurers -- full speed ahead.
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